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11 October 2023 04 07 11 14
African growth Limited public debt, al- Intra-African trade is Additional liquidity
enablers are resilient though servicing costs set to rise from trade credit
to economic cycles remain high

16 18 23 29
Critical raw materials The youngest continent The demographic Conclusion and policy
and geo-diplomacy divided is not a done recommendations
deal

Allianz Research

Going together
and going far
Powering Africa´s economic and social potential
Allianz Research

Executive
Summary
The African continent is showing much greater resilience than expected,
given the set of macro-financial conditions. Economic resilience and
adaptability to prolonged political violence, events leading to business
interruption and challenging financing conditions will set the stage for an
Michaela Grimm,
Senior Economist acceleration in 2024-2025 as many growth enablers persist. Africa also
michaela.grimm@allianz.com retains lower growth volatility than other regions, with positive effects on
investor penetration, market expansion and overall business sentiment. If the
continent’s GDP growth resumes the pace of 2000-2010, the economy will
reach USD4.6trn by 2030, equivalent to a USD1.7trn increase.

Arne Holzhausen, Enhancing critical investment and liquidity conditions across Africa will be
Head of Insurance, Wealth and Trends vital to redress balance of payment imbalances caused by the asymmetric
arne.holzhausen@allianz.com
commodity price shock and tackle periodic currency devaluations. Effective
implementation of the African Continental Free-Trade Area may result in an
average income increase of +7% among member countries by 2035, while
increased trust and trade credit will free up to USD65bn or 2% of Africa’s GDP
to be reinvested into the real economy. Strengthening legal frameworks and
deepening financial and technological infrastructure will be key to attract
Maxime Lemerle
Lead Advisor, Insolvency Research foreign direct investment and unleash economic growth. This will not only
maxime.lemerle@allianz-trade.com improve the countries’ fiscal position but also lead to the development of a
more efficient and inclusive financial system, benefiting both domestic and
international investors.

Africa is also home to plenty of undervalued resources, including 24-

92% of global reserves of critical raw materials such as platinum,
Luca Moneta, cobalt, manganese, chromium and bauxite. It also possesses a long-term
Senior Economist for Africa and Middle East
luca.moneta@allianz-trade.com demographic dividend: The number of people aged between 15 and 64 will
surpass that of Europe, Latin America and Oceania combined in 15 years. If
we consider that in almost half of the African countries at least 50% of the
population aged 25 and older have either an account at a financial institution
or use a mobile money service, demography could be leveraged once legal
frameworks are strengthened and financial and technological infrastructure
Pablo Espinosa Uriel
Investment Strategist, Emerging deepen. This would create a more stable environment for investors and
Markets & Alternative Assets reinforce their confidence, with enhanced fiscal position, capillary logistics and
pablo.espinosa-uriel@allianz.com
wider financial inclusion as desirable outcomes.

Against a backdrop of geo-strategic challenges, investors, insurers and

pension funds have a vital role to play to attract the financial means
necessary for Africa to develop its economy further. A thriving insurance
sector can close protection gaps and help to reduce the “African premium“
for the cost of debt and foster a conducive environment for infrastructure
development.

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11 October 2023

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Allianz Research

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African growth
enablers are resilient to
economic cycles
Africa has achieved positive economic results even 2014, breaking away from the global average at rates
under challenging conditions. While Africa‘s “big comparable to those of lower-middle-income countries,
three“ economies – Nigeria, South Africa and Egypt including many Asian economies (Figure 1). Almost half
– have decelerated in recent years, growth rates of the continent’s population resides in countries that
have proven to be solid in other African countries, achieved annual GDP growth rates of more than +4.2%
demonstrating economic resilience and adaptability to from 2010 to 2019 – the simple average for the continent
prolonged political violence, events leading to business since 2000 – driven by rising investment, exports and
interruption and challenging financing conditions. In urbanization. If the continent’s GDP growth resumed the
fact, the continent grew significantly between 2000 and pace of 2000-2010, the economy would reach USD4.6trn
by 2030, equivalent to a USD1.7trn increase.

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Figure 1: GDP growth, selected aggregates (%)

Africa High income

Lower-middle income World
8

-2

-4

-6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023f
2024f
2025f
Sources: World Bank, Allianz Research forecasts

FigureGrowth
2: Macroeconomic forecasts
and Inflation Forecasts (%)
GDP growth (pps) Inflation (pps)
2023 2024 2023 2024
Africa 3.2 3.6 15.9 11.8
Algeria 2.4 1.8 9.0 4.8
Angola 2.6 3.5 12.0 10.5
Côte d'Ivoire 6.5 6.4 4.3 3.2
Egypt 2.8 3.5 40.0 32.0
Ghana 2.5 3.0 43.0 22.0
Kenya 4.4 5.2 7.5 5.5
Morocco 2.6 2.8 6.4 3.0
Mozambique 5.0 7.0 7.4 6.5
Nigeria 2.4 3.0 22.5 17.0
Senegal 5.5 8.0 8.0 4.0
South Africa 0.7 1.4 5.2 4.2
Tanzania 5.6 4.8 3.5 3.0
Tunisia 0.9 1.8 9.5 8.0

Source: Allianz Research

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Allianz Research

Figure 3: Country risk map, short-term indicators Figure 4: GDP of African countries in 2022 (USD bn)

Nigeria
507

Other countries
798
South Africa
Côte d'Ivoire 399
77
Tanzania
85
Egypt
Angola
387
118 Kenya
118
Morocco Ethiopia Algeria
139 156 206

Source: Allianz Research Sources: IMF, Allianz Research

We expect an acceleration in 2024-2025 as many environment and potential for industrial synergies.
growth enablers persist: Africa has lower growth Almost 300 of the above firms are not state-owned and
volatility than other regions, with positive effects on over 230 are homegrown¹. This positive trend in economic
investor penetration, market expansion and overall growth and company upscaling can be attributed to
business sentiment. At 24.5%, Africa’s average gross various factors, such as improved governance, increased
domestic investment on GDP between 2017-2022 has foreign direct investment and the implementation of
been the highest among world regions, if we exclude sound economic policies. Additionally, the region‘s
China, and 10-year rolling GDP volatility is also the abundant natural resources and young, dynamic
lowest globally (excl. China). African companies have workforce contribute to its attractiveness for both
also been scaling up, with almost 350 firms exceeding domestic and international investors.
USD1bn of turnover. This indicates a favorable business
Figure 5: Companies with revenues of USD1bn or more by country

147

33

23
20

12
9
6
4 4 4 4 3
Morocco

Ethiopia
Africa

Nigeria

Angola

Kenya

Tunisia

Senegal
Algeria

Ghana

Congo
Egypt
South

(DRC)

Sources: McKinsey, Allianz Research.

