Tanzania has blocked all agricultural imports from Malawi, its southern neighbour, and South Africa, Africa’s largest economy. 

Since Malawi is landlocked, it relies on Tanzania’s ports for international trade. Therefore, its top exports – raw tobacco, tea, legumes, soybeans, and sugar – will suffer, particularly since its top trading partners are international (with Germany and India as leading destinations).

The export of fertiliser to Malawi will also be suspended.

South African exports which will be hit include various fruits, including apples and grapes. While relatively muted compared with the impact of Tanzania’s move on Malawi’s economy, South Africa is heavily reliant on exports. Already weakened by 31% tariffs from the US ($500 million worth of South Africa’s $13.7 billion in agricultural exports go to the US), the country may now struggle in the intra-regional reorientation which many other economies are enjoying.

Tanzania has also halted the transit of any agricultural goods through its territory to either country, stymying Malawi’s international importing capability in particular.

Tanzanian Minister of Agriculture Hussein Bashe has justified this policy as retaliatory. Both Malawi and South Africa have embargoes on Tanzanian produce. 

This refers to Malawi’s ban on the import of certain produce, which was apparently designed as a temporary measure: a “strategic move to create an environment where local businesses can thrive without the immediate pressure of foreign competition,” according to Malawi’s Trade Minister, Vitumbiko Mumba at the time.

Tanzania, Malawi, and South Africa are all members of the Southern Africa Development Community (SADC) regional economic bloc. This may grow fraught with Bashe’s emphasis that Tanzania will begin to act in defence of its national sovereignty.

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Commerce thrives when barriers are lifted, and opportunities are shared. Unfortunately, history shows that progress in trade has often excluded half the population from its full benefits. 

To learn more about gender issues in trade, treasury, and payments, Mahika Ravi Shankar of Trade Finance Global (TFG) spoke with Gwen Mwaba, Afreximbank’s Managing Director of Trade Finance and Correspondent Banking, at TFG’s annual Women in Trade Treasury and Payments event in London. 

Women, particularly those in emerging markets, often face unique struggles that hinder their ability to participate fully in the global economy, such as limited access to education, outdated legal systems, and restrictive inheritance laws. 

Without the right to own property in some regions, securing financing becomes nearly impossible shackling many organisations to their small business status. When businesses remain small because they cannot finance the growth waiting for them, the entire economy suffers.

Mwaba said, “A woman in trade can be a leader of a big organisation, but that’s the minority. The majority of ‘women in trade’ in emerging markets would be the women selling goods in a marketplace or the women carrying cash across the border from one country to another to buy goods that are required in their country.”

Many of these African women engage in commerce as street vendors or cross-border traders, but see their contributions go underrecognised. Many are becoming farmers, turning to agriculture as a viable and promising career. Yet, systemic obstacles persist that the financial sector will have a role in overcoming.

Institutions have begun focusing on the economic inclusion of women through targeted programs. Liquidity solutions for small and medium-sized enterprises (SMEs) provide a lifeline. When credit becomes accessible, business owners can expand operations, hire more workers, and bolster their communities in the process. 

Beyond funding, visibility matters. Placing women in leadership allows young girls to see someone like them in charge, encouraging them to dream big. It also ensures decision-making reflects diverse perspectives and does what is best for the organisation and economy as a whole, rather than just a gender-biased subset.

Mwaba said, “There are a number of unique challenges that are very specific to a continent like Africa. Some of those include things like a lack of access to education for young girls. Boys still tend to be favoured, and many families would rather pay for the male child to go to school than the female children.”

These issues demand attention. Collective advocacy strengthens the case for practical solutions that allow women to thrive in both business and family life.

Trade, treasury, and payments have historically been male-dominated but that reality is beginning to shift as more women enter the sector, find success, and push for broader representation. A big step also comes from recognising that no two ‘women in trade’ are alike, that unique circumstances demand unique solutions.

The next step involves dismantling outdated norms, promoting financial inclusion, and ensuring women are positioned as leaders, not just contributors. The momentum exists. What happens next depends on those willing to drive change.

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Africa has been in increasing its foothold in the global economy for a number of years. With the Global South enjoying new influence and wealth, the world’s economic centre of gravity is no longer under Western dominance. The volume of South-South trade has now surpassed the volume of North-South trade, reaching US$5.3 trillion – showcasing the growing connections between countries in the Global South. 

