Venture capital (VC) and private equity leaders are expecting a sub-Saharan African economic boom with GDP growth beating International Monetary Fund forecasts this year and next year, new research for blockchain-based mobile network operator World Mobile shows.
The IMF** is predicting sub-Saharan Africa’s economy will expand by 3.7% this year and 4% next year and warns that the impact of Russia’s invasion of Ukraine and the global shock to oil and food prices is affecting the region, which is recovering from the after-effects of the COVD-19 pandemic and US interest rate rises.
However, the senior VC and private equity executives questioned across the UK, US, the Middle East, Singapore, Hong Kong, France and Germany believe economic growth in the region will beat expectations, and they highlight efforts to improve internet connectivity as a potential reason.
Nearly three-quarters (74%) expect GDP growth in the region to be 4%-plus this year with one in five (21%) predicting 4.3% or higher. For 2023, 90% expect GDP growth to beat the IMF forecast of 4% with more than two out of five (43%) predicting 4.5% growth or higher.
The research highlights the importance to VC and private equity executives of improvements to internet connectivity in driving economic growth – around 57% say it is extremely important while 29% believe it is important. Around 12% say it is important along with other factors, while just 1% say it is not very important to economic development. But World Mobile warns innovation could be held back if businesses do not recognise the importance of internet connectivity.
World Mobile is one of the major innovators revolutionising internet connectivity in Africa and is already working with the government in Zanzibar. Its innovative solution includes launching a unique hybrid mobile network delivering connectivity supported by aerostats backed up with a range of technologies including mesh networking, hybrid spectrum, renewable energy, and blockchain. It plans to expand the network throughout the continent and is in discussions with government officials in Tanzania and Kenya, as well as other territories underserviced by traditional mobile operators.
Micky Watkins, CEO of World Mobile said: “Global economic growth is being hit by the fallout from the Russian invasion of Ukraine and the widening impact on food and fuel prices along with rising interest rates in the US.
“Countries in sub-Saharan Africa which are commodity importers are particularly affected, so it is good to see that venture capital and private equity investors on the ground believe that the economic outlook is more optimistic than thought by the IMF.
“They are right to highlight the importance of internet connectivity to economic development and it will only grow in the future, particularly for areas where delivering affordable and reliable connectivity remains an issue. World Mobile’s network based on the sharing economy sells affordable network nodes to local business owners, so they have the power to connect themselves and others while sharing the rewards. This will enable more people to access the opportunities that internet connectivity creates.”
World Mobile’s balloons will be the first to officially launch in Africa for commercial use, offering a more cost-effective way to provide a digital connection to people and is the first step in its mission to help bring nearly four billion people online before 2030 in line with the UN and World Bank’s SDGs.
World Mobile’s hybrid network takes a more sustainable approach than that of legacy mobile operators, offering innovative solutions to environmental, social and governance concerns. By using solar-powered nodes, second-life batteries and energy-efficient technology, the network mitigates its environmental impact. World Mobile also facilitates positive and sustainable societal growth through the application of its “sharing economy”, where locals share in the ownership and rewards of the network.
Zambia’s Finance Minister Faces Dual Challenge in Upcoming Budget Address
As Zambia’s Finance Minister, Situmbeko Musokotwane, prepares to present the nation’s budget, he finds himself at a pivotal crossroads.
The second-largest copper producer in Africa is grappling with two pressing concerns: debt sustainability and soaring living costs.
Debt Restructuring Dilemma: Musokotwane’s foremost challenge is finalizing the $6.3 billion debt-restructuring deal with official creditors, led by China and France.
Delays have hindered disbursements from the International Monetary Fund (IMF) and left private creditors in limbo.
To reassure investors, a memorandum of understanding with the official creditor committee is urgently needed.
President Hakainde Hichilema emphasizes the importance of sealing these transactions to signal closure on this tumultuous chapter.
Plummeting Tax Revenue: The key copper-mining industry, which accounts for 70% of Zambia’s export earnings, is in turmoil.
First-half mining company taxes and mineral royalty collections have nosedived, adding to economic woes.
This, in turn, has depreciated the local currency, exacerbating imported inflation, particularly in fuel prices.
Rising Food Inflation: Musokotwane faces mounting political pressure to combat soaring living costs, with annual inflation reaching an 18-month high of 12%. Corn meal prices, a staple in Zambia, have surged by a staggering 67% in the past year.
Neighboring countries’ demand for corn has led to smuggling and further price spikes, raising concerns about food security.
Currency Woes: The kwacha’s value has been a barometer for the nation’s economic health. It depreciated by 16% since June 22, the worst performance among African currencies, reflecting the ongoing debt-restructuring uncertainty.
In his budget address, Musokotwane faces the daunting task of striking a balance between debt management, economic stability, and alleviating the burden on Zambia’s citizens.
The international community will keenly watch to see if his fiscal measures can steer the nation toward a path of recovery and prosperity.
IMF Urges Sub-Saharan African Nations to Eliminate Tax Exemptions for Fiscal Health
Sub-Saharan African countries have been advised by the International Monetary Fund (IMF) to tackle their fiscal deficits by focusing on eliminating tax exemptions and bolstering domestic revenue rather than resorting to fiscal expenditure cuts, which could hamper economic growth.
The IMF conveyed this recommendation in a paper titled ‘How to avoid a debt crisis in Sub-Saharan Africa.’
The IMF’s paper emphasizes that Sub-Saharan African nations should reconsider their overreliance on expenditure cuts as a primary means of reducing fiscal deficits. Instead, they should place greater emphasis on revenue-generating measures such as eliminating tax exemptions and modernizing tax filing and payment systems.
According to the IMF, mobilizing domestic revenue is a more growth-friendly approach, particularly in countries with low initial tax levels.
The paper highlights success stories in The Gambia, Rwanda, Senegal, and Uganda, where substantial revenue increases were achieved through a combination of revenue administration and tax policy reforms.
The IMF also pointed out that enhancing the participation of women in the labor force could significantly boost Gross Domestic Product (GDP) in developing countries.
The IMF estimates that raising the rate of female labor force participation by 5.9 percentage points, which aligns with the average reduction in the participation gap observed in the top 5% of countries during 2014-19, could potentially increase GDP by approximately 8% in emerging and developing economies.
In a world grappling with the weakest medium-term growth outlook in over three decades, bridging the gender gap in labor force participation emerges as a vital reform that policymakers can implement to stimulate economic revival.
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