¹Source: McKinsey Global Institute, Reimagining economic growth in Africa, June 2023

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 11 October 2023

Limited public debt,

although servicing costs
remain high
Debt sustainability is related to liquidity constraints Historically, debt-to-GDP in Sub-Saharan Africa
more than solvency. Public debt across the region has remained below that of emerging markets and
has increased in recent years, but the average debt- developing economies and almost 20pps lower than
to-GDP ratio of African countries remains within the that of Northern African countries (Figure 6). Northern
average for emerging markets, indicating prudent debt African countries represent around 40% of the region’s
management in many countries. The number of defaults public debt, while Sub-Saharan Africa retains an
in 2020–2023 has been lower than expected, given average debt level under 60% of GDP, which is seen as a
external macroeconomic conditions and structural threshold for sustainability.
imbalances. Notably, low tax revenues and the small
size of national economies relative to the volume of
investment and trade rather than solvency cause
liquidity issues for African countries, especially those
south of the Sahara. This is particularly true for over 20
African countries that this year face interest payments
exceeding 10% of their revenue.

Figure 6: Debt-to-GDP, selected regional and economic aggregates (%)

Emerging market and developing economies

80 Africa
Sub-Saharan Africa
Northern Africa

60

40

20
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023f

Sources: IMF, Allianz Research

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Allianz Research

Figure 7: Public debt of African countries in 2022 (USD bn)

Egypt
421
Other countries
400
Ethiopia
56
Sudan South Africa
63 288
Ghana
65
Kenya Nigeria
79 Angola 181
81
Morocco Algeria
95 102
Sources: IMF, Allianz Research

Exposure to bilateral creditors is lower than that of inadequacy of restructuring processes. These risks are
developing countries, while private creditors have reflected in Africa’s high borrowing costs: The regional
been increasing their share. Many concerns have average cost of financing is around 12%, which is 8.5pps
been raised in recent years about the growing financial higher than the US benchmark. The caution adopted by
exposure of African governments to individual countries, several international organizations, such as the OECD,
chief among them China. Indeed, the debt incurred under the sustainable lending initiative has made it possible
by many African economies from single and private to maintain, on average, non-concessional indebtedness
creditors, including through the issuance of Eurobonds, that is still lower than that of developing countries (Figure
has increased. Sometimes it has reached levels that 8). Enhanced transparency and market-oriented reforms
make refinancing problematic. Debt restructurings will bring African countries increased access to institutional
have also revealed the fragility of these debts and the investors and retail markets in the future.

Figure 8: Public debt of African countries in 2022 (USD bn)

Private creditors Bilateral creditors Multilateral creditors

24
30 33
37

14
23
23
33

62
47 44
30

2010 2021 2010 2021

Developing countries African countries

Sources: UNCTAD, World Bank, Allianz Research

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 11 October 2023

Over 20 African countries face interest payments Such a premium persists due to several key factors,
exceeding 10% of their revenues (Figure 9), a larger including the transparency of the budget process, the
share than what they can allocate to education and significance of the informal sector, the level of financial
health. However, there are some countries where foreign development and the quality of public institutions.
debt remains relatively high, demonstrating a relatively Misperceptions and biases hinder the harmonization
good appetite from international markets. These countries of macroeconomic fundamentals with a suitable price-
are also less exposed to interest payments as a share of to-risk ratio, thereby prompting international investors
respective fiscal revenues. to exhibit asymmetric and herding behavior, clustering
African debt assets together as a single category. The
The cost of debt is a major concern: the “Africa premium” informal sector, which has played a significant role
in access to liquidity is a spread of between 2.9% and in Africa‘s resilience over the past 18 months, is also
3.4% in sovereign bond rates , mostly associated with exerting upward pressure on borrowing costs. This is due
fiscal transparency, political volatility and exposure to to its impact on the government‘s revenue-generation
capital flight. The regional cost of financing for sovereigns capabilities, which hinder its ability to effectively
is around 12%. Conversely, location risk influences meet debt obligations. Similarly, investors are likely
disparities in interest rates in a more pronounced way at the to charge countries whose financial markets are still
corporate and retail level compared to international peers. underdeveloped with higher premia to buffer against
the risk of bond illiquidity.
Figure 9: Interest payments on public debt and share of FX-denominated public debt, selected African countries

60
Interest payments 2023-2024 (% of fiscal

Egypt
50
Ghana

40
revenues)

30 Zambia
Nigeria Kenya
Angola
20 South Africa
Côte d'Ivoire
Tanzania Tunisia
10 Mozambique
Morocco Cameroon
Senegal
Algeria Ethiopia
DRC
0
0 20 40 60 80 100
FX-denominated debt (% of total debt as of Dec 2022)

Sources: IMF, Refinitiv, Allianz Research

The cost of debt is a major concern: the “Africa premium” macroeconomic fundamentals with a suitable price-
in access to liquidity is a spread of between 2.9% and to-risk ratio, thereby prompting international investors
3.4% in sovereign bond rates², mostly associated with to exhibit asymmetric and herding behavior, clustering
fiscal transparency, political volatility and exposure to African debt assets together as a single category. The
capital flight. The regional cost of financing for sovereigns informal sector, which has played a significant role
is around 12%. Conversely, location risk influences in Africa‘s resilience over the past 18 months, is also
disparities in interest rates in a more pronounced way at exerting upward pressure on borrowing costs. This
the corporate and retail level compared to international is due to its impact on the government‘s revenue-
peers. Such a premium persists due to several key factors, generation capabilities, which hinder its ability to
including the transparency of the budget process, the effectively meet debt obligations. Similarly, investors
significance of the informal sector, the level of financial are likely to charge countries whose financial markets
development and the quality of public institutions. are still underdeveloped with higher premia to buffer
Misperceptions and biases hinder the harmonization of against the risk of bond illiquidity.