The South-South shift is not just about increasing trade volumes, but about an evolving landscape with highly diversified economies. Africa is rich in natural resources but is also actively diversifying its economic activities, with fast-growing sectors like telecommunications, energy and renewables, and Agri-tech taking the reins. The Gulf Cooperation Council’s (GCC) own journey towards economic diversification complements Africa’s aspirations for sustainable growth and infrastructure renewal. In this context, there stands a real opportunity for Africa and GCC states – to strengthen their ongoing relationship for mutual benefit. 

Double down on diversification

For GCC nations, these diversification journeys are not recent developments. Looking back at the Gulf’s own transformation, states like the UAE and Saudi Arabia have been transformed from desert landscapes into some of the world’s most advanced trade, logistics, finance and technology hubs by the end of the 20^th century, with both undergoing profound transformations. It is evident that over the past decade, unprecedented levels of economic progress, foreign and domestic investment, demographic growth and high-profile cultural and public-sector projects across the Gulf region have catapulted Gulf Cooperation Council (GCC) countries onto the global stage. 

Diversification – through ambitious projects to enhance infrastructure, real estate, and tourism – across GCC countries has been a successful strategy in unlocking new opportunities and revenue streams. Tapping into this further will remain a priority in years to come. An example is the Saudi Vision 2030, a government programme with the goal of diversifying the country economically, socially, and culturally. The vision includes forming new international partnerships, creating diverse job opportunities, and attracting global talent to build Saudi Arabia as a global trade hub. Similarly, the UAE’s Energy Strategy 2050 seeks to channel funding into energy efficiency, drive R&D and innovation in energy technologies, and encourage investment in the UAE’s renewables. 

Powering the GCC’s diversification goals

For Africa, the GCC’s focus on diversification and green initiatives represents an opportunity for collaboration and growth. Across the globe, environmental, social, and governance (ESG) standards are at the forefront of investment considerations, with climate initiatives remaining a top priority. The climate crisis continues to intensify, with stories of floods and droughts regularly gripping headlines worldwide. This is accelerating the urgency to transition to sustainable energy sources. 

Africa has an abundant resource base that can help power the GCC’s energy transition. The continent is home to around 30% of the world’s mineral reserves, including up to 90% of its platinum and chromium, alongside large deposits of lithium, phosphate, and nickel – and the global demand for these resources is escalating. As countries transition to renewable energy, the demand for critical minerals will increase due to their essential role in manufacturing batteries for electric vehicles and other clean energy technologies. This creates an opportunity for GCC nations and Africa to collaborate and secure the supply chain for the critical minerals that will drive the green energy revolution. 

GCC countries are in a prime position to bridge Africa’s infrastructure gap. Having built its metropolises from the ground up just decades ago, it has unparalleled experience in modern infrastructure development, and as such, unique insights into the infrastructure challenges that many African nations face. In recent years, the UAE and Saudi Arabia have invested heavily in Africa’s ports and logistics networks. 

As the UAE and Saudi have diversified, they are seeing more and more opportunity in Africa. In 2023 alone, GCC companies announced 73 foreign direct investment (FDI) projects in Africa, totalling more than $53 billion.

The UAE’s Dubai Ports World (DP World) has built and expanded key ports to streamline logistics and supply chains, helping Africa to connect more efficiently with global markets. Its projects—like those in Senegal, Egypt, and Tanzania—offer direct improvements to trade routes, cutting down both time and costs for goods moving in and out of Africa. 

A golden age of Global South growth

Collectively, GCC countries have invested over $100 billion in Africa over the past decade, as they continue to cement long-term partnerships with African governments and businesses. Combining efforts to diversify and expand will unlock new opportunities for economic development and resilience—and herald a new dawn in South-South cooperation. 

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The investment will support AgDevCo’s financing of small and medium-sized enterprises (SMEs) in rural areas producing high-impact crops, contributing to sustainable development and regional food security.

AgDevCo, founded in 2009, holds a portfolio of 40 SMEs across 11 countries in Sub-Saharan Africa, improving agricultural production in rural areas and bringing sustainable agriculture to small farms. BII’s $50 million investment comes on top of a previous investment of the same value, making BII AgDevCo’s biggest external investor. The Swedish and Norwegian investment funds will contribute a further $20 million and $15 million, respectively.