² “Sub-Saharan Africa’s Risk Perception Premium: In the Search of Missing Factors”, IMF Working Paper, June 2023

9
Allianz Research

Figure 10: Comparison of sovereign spreads of African and non-African countries with similar economic fundamentals that shows the
existence of an “African premium”, 2015-2021

Africa Africa
1,600 1,600
Other EM

Sov USD spreads, bps

Sov USD spreads, bps

Linear (Africa)
1,200 Other EM 1,200 Linear (Other EM)

800 800

400 400

0 0
-2 0 2 4 6 8 10 20 40 60 80 100 120
real GDP annual growth % Public debt to GDP ratio

Sources: Bloomberg, Allianz Research

There are several ways to reduce the “Africa premium”,

from self-financing through more effective taxation to
the opening of the stock market and increased pension
and social protection to mobilize long-term, sustainable
investment. Efforts to improve debt transparency are
ongoing, with some countries, including Nigeria – Africa’s
largest economy – implementing measures to enhance
the reporting, disclosure and sustainability of the pension
system. These efforts have helped African countries
attract foreign investment and secure more favorable
borrowing terms, as was the case for Morocco earlier
this year, but also for Senegal, Ghana and Côte d’Ivoire.
Collaboration with international lenders has fostered
greater accountability and facilitated risk assessment
and management of debt levels. However, challenges
remain as some countries continue to struggle with high
debt burdens, hindering their ability to invest in crucial
development projects and meet the needs of their
populations.

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 11 October 2023
Photo by Rohan Reddy on Unsplash

Intra-African trade
is set to rise
Intra-African trade is set to expand as 47 out of 54 trade under the favorable system. The remaining 10%,
signatories of the African Continental Free-Trade Area which mostly covers sensitive sectors like textiles and
(AfCFTA) have already ratified the agreement. The apparel, as well as the automotive industry, is still up
pact aims at phasing out tariffs on 90% of goods and for discussion.
unlocking the full potential of the Pan-African Payments
and Settlement System. Already hailed as the largest With 47 of the 54 signatories having submitted
active free-trade area in terms of members, population tariff-reduction schedules, the objective to phase
and geographical size, the free-trade area is up and out tariffs on 90% of items by 2030 at the latest
operating. It covers more than 1.3bn people for an seems at hand, while members will have more
aggregate nominal GDP of around USD3trn. time to eliminate tariffs on 7% of sensitive goods.
Commitments to free trade in services have yet to be
There has been very little actual trade within the made for the five priority sectors for liberalization:
framework of the agreement since its entry into force business services, communications, financial services,
in 2021, but the foundations are being laid and five transportation and logistics and tourism. Phase two
more members, including Morocco and Mozambique, covers intellectual property rights (IPRs), investment
ratified the agreement after Russia invaded Ukraine policy and competition policy, with an outline for the
in February 2022. Phase one, which is related to protocols that have also been agreed by ratifying
negotiations on goods, is nearly complete. For 90% of countries. After phase two is completed, phase three
the items to be traded under the agreement, rules of will begin on protocols related to digital commerce
origin are settled, which is critical to ensuring that only and women and youth in trade, but there is no set
authentic African goods benefit from tariff discounts and schedule for when these conversations will begin or
end.

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Allianz Research

Figure 11: African countries that have ratified the AfCFTA

Sources: AfCFTA, Allianz Research.

Among the operational instruments of the AfCFTA, PAPSS will revolutionize intra-African trade by reducing
the Pan-African Payments and Settlement System transaction costs by USD5bn annually for African
(PAPSS) stands out as a single platform for making enterprises. No cryptocurrencies or central bank digital
and receiving payments to and from regional currencies will be accepted, at least for now.
partners. If we consider that approximately 42 distinct
currencies are in use across Africa right now, the Effective implementation of the agreement may
PAPSS would allow African businesses to trade among result in an average income increase of 7% among
themselves using their own currency, speeding up member countries by 2035 compared to the baseline
payment and settlement for deals while cutting their scenario, with peaks of 10% or more in Côte d‘Ivoire,
expenses through a proprietary cloud-based digital Zimbabwe, Kenya, Namibia, Tanzania and the
platform. Settlements between two African currencies Democratic Republic of Congo. This number includes
were previously settled in a third, external currency, the benefits of tariff and non-tariff barriers (NTBs) as
typically USD or EUR, via correspondent banks based well as those of trade facilitation (TF) tools.
outside of Africa – some 48% of all bank payments
involve foreign lenders. At a time when Africa’s central
banks need to look after foreign exchange and liquidity
requirements carefully, it has been estimated that

Figure 12: African countries that have ratified the AfCFTA

Tariffs, NTBs and TF Tariffs and NTBs Tariffs only

14%
12%
10%
8%
6%
4%
2%
0%
Tanzania

Cameroon

AfCFTA average

Botswana
Côte d'Ivoire

South Africa
Kenya

Morocco

Mozambique
Ethiopia

Nigeria
Namibia

Burkina Faso

Tunisia

Senegal

Madagascar
Zimbabwe

Ghana

Zambia

Malawi
Rwanda
Mauritius
Egypt

Uganda
Congo, Dem. Rep.

Source: World Bank, Allianz Research

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 11 October 2023

Improving liquidity will also help improve the place commercial risk with instruments such as the letter of
ratios of banking systems, particularly in those credit. As credit conditions tighten, a gradual adoption to
countries where the nexus with the sovereign (i.e. the trade credit solutions is likely to materialize, with credit risk
interdependence of the banking system as a lender progressively shifting from banks to buyers.
in turn guaranteed more or less implicitly by the
government) is more pronounced. A lower standing of
banks and scarce liquidity is weighing on the ability to

Figure 13: African banking sector heatmap, selected countries

Trend of main Credit External Exposure to

Operating Capital Sovereign Government
Economic risk sectors of growth funding NPLs state-owned
profit adequacy risk support
exposure volatility conditions entities
Nigeria
Egypt
South Africa
Kenya
Morocco
Angola
Tunisia
Ghana

Sources: National authorities, IMF, Fitch, Allianz Research

Photo by Rohan Reddy on Unsplash

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Allianz Research

Additional liquidity from

trade credit
Giving buyers in Africa 30 more days in payment terms late payments with African buyers are generally judged
would free up the equivalent of 2% of the continent’s to be either “very frequent“ (two out of 10 countries), or
GDP. Past and present bad payment experiences “very frequent“ or “frequent“ in the absence of secure
with buyers in African countries, whether linked to operations (seven out of 10). Most often, these delays are
counterparty risks, non-transfer risks or political risks, attributable to a lack of foreign currency (unavailable
are seriously harming the development of African at the time of transfer), but they are also due either to
companies, and thus Africa as a whole. Indeed, the a lack of cash flow or banking support for SMEs, or to
lack of inter-company credit translates de facto into an administrative or customs clearance problems.
increase in the working capital requirements of African
companies, against which they mobilize financing Whatever the case, the short payment terms granted
capacities that could be more judiciously employed. to African companies are clearly damaging, firstly, at
the microeconomic level, since each transaction carried
A closer look at international payment practices³ reveals out without a payment period increases the WCR of the
that payment terms are the exception rather than African companies concerned and reduces their available
the rule for African buyers. In seven out of 10 African cash flow. This is a double whammy: on the one hand,
countries, payment terms consist of pre-payment or, higher transaction costs, both administrative costs linked
failing that, documentary credits, the latter being (i) to documentary credits and other guarantees, and
“at sight“ or at best “30 days“ and (ii) “irrevocable“ and financing costs (since supplier credit is “free“ compared
even “confirmed“. And for three countries out of 10, to bank credit); on the other hand, financial resources
payment deadlines are granted and can extend to 60 that could be mobilized for more useful purposes –
days, provided that the transaction is secure. SWIFT such as debt reduction or investment in production
transfers are then guaranteed either by a stand-by capacity, business development or R&D. There is also a
letter of credit or by credit insurance. This constraint macroeconomic impact that should not be overlooked.
is in addition to the down payments negotiated by For Africa, which imports over USD800bn worth of goods
international sellers, which are “highly recommended“ in and services every year, allowing 30 days payment on
eight African countries out of 10. imports would free up around USD65bn in working
capital. This is equivalent to over 2% of Africa‘s GDP or
It is true that international sellers are reinforced in their the GDP of the Democratic Republic of the Congo (DRC),
demands by the level of risk of late payment. In practice, Africa‘s 12th largest economy just behind Côte d‘Ivoire.

³ Based on information published by the Moniteur du Commerce International (2022 edition) for 32 African countries, which respectively account for
94% and 93% of Africa‘s GDP and imports.

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Figure 14: Increase in working capital requirements by country with a trade credit extension of 30 days
Unleashed WCR with
2022 imports
+30 days in DPO
USDbn USDbn % of GDP
Algeria 46.4 3.7 1.9%
Angola 28.3 2.3 1.9%
Benin 5.4 0.4 2.5%
Burkina Faso 6.7 0.5 2.8%
Cameroon 9.5 0.8 1.8%
Congo 3.3 0.3 2.1%
Côte d'Ivoire 19.1 1.5 2.2%
DRC 27.5 2.2 3.5%
Djibouti 5.8 0.5 12.9%
Egypt 95.3 7.7 1.6%
Eq. Guinea 2.6 0.2 1.3%
Ethiopia 24.2 1.9 1.6%
Gabon 4.8 0.4 1.8%
Ghana 24.9 2.0 2.8%
Guinea 5.7 0.5 2.3%
Kenya 23.6 1.9 1.6%
Libya 12.4 1.0 2.3%
Madagascar 4.6 0.4 2.5%
Mali 6.8 0.5 2.9%
Mauritania 6.0 0.5 4.7%
Mauritius 8.0 0.6 5.1%
Morocco 72.9 5.9 4.3%
Mozambique 15.8 1.3 7.1%
Niger 4.2 0.3 2.2%
Nigeria 76.7 6.2 1.3%
Rwanda 4.9 0.4 3.1%
Senegal 13.1 1.1 3.8%
South Africa 127.3 10.3 2.5%
Tanzania 16.6 1.3 1.7%
Togo 2.8 0.2 2.8%
Tunisia 28.7 2.3 5.0%
Uganda 11.1 0.9 1.8%
Selected countries (32) 745.3 60.0 2.2%
Other countries 57.5 4.6 2.7%
Total Africa 802.7 64.7 2.2%

Sources: IMF, WTO, LeMoci, Allianz Research

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Allianz Research

Photo by Zach Wear on Unsplash

Critical raw materials
and geo-diplomacy
In recent years, Africa has demonstrated remarkable underpin Africa‘s economic prosperity for the long term.
strategic acumen in geo-diplomacy, transforming Furthermore, the evolving global financial landscape,
its economic landscape through infrastructure particularly China turning inwards, is opening
development, the management of critical raw windows of opportunity for nearshoring and fostering
materials and the cultivation of strategic partnerships. collaboration, even among African countries.
This prowess in geo-diplomacy is now converging with a
burgeoning focus on next-generation commodities, such
as natural gas, hydrogen and minerals, which are set to

Figure 15: Reserves of selected raw materials

Africa Rest of the World

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Sources: USGS, BP, Allianz Research.