The investment will help AgDevCo expand its portfolio and support businesses to increase productivity and scale up sustainably. The company’s impact on small-scale agribusinesses in Sub-Saharan Africa has already been massive: over 2.4 million people benefited from opportunities linked to AgDevCo’s companies, ranging from access to markets to direct employment to support for rearing backyard chicken in individual households. AgDevCo estimates that thanks to the new investment, its portfolio will be able to deliver benefits to up to 4 million farmers and support 60,000 jobs by 2030. 

Agricultural businesses in Sub-Saharan Africa face a range of challenges, from limited financing access and stunting growth to underdeveloped value chains and restricted access to global markets. Geopolitical instability and extreme weather events caused by climate change have made agriculture businesses more vulnerable. A drought in September 2024 was declared “the worst in a century” by the UN, which warned of a major humanitarian crisis that could affect the livelihoods of over 27 million people.

The investment will enable AgDevCo to expand its portfolio of SMEs in the region, especially targeting businesses producing high-nutrition crops for local consumption and crops intended for export. This is expected to improve the resilience and adaptability of Sub-Saharan African agriculture in the long term – a crucial step to strengthen supply chains worldwide. 10% of the EU’s food imports come from the region, and the UK’s food imports from Sub-Saharan Africa have been rising since the 1990s: 87% of UK imports of green beans come from just five African countries in the region as well as much of the fruits and vegetables sold in UK supermarkets, especially during winter. 

Businesses like AgDevCo can support small-scale farmers to be more resilient to climate change and strengthen supply chains throughout the region, especially by improving access to crops in rural areas. “Developing commercial agriculture in Africa requires patient and strategic investment. […] This latest capital injection from BII, Norfund, and Swedfund strengthens AgDevCo’s position as a leading specialist investor, enabling us to grow our portfolio and drive positive impact at scale,” said Daniel Hulls, AgDevCo’s CEO.

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What are the top political, security, and economic trends and risks shaping Africa and the Middle East in 2025?

This research and analysis is provided by PANGEA-RISK and distributed in partnership with Trade Finance Global.

Five big trends in Global South country risk in the coming year

The shift in the US towards protectionism is a harbinger of an uncertain and increasingly fragmented year, amongst Western economic powers. In this context, Gulf states will increasingly grasp power and influence amongst the Global South. The Gulf Cooperation Council (GCC) countries have already invested over $110 billion in the region. The United Arab Emirates has been particularly active, committing $110 billion to projects between 2019 and 2023, including $72 billion in renewable energy, as companies like DP World expand their logistics and port operations.

Regarding American protectionism, a critical moment will be the expiry of the African Growth and Opportunity Act (AGOA), a preferential trading program designed to expand African countries’ duty-free market access and boost US-African trade. If the US Congress decides not to renew the AGOA, the trade competitiveness of African exports may be damaged.

This has been growing increasingly visible in the currency arena. China and other nations are actively promoting de-dollarisation, challenging US economic dominance through local currency trade and alternative payment systems like the Cross-Border Interbank Payments System in place of SWIFT.

Economic opportunities in the Global South are tempered by significant challenges, including persistently high youth unemployment, elevated food prices, and the disproportionate impact of climate change. These factors could potentially trigger political instability, resource nationalism, and increased interference from global powers seeking economic and military influence.

In terms of investment in Africa, Saudi Arabia has been active in mining and agribusiness, Qatar in aviation, and Türkiye in aviation, ports, construction, and defence. Hopes for peace and normalisation in the Middle East are tentative, but more promising than ever. Regional actors have been leveraging the power vacuum left in Iran and Syria to secure strategic gains, for instance, by disrupting Hezbollah’s supply chains.

Seeking alternative global trade routes amidst political risk

As instability persists in Gaza, so too will Houthi attacks on Red Sea shipping; and since maritime disruptions benefit the overland Silk Route, it is unlikely that China will contribute to preventing these attacks to further their Belt and Road Initiative (BRI). The India-Middle East-Europe Corridor is a complementary rather than competing corridor; similarly, western corridors like the European Union’s (EU) Global Gateway project will struggle to compete with the BRI’s more than $1 trillion.

Rising inflation worldwide has been caused by supply chain disruption, climate change, tariffs, and sanctions. The persistently high cost of living has been exacerbated by stubbornly high rates of youth unemployment, a common feature of fast-urbanising emerging markets. In this context, global food prices were hit hard, remaining almost 30% higher in 2024 compared with pre-pandemic levels. Multilateral organisations attempt to combat food insecurity, but the problem is exacerbated by infectious diseases that arise in conflict areas. 