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Africa‘s smart geo-diplomacy revolves around the art of On the other hand, the pursuit of next-generation
forging strategic partnerships that bolster infrastructure commodities necessitates significant investments in
development and resource management. Recent infrastructure, technology and human capital. While
initiatives have seen Africa collaborating with diverse traditional financing sources remain relevant, Africa
countries and organizations, from China to the US and is diversifying its options. China‘s increasing domestic
the EU, to invest in critical infrastructure projects. These focus is prompting African nations to explore new
projects, including roads, railways and ports, serve as avenues for funding. Africa has exhibited growing
the bedrock of economic growth, connecting regions disaffection towards Chinese lending practices and
and facilitating the flow of goods, people and ideas. concerns over the lack of transparency in contracts
Moreover, Africa‘s strategic engagements with nations involving Chinese firms, highlighting the need for
in the Middle East and Asia have opened doors to more equitable and transparent partnerships. This
investments and technological exchanges, bolstering shift presents windows of opportunity for nearshoring,
its development goals. This adaptable approach both among African countries and with other regional
ensures that Africa benefits from these collaborations, powers. African nations can invest in local industries
showcasing its nuanced understanding of geo- and value chains, fostering self-reliance and regional
diplomacy. integration. Initiatives like the AfCFTA facilitate
the movement of goods, services and investments,
Africa‘s geo-diplomatic intelligence extends beyond enhancing intra-continental collaboration.
partnership-building to skillful middle power diplomacy.
The continent adeptly navigates the complex landscape Africa‘s multifaceted approach to geo-diplomacy and
of global politics, playing a role in multilateral forums its embrace of next-generation commodities position
with single countries and more recently with the African the continent for a prosperous and self-reliant future.
Union (AU) joining the G20 as a permanent member By leveraging its strategic partnerships, middle power
(adding up to South Africa). Within the AU, Africa diplomacy and resource management expertise,
champions peacekeeping missions, conflict resolution Africa is poised to harness the potential of natural gas,
and sustainable development, solidifying its position as hydrogen, minerals and other commodities. Diverse
a responsible middle power. Negotiations around BRICS financing sources and nearshoring initiatives further
enlargement have also increased Africa’s visibility and reinforce Africa‘s trajectory toward economic prosperity
outreach. and sustainability on the global stage.

Africa‘s resource management prowess extends to the

strategic handling of critical raw materials, including
minerals, oil and gas. The continent‘s vast reserves
have made it a key player in global supply chains,
and Africa is actively asserting control over resource
extraction and distribution to ensure equitable benefits
while mitigating exploitation risks. African nations are
forming cooperative agreements, regulating mining and
agricultural practices and emphasizing value addition
within their borders. By controlling the supply chain,
Africa can negotiate favorable terms with international
partners and attract investment that promotes
sustainable resource management.

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Allianz Research

Photo by Palesa on Unsplash

The youngest continent
Demographic developments are in favor of Africa.
While in all other world regions population growth is
set to slow down markedly or even turn negative as
in Europe, Africa’s population is expected to grow by
around 1bn people, or 70%, from 1,460mn people today
to 2,485mn in 2050, keeping its position as the second
most populous continent behind Asia (Figure 16).

Figure 16: Population, by world region

5500
popoulation (in million)

5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Africa Asia Europe Latin America* Northern America Oceania

2023 2050

*Latin America and the Caribbean

Sources: United Nations Population Division, Allianz Research

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 11 October 2023

Africa is also set to remain the youngest world region but with 4.2 children in 2022 they are still well above
in the long run due to the combination of high fertility the reproduction rate of 2.1 children. UN demographers
rates on the one hand and a still comparatively low expect this development to continue and assume a
average life expectancy on the other, though these both further decline to an average 2.9 children in 2050, while
reflect the still low development level of many African fertility rates in other world regions are expected to
countries. Since the mid-1970s, fertility rates have fallen, remain below the reproduction level (Figure 17).
Figure 17: Development of fertility rates, by world region

7.0

6.0
Fertility rates

5.0

4.0

3.0

2.0

1.0

0.0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Africa World Oceania Asia

Latin America* Northern America Europe reproduction rate

*Latin America and the Caribbean

Sources: UN Population Division, Allianz Research.

At the same time, Africa records the lowest life much higher than in Latin America and Asia (around five
expectancy at birth of all world regions, lagging behind years). The UN expects the average life expectancy at
the development in other emerging regions. Since 1950, birth in Africa to increase to 68.3 years in 2050, a value
the average life expectancy of a newborn in Africa has that had already been reached in Asia in 2001 and in
increased from 37.6 years to 62.2 years in 2022. With Northern America in 1952 (Figure 18).
17 years, however, the gap to developed regions is still

Figure 18: Development of the average life expectancy at birth, by world region
90

80
Life expectancy at birth (in years)

70

60

50

40

30
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Northern America Europe Oceania Latin America* Asia World Africa

*Latin America and the Caribbean

Sources: UN Population Division, Allianz Research.

19
 Allianz Research

From 2038, Africa will have more people aged

between 15 and 64 than Europe, Latin America and
Oceania combined. The number of people in the age
group 15 to 64 is expected to increase by an average
+2.3% per year, i.e. to almost double from 804.5mn to
1556.5mn in 2050. (Figure 19).

Figure 19: Population development, by age group (in million)

2500
population, by age group (in million)

2000

1500

1000

500

0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0 to 14 15 to 64 65+

Sources: UN Population Division, Allianz Research

Given the growth rate of the number of people in raise again from then onwards. With the majority of the
working age between 15 and 64, Africa has the best population of working age, there is an opportunity to
demographic preconditions to become the future increase economic growth and overall living standards,
economic growth hub of this century. Especially since invest in infrastructure, and build effective social
the total dependency ratio, which measures the number security systems that are sustainable over the long
of economically dependent people aged between 0 term. Examples of countries which succeeded in turning
and 14 and 65 and older per 100 people in working age this demographic transition phase into a demographic
between 15 and 64 years, is set to decline further from dividend are today’s industrialized countries, including
77% today to 52% in 2077 before it is expected to slowly Japan and South Korea, but also China.

20
 11 October 2023

Figure 20: Total dependency ratios, by world region

95

90
and 65+ in % of poopulation aged 15 to 64)
total dependency ratios (age groups 0-14

Europe
85
Latin America
80
Northern America
75
Asia
70 Oceania
65
World
60

55
Africa
50

45

40
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

*Latin America and the Caribbean

Sources: UN Population Division, Allianz Research

The timing of the demographic dividend also differs the fertility rate negatively correlated, there are marked
by country. Given the heterogeneity of the demographic differences between the countries. In 2022, the average
and economic development of the African countries, life expectancy at birth ranged from merely 53.0 years
time horizons until the demographic window of in Chad and Lesotho to 82.6 years in Réunion and the
opportunity is going to close differs markedly. Since the fertility rates between 6.7 in Niger and 1.3 in Mauritius
average life expectancy is positively correlated to the (Figure 21).
overall living standard measured in GDP per capita, and

Figure 21: Fertility rates and life expectancy at birth

7
Niger
Somalia
Chad
Congo, DR
6 CAF Mali

Nigeria Angola
5 Benin Burundi

Mozambique Sudan Tanzania

South Sudan Mayotte
fertlity rate

4 Guinea Comoros
Eritrea
Zimbabwe Gabon
Namibia Kenya
3 Lesotho Egypt
Eswatini Algeria
Djibouti Botswana
South Africa Morocco Réunion
2 Seychelles Tunisia
Cabo Verde
Saint Helena
Mauritius
1

life expectancy at birth, both sexes (in years)

0
40 45 50 55 60 65 70 75 80 85 90

Sources: UN Population Division, Allianz Research.

21
 Allianz Research

Hence, in Northern and Southern Africa, the

demographic dividend is set to fade out around 2040.
In Eastern Africa the total dependency is expected to
reach is turning point in the mid-2070s, while in Middle
Africa and Western Africa it is not expected to increase
before 2092 (Figure 22).

Figure 22: Total dependency ratios, by African region

100
total dependency ratios (age groups 0-14

95
and 65+ in % of age group 15-64)

90
85
80
75
70
65
60
55
50
45
40
1950 1975 2000 2025 2050 2075 2100

Sub-Saharan Africa Eastern Africa Middle Africa

Northern Africa Southern Africa Western Africa

Sources: UN Population Division, Allianz Research

22
 11 October 2023
Photo by Annie Spratt on Unsplash

The demographic dividend

is not a done deal
The education and qualification of the labor force are this holds true for 72% and in Western and Central
key to economic progress. This holds especially true in Africa only for 60% of the population. This compares
the case of Africa, where many countries still must build to a global average of 87%. However, some progress
the basic preconditions by increasing the literacy rate has been made in increasing the youth literacy rate,
among the population. In Middle East and Northern reflected by the fact that in the age group 15 to 24
Africa, only 77% of the population aged 15 and older literacy rates are between 9-13pps higher than among
can read and write. In the Eastern and Southern Africa, the total population aged 15 and older. (Figure 23).
Figure 23: Development of literacy rates, by region

95
85
75
65
55
45
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Literacy rate, adult total Literacy rate, youth total

(% of people ages 15 and above) (% of people ages 15-24)

Middle East & North Africa (excl. high income)

Eastern and Southern Africa
Sub-Saharan Africa
Western and Central Africa

Sources: World Bank World Development Indicators, Allianz Research

23
Allianz Research

In most African countries, less than 80% of children have only limited reading, writing and mathematical
complete primary school, compared to almost 100% in skills. New technologies that enable remote
industrialized countries. learning can help to ease the access to education
and vocational training.⁵ However, lacking basic
The completion rates of upper secondary education are infrastructure such as sufficient power supply could
also still markedly below the levels observed in other hamper their use. In fact, in most African countries, less
emerging markets or industrialized countries: only four than 50% of the population uses the internet.
countries (Egypt, Mauritius, Tunisia and South Africa)
have rates of 60% and more; in the US, this share was Combating youth unemployment is also essential
94.6% and in China 75.3%. for harnessing the demographic dividend. 20% of
Africa’s population is aged between 15 and 24 and
In this context, improving education systems and the number of young people entering the labor
the access to education remains an important goal. market each year is set to increase from 30mn today
However, in many countries, the lack of qualified to more than 55mn until the end of the century. In
teachers and large classes hinder educational success. this context, improving access to free education and
According to the latest available UNESCO data, only training and the integration of young people into the
57.4% of children in South Africa had achieved at labor market is not only crucial to prevent long-term
least a minimum proficiency level in reading at the unemployment and enhance social inclusion, but also
end of primary education. As a consequence, many to prevent social unrest (Figure 24).
adolescents and adults, despite claiming to be literate,

Figure 24: Number of young people turning 18 (in mn)

60

50
18-year-olds (in million)

40

30

20

10

0
1950 1975 2000 2025 2050 2075 2100

Sources: UN Population Division, Allianz Research

⁵See UNESCO, Annual Report 2022; Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ, 2017), Digital transformation in the informal
economy. Opportunities and challenges for technical and vocational education and training in development cooperation.

24
 11 October 2023

Against this background, many African governments However, not only the absolute shares of NEETs
have already stepped up their efforts to improve give reason for concern, but also the development
vocational education and training (VET).⁶ However, in recent years: Though the good news is that most
despite ongoing efforts the situation has hardly countries have managed to return to pre-Covid-19
improved: In most African countries, the shares of levels, the situation of the youth has in most countries
youth that are not in employment, education or hardly improved within the last 10 years. In fact, in
training were still markedly above 25%. Africa’s most more than half of the African countries the share of
populous and biggest economies were found among youth not in employment, education or training is even
the ten countries which reported the highest shares: higher than in 2012 (Figure 25).
In Nigeria, 36.3% of the adolescents were neither in
employment, education or training. In South Africa, this
held true for 34.4% of the youth.

Figure 25: Share of youth not in employment, education or training (NEET) (in %)

45
40
2012 2022
Share of NEETs (in %)

35
30
25
20
15
10
5
0
Burkina Faso

Benin

Namibia
Tunisia
Guinea
South Africa

Cabo Verde
Senegal

Western Sahara

Equatorial Guinea

Kenya

Angola
Nigeria

Libya
Eswatini

Congo, DR

Mali
Rwanda

Morocco
Botswana
Zambia

Comoros
CAR
Eritrea

Ghana

Liberia
Tanzania
Burundi
Madagascar
Somalia

Mauritania

Gabon

Guinea-Bissau
Niger

Malawi
Chad

Congo
Djibouti
Algeria

Uganda
Zimbabwe
Mauritius
Ethiopia
Lesotho

Sierra Leone

Sudan

Gambia

Togo
Sao Tome & Principe

Côte d'Ivoire
Mozambique

Cameroon
Egypt
South Sudan

Sources: ILO, Allianz Research

⁶ See for example Federal Republic of Nigeria (2021): Nigerian youth employment action plan 2021-2024.