In 2025, key elections in Egypt, Iraq, Tanzania, Malawi, and Ivory Coast will be critically influenced by these key socioeconomic grievances. Countries with weak institutions like Niger, Togo, and Gabon face potential military interventions or election disruptions, continuing a pattern of political instability observed since 2019. The electoral landscape will be further complicated by a resurgence of resource nationalism, with governments in the Sahel and Senegal arbitrarily challenging international investment contracts, imposing unexpected taxation, and potentially expropriating state assets. 

The situation differs sector-by-sector too. The critical mineral industry is exposed not just to extreme climate and maritime disruption, but also geopolitical drivers. Coups in Niger and Gabon in 2023 showed the vulnerability of supply chains for critical resources like uranium and manganese.

Finally, vulnerable regions are dramatically destabilised by rising temperatures, erratic rainfall, and desertification fuelling food insecurity, mass displacement, and resource-driven conflicts across the Sahel, Levant, South Asia, and Central and southern Africa. Militant groups are exploiting these environmental vulnerabilities by controlling water sources and recruiting from marginalised communities, thereby undermining government authority. 

The central Sahel countries—Burkina Faso, Mali, and Niger—are particularly affected, allocating substantial resources to military campaigns while experiencing unprecedented violence and climate-induced displacement. The number of internally displaced persons has surged substantially over the past decade, with this trend expected to accelerate as environmental conditions deteriorate. 

Going forward, the need for ‘grey swan’ assessments to mitigate country risk are necessary: that is, by reasonably assessing improbable but predictable, high-impact scenarios. A ‘grey swan’ in 2024 was the sudden fall of the Syrian regime, and 2025 could see a seriously weakened Iranian military-clerical order or on the flip side, a stable unified government in Libya.

Top 10 elections to watch in 2025

2024 was often termed the ‘year of elections’, with some of the world’s biggest democracies taking to the ballot – including India, the UK, and the US. But in 2025, some significant and impactful elections will occur across frontier and emerging markets. 

The next year of elections will likely be shaped by governance challenges, political transitions and mounting socio-economic frustrations, with some governments potentially using legislative means to maintain control whilst restricting opposition. In fragile democracies and post-military states, inadequate preparation and weak institutions may increase the likelihood of disputed results, particularly where there are existing political tensions and polarised voters. Economic difficulties including inflation and unemployment could fuel civil unrest and demonstrations, especially as opposition groups capitalise on public discontent to challenge governments that suppress dissent.

Here are ten to watch, with factors potentially contributing to instability highlighted. 

Cameroon

Cameroon’s political stability is at risk due to the lack of a clear succession plan for ageing President Paul Biya, whose departure could create a power vacuum and potentially prompt military intervention. Rising political and socioeconomic grievances, coupled with election delays and intensified repression, increase the likelihood of opposition-led protests and the risk of military mutinies or even a coup ahead of the 2025 presidential election expected by October.

Cote D’Ivoire

President Alassane Ouattara’s intentions for a fourth term remain unclear, and opposition divisions hinder the likelihood of a unified candidate for the October 2025 election. The risk of civil unrest is elevated, driven by potential repressive measures, a possible fourth-term announcement, and socioeconomic grievances like the rising cost of living, which may fuel protests and strikes.

Egypt

The upcoming legislative elections in November 2025 are expected to solidify President Abdel Fattah Al Sisi’s grip on Egypt’s political and economic systems, with the pro-government Nation’s Future Party likely to maintain dominance. However, Egypt’s deepening economic crisis, marked by inflation and currency depreciation, raises the risk of abrupt policy changes, which could affect businesses and investors; furthermore, sporadic unrest may still emerge from mounting economic grievances despite strong state control.

Gabon

Gabon is set to hold general elections by August 2025, marking a return to democratic rule following the 2023 coup led by interim president General Brice Oligui Nguema. While Nguema’s likely candidacy and the new constitution enabling a potential 16-year rule raise concerns about prolonged military influence and opposition intimidation, his strong public support as a liberator from the Bongo family’s rule reduces the immediate risk of significant unrest.

Georgia

The atmosphere for Georgia’s 2025 local elections is set to be highly polarised. The ruling Georgian Dream party expected to use its institutional control to maintain power amid allegations of voter suppression, media bias, and opposition intimidation. Public discontent over governance and the suspension of EU accession talks, alongside fears of a shift toward Russian influence, may fuel opposition efforts to mobilize voters and could trigger further unrest, especially in urban areas.

Iraq

Muqtada Al Sadr’s return to politics could potentially challenge the dominance of the Iran-backed Shia Coordination Framework (CF). This could reignite factional rivalries within Shia blocs and increase the risk of violence, while amended electoral laws favouring established parties and accusations of manipulation may further erode political trust and fuel unrest.

Malawi

Malawi’s political landscape is expected to remain volatile leading up to the 2025 general election, with growing public frustration over economic hardships and slow anti-corruption progress fueling the risk of unrest. The election is shaping up as a contest between alliances led by the ruling MCP and the opposition DPP, but no single party is likely to secure a majority, making smaller parties and independents key to forming the next government.

Niger

Political instability in Niger is likely to persist: General Abdourahamane Tiani’s military junta is growing isolated from Western and regional partners, and strengthening ties with Russia and China. Delayed national dialogue, political repression, and deteriorating economic conditions fuel public discontent, raising the risk of civil unrest, particularly if elections planned for 2025 are not held.

Tanzania

Tanzania’s ruling Chama Cha Mapinduzi (CCM) is poised to maintain power in the 2025 general election, with President Samia Suluhu Hassan running for her first full term. While her business-friendly policies are expected to benefit foreign investors, the CCM’s reliance on authoritarian tactics to suppress dissent may fuel political tensions, though these are unlikely to significantly disrupt the broader business environment.

Togo 

President Faure Gnassingbé and the ruling UNIR party are set to maintain their dominance in Togo, with a fragmented opposition and key critics detained, enabling Gnassingbé to potentially stay in power until 2033. While public frustration over economic mismanagement, political repression, and security challenges may fuel sporadic protests, particularly in Lomé as the 2025 election approaches, the opposition’s divisions and waning support reduce the likelihood of a significant uprising.

Trump presidency implications for Africa

The economic nationalism that incoming US President Donald Trump promises will have a varied impact across the African continent. Undoubtedly, 2025 will see new approaches to trade dynamics, development financing, and security partnerships. 

It’s uncertain whether Trump will renew the African Growth and Opportunity Act (AGOA), which expires in 2025. The act provides eligible sub-Saharan African countries with duty-free access to the US market for selected products. Moving away from unexclusive agreements, South Africa, the largest beneficiary of the African Growth and Opportunity Act (AGOA), might risk losing its duty-free access to the US market due to its foreign policy positions regarding Russia and Israel, which some US officials perceive as conflicting with broader American global interests.

The proposed isolationist, “America First” economic strategies could indirectly affect African economies through potential increases in US inflation, driven by factors such as tariff increases, tax reductions, and domestic reshoring efforts. It also suggests potential reductions in foreign aid and a diminished commitment to climate resilience initiatives across the continent; the administration’s sceptical stance on climate change could further complicate development and sustainability efforts in African nations.

The security front

Trump’s apparent commitment to the Middle East and Ukraine means it’s unnlikely that the US will provide military assistance towards escalating insecurity in the Sahel Region. Perpetrated by insurgent groups under the governance of military juntas in Mali, Niger, and Burkina Faso, diplomatic relations between nations in the region and amongst their Western partners have substantially deteriorated—a trend unlikely to improve under a Trump administration.

In the Middle East, efforts to facilitate Saudi-Israel normalisation would remain a key diplomatic objective. Trump would likely endeavour to incentivise Saudi Arabia through commercial opportunities, arms sales, and targeted security assurances to encourage cooperation with Israel. However, Saudi leaders must navigate pressures concerning Palestinian sovereignty and the contentious issue of Israeli settlement expansion, amongst others. 

Trump’s policy towards Iran is anticipated to maintain and potentially escalate the maximum-pressure sanctions regime, with minimal diplomatic engagement. This approach is designed to curtail Iran’s economic capabilities, thereby limiting its regional influence, nuclear development prospects, and capacity to support allied militias.

Iran may respond to perceived threats by strategically deploying its regional proxies and advancing its nuclear programme: a confrontational stance could potentially destabilise the already fragile geopolitical balance in the Middle East.

COP29 bringing tensions to the fore

International climate finance negotiations at COP29 in Azerbaijan have revealed tensions between Western countries and emerging economies. Western nations are pressuring China and Saudi Arabia—both still classified as ‘developing’ economies—to increase their financial contributions to climate initiatives. China is leveraging the G77 group of developing countries to resist these demands, although the G20 has tentatively agreed to redefine ‘developing’ economy classifications, which could expand the pool of contributing nations.

Despite these negotiations, establishing a New Collective Quantified Goal exceeding $1 trillion annually from 2025 remains challenging. By 20 January 2025, a more comprehensive assessment is expected, aimed at helping members prepare for the potential commercial implications of the incoming administration across Africa, Asia, and the Middle East.

African governments pivot to domestic markets amid external financing constraints 

The borrowing patterns amongst African nations are shifting significantly, with governments increasingly turning to domestic markets as their access to international capital becomes more restricted.

As domestic dependence drives fiscal uncertainty, his trend is raising concerns about debt sustainability on the continent.

Debt servicing costs strain national budgets 

Sub-Saharan African countries are projected to spend $74 billion on debt servicing in 2024, compared to $17 billion in 2010. This exponential increase is forcing governments to make difficult choices between debt obligations and essential services. 

The volume of debt is a secondary concern, compared with the structural weaknesses which this burden brings to the fore. Along with the debt crisis, the continent simultaneously faces the challenge of raising $1.4 trillion in climate adaptation financing by 2030, further complicating fiscal management.

Kenya’s debt challenges exemplify the broader regional trend. The country’s debt-to-GDP ratio has risen from 40% in 2013 to 70% in 2023, with debt servicing now consuming 68% of fiscal revenue. Much of this debt can be attributed to mega infrastructure projects bringing insufficient returns: these investments are incompatible with Kenya’s informal sector-dominated economy. The banking sector holds 45% of the government’s $41 billion domestic debt, raising further concerns about systemic risks.

Kenya’s political instability has limited the country’s capability to raise funds. Widespread anti-tax protests in July meant that Kenyan tax collection as a proportion of GDP has stagnated at 15.2%; President William Ruto’s intended Finance Bill, predicted to raise an extra $2.7 billion, has been withdrawn as a result. Such tensions have instigated investor concerns over debt default risks: between June and October, auctions of seven out of nine longer-dated Kenyan bonds were undersubscribed, while the two oversubscribed auctions were issued with an average yield of above 18%.

Egypt’s situation says much about the relationship between the national banking sector and sovereign debt. While external debt has declined by 5% to $15.9 billion, domestic debt continues to rise rapidly – projected to escalate by 32.7% in the 2024/2025 fiscal year. 

The increasing reliance on domestic debt has, in theory, reshaped African banking sectors. It’s reduced private-sector lending, increased vulnerability to government fiscal health, and brought the need for careful liquidity management.

In spite of growing exposure to sovereign debt, the Egyptian banking sector has remained resilient. The sector holds 60% of government securities and maintains strong liquidity with loan-to-deposit ratios around 52%.

Promising policy responses: innovative financing solutions 

In Nigeria, domestic debt has reached over $70 billion, accounting for 62% of total public debt. But some recent reforms add optimism to the landscape, including a fuel import bill reduction from $600 million to $50 million monthly; the elimination of fuel subsidies, saving $3.3 billion annually; clearance of $7 billion foreign exchange backlog; and a new Dangote Refinery deal enabling Naira-denominated transactions.

In this manner, African governments are implementing various strategies to manage debt challenges:

• Increased use of trade finance solutions and export credit guarantees
• Exploration of green and blue bonds
• Enhanced regional trade through AfCFTA mechanisms
• Pursuit of concessional loans from multilateral institutions

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The outlook for Africa’s debt sustainability remains challenging. While domestic borrowing offers a temporary solution to external financing constraints, the high costs of this strategy may prove unsustainable. Success will depend on governments’ ability to implement effective fiscal reforms while maintaining access to diverse funding sources. The upcoming IMF and World Bank annual meetings in October 2024 will be crucial in addressing these challenges and developing more comprehensive solutions to Africa’s debt crisis.

Buoyant interest in African critical minerals spurs investments in infrastructure and logistics

Africa’s critical minerals sector is experiencing a strategic shift in global investments, with the United States and Europe promoting projects to challenge China’s dominance and diversify partnerships. 

Investment profile shifts: The Lobito Corridor

The Lobito Corridor project, traversing Angola, the Democratic Republic of the Congo (DRC), and Zambia, exemplifies this shift. It aims to link copper-rich regions to Angola’s Atlantic port of Lobito through railway rehabilitation and construction.

The US International Development Finance