25
Allianz Research

The demographic transition phase with relatively low of public health systems were reported in Northern and
shares of an economically dependent population is Southern African countries, with a coverage rate of 78% in
also a window of opportunity for building sustainable Algeria and around 70% in Tunisia, Morocco, South Africa
social security systems. Today, in most African and Egypt. In contrast, in Chad and South Sudan, merely
countries, the coverage of the public health and pension 28% of the population was covered by the health system.
systems is still rather low. According to the International For comparison, in most industrialized countries, this
Labour Organization (ILO), the highest coverage rates coverage ratio is above 80% (Figure 26).

Figure 26: Effective coverage of health systems

Source: ILO

The coverage of pension systems is also comparatively The coverage of the working-age population does not
low. In most African countries, less than 20% of the point to an improvement of the situation in the short run.
population aged 65 and older receives a public pension, In most African countries, less than 15% of the workforce
with only a few exceptions (Figure 27). Furthermore, population are effectively covered by the pension
in most countries, benefit levels are rather low and system, i.e. paying into the pension system and building
payments are often delayed. up future pension entitlements (Figure 28). The main
reason is the high share of informal labor which exceeds
90% in many countries.⁷

⁷ See World Bank and National Bureau of Statistics Nigeria.

26
 Coverage of labor force (in %)
Coverage of older persons (in %)

100

10
20
30
40
50
60
70
80
90

100

20
40
60
80

0
Botswana
Gabon Eswatini
Tunisia Mauritius
Mauritius Namibia
Seychelles
Egypt Lesotho
Cabo Verde Cabo Verde

Source: ILO, Allianz Research

Source: ILO, Allianz Research
Algeria Tunisia
Eswatini South Africa
Morocco Libya
Sao Tome & Principe Sao Tome & Principe
Libya Algeria
Zimbabwe Egypt
Guinea Mozambique
Gabon
Botswana Senegal
Congo, DR Morocco
Zambia Congo
Figure 27: Pension system coverage of older persons

Ghana Zimbabwe
Angola Togo
Gambia Cameroon
Kenya Ghana
Senegal Gambia
Cameroon Mauritania
Congo, DR
Namibia Angola
Djibouti Djibouti

Figure 28: Labor force covered by the pension system (active contributors)
Mauritania Kenya
Rwanda Uganda
Congo Benin
Nigeria Nigeria
Côte d'Ivoire Sudan
Burkina Faso Guinea-Bissau
Sierra Leone Zambia
Côte d'Ivoire
Mali Tanzania
Ethiopia Mali
Liberia Sierra Leone
Benin Burkina Faso
Mozambique Niger
Madagascar CAR
South Africa Madagascar
Burundi Burundi
Uganda Ethiopia
Liberia
Malawi Rwanda
Sudan Malawi
Tanzania Guinea
Lesotho Chad
Togo South Sudan
Niger
CAR
Guinea-Bissau
Chad

27
11 October 2023
 Allianz Research

Private provision can help to reduce the public However, private insurance coverage is still rather low,
social security systems’ protection gaps. However, albeit with marked differences between the countries.
a necessary precondition is the access to financial The insurance penetration, i.e. premiums as a percentage
services. In fact, within the last decade, most African of GDP, ranges from 0.2% in Chad to 12.1% in South Africa,
countries have made progress in this respect. In the where the market is dominated by the life insurance
meantime, in almost half of the African countries, at business, which accounts for almost 80% of total gross
least 50% of the population aged 25 and older have written premiums (Figure 29). In contrast, in most other
either an account at a financial institution or at least African countries, the higher share of insurance premium
use a mobile money service. In 2014, this was the case in income stems from the non-life sector, with motor
merely eight countries. insurance being the strongest business line. Increasing
motorization – the number of cars in use has increased by
4% between 2015 and 2020 – and the fact that in many
African countries, car insurance and third-party-liability
insurance are still not compulsory should boost demand
for motor insurance further.

Figure 29: Insurance penetration, total gross written premiums (percent of GDP)
14

12
GWP, total (in percent of GDP)

10

Equatorial…
Botswana

Benin

Tanzania
South Africa

Swaziland

Cameroon

Sierra Leone

Guinea*
Lesotho

Kenya
Mozambique

Sudan
Togo

Congo, DR

Nigeria
Ethiopia

Chad
Namibia

Seychelles

Cape Verde

Burundi
Burkina Faso

Gabon
Djibouti

Eritrea

Angola

Madagascar
Niger
Senegal

Ivory Coast

Mali
Zimbabwe

Rwanda

Zambia
Malawi

Ghana

Gambia*
CAR

Mauritania
Mauritius

Uganda
Congo, Rep.

*2016
Sources: Axco, Allianz Research

Despite the need for private provision, life insurance in a competitive market. In addition, strengthening
demand is still rather low, especially due to low capital-funded provision could also be a means to
income levels. Gross written premiums in all but the close long-standing gaps in infrastructure investment,
South African countries are still at or markedly below since institutional investors, like insurance companies
1% of GDP. Occupational pension or saving schemes and pension funds⁸, can provide the necessary capital
could help to close the protection gaps in old-age, which and risk management tools to support these projects,
again emphasizes the need for a formalization of the ensuring their successful implementation and long-
labor markets. In fact, in the near term, life insurance term sustainability.
demand is expected to be especially driven by large
companies that start to offer occupational insurance
schemes as an incentive to attract and retain top talent

⁸ According to the latest OECD statistics, accumulated assets in asset-backed pension arrangements in Ghana, Kenya, Morocco, Namibia, Nigeria,
Uganda, Zambia and Zimbabwe reached USD76.1bn in 2022. Corresponding to between 2.7% of GDP in Zambia and 11.3% in Kenya and Uganda. In
Namibia, they accounted for 101.3% of GDP. For comparison, the average in OECD countries was 81.3%. See OECD (2023): Pension markets in focus.
Preliminary 2022 data.

28
 11 October 2023

Conclusion and policy

recommendations
Africa‘s remarkable economic resilience and However, to fully harness this potential, addressing
adaptability have been on full display, with numerous critical investment and liquidity conditions is
countries maintaining solid growth rates despite paramount. Strengthening legal frameworks and
challenging conditions. This resilience, coupled with the deepening financial and technological infrastructure
continent‘s lower growth volatility compared to other are vital steps that will not only attract foreign direct
regions, offers an inviting landscape for investors. It not investment but also foster a more efficient and inclusive
only encourages increased investor engagement but also financial system. These efforts hold the promise of
promises expanded market opportunities and a generally improving fiscal positions and benefitting both domestic
positive business environment. Moreover, Africa‘s wealth and international investors.
of underutilized resources and its demographic dividend
provide compelling prospects for long-term investments, Harnessing the demographic dividend requires further
provided the necessary foundational elements are put in actions by the governments, first and foremost to
place. In the face of complex geo-strategic challenges, markedly increase spending on education, secure
investors, insurers, and pension funds hold a pivotal role free access to educational institutions and reduce
in providing crucial financial support to nurture Africa‘s child labor. Efforts to improve vocational education
economic development and create a stable atmosphere and training (VET) have to be stepped up, too. Steps to
conducive to growth. reduce youth unemployment like the inauguration of a
Technical Working Group (TWG) on Youth Employment
One of the key drivers of Africa‘s economic and Skill Development in Nigeria are highly welcomed.
transformation lies in the implementation of the African Other countries should follow swiftly as high
Continental Free-Trade Area, offering substantial unemployment rates among the young threaten to turn
income growth and increased trade credit potential. into a source of social unrest. Essential for a thriving
This initiative has the capacity to unlock billions of insurance sector to close protection gaps are open
dollars for reinvestment in the real economy, leading to capital markets and transparent regulations to attract
significant economic expansion by 2030 if GDP growth both domestic and foreign investors. This also helps
can regain the momentum of the 2000-2010 period. reduce the “African premium“ and foster a conducive
environment for infrastructure development.

29
Allianz Research
ALLIANZ RESEARCH

Our
team

30
 11 October 2023
Chief Economist Head of Head of Insurance, Wealth
Allianz SE Economic Research & Trend Research
Allianz Trade Allianz SE

Ludovic Subran Ana Boata Arne Holzhausen

ludovic.subran@allianz.com ana.boata@allianz-trade.com arne.holzhausen@allianz.com

Macroeconomic Research

Maxime Darmet Cucchiarini Roberta Fortes Jasmin Gröschl Françoise Huang

Senior Economist for US & France Senior Economist for Ibero-Latam Senior Economist for Europe Senior Economist for Asia Pacific
maxime.darmet@allianz-trade.com roberta.fortes@allianz-trade.com jasmin.groeschl@allianz.com francoise.huang@allianz-trade.com

Maddalena Martini Luca Moneta Manfred Stamer

Senior Economist for Italy & Greece Senior Economist for Africa & Middle East Senior Economist for Middle East &
maddalena.martini@allianz.com luca.moneta@allianz-trade.com Emerging Europe
manfred.stamer@allianz-trade.com

Corporate Research

Ano Kuhanathan Aurélien Duthoit Maria Latorre Maxime Lemerle

Head of Corporate Research Senior Sector Advisor, B2C Sector Advisor, B2B Lead Advisor, Insolvency Research
ano.kuhanathan@allianz-trade.com aurelien.duthoit@allianz-trade.com maria.latorre@allianz-trade.com maxime.lemerle@allianz-trade.com

Capital Markets Research

Jordi Basco Carrera Bjoern Griesbach Pablo Espinosa Uriel

Lead Investment Strategist Senior Investment Strategist Investment Strategist, Emerging
jordi.basco_carrera@allianz.com bjoern.griesbach@allianz.com Markets & Alternative Assets
pablo.espinosa-uriel@allianz.com

Insurance, Wealth and Trends Research

Michaela Grimm Patricia Pelayo-Romero Kathrin Stoffel Markus Zimmer

Senior Economist, Senior Economist, Insurance & ESG Economist, Insurance & Wealth Senior Economist, ESG
Demography & Social Protection patricia.pelayo-romero@allianz.com kathrin.stoffel@allianz.com markus.zimmer@allianz.com
michaela.grimm@allianz.com

31
Allianz Research

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Discover all our publications on our websites: Allianz Research and Allianz Trade Economic Research

32
 11 October 2023

Director of Publication
Ludovic Subran, Chief Economist
Allianz SE
Phone +49 89 3800 7859

Allianz Group Economic Research

https://www.allianz.com/en/economic_research
Königinstraße 28 | 80802 Munich | Germany
allianz.research@allianz.com

@allianz
allianz

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http://www.allianz-trade.com/economic-research
1 Place des Saisons | 92048 Paris-La-Défense Cedex | France
research@allianz-trade.com

@allianz-trade
allianz-trade

About Allianz Research

Allianz Research comprises Allianz Group Economic Research and
the Economic Research department of Allianz Trade.

Forward looking statements

The statements contained herein may include prospects, statements of future expectations and other
forward-looking statements that are based on management’s current views and assumptions and
involve known and unknown risks and uncertainties. Actual results, performance or events may differ
materially from those expressed or implied in such forward-looking statements.
Such deviations may arise due to, without limitation, (i) changes of the general economic conditions
and competitive situation, particularly in the Allianz Group’s core business and core markets, (ii) per-
formance of financial markets (particularly market volatility, liquidity and credit events), (iii) frequency
and severity of insured loss events, including from natural catastrophes, and the development of loss
expenses, (iv) mortality and morbidity levels and trends, (v) per-sistency levels, (vi) particularly in the
banking business, the extent of credit defaults, (vii) interest rate levels, (viii) curren-cy exchange rates
including the EUR/USD exchange rate, (ix) changes in laws and regulations, including tax regulations,
(x) the impact of acquisitions, including related integration issues, and reorganization measures, and
(xi) general compet-itive factors, in each case on a local, regional, national and/or global basis.
Many of these factors

No duty to update

The company assumes no obligation to update any information or forward-looking statement cont-
ained herein, save for any information required to be disclosed by law. may be more likely to occur, or
more pronounced, as a result of terrorist activities and their consequences.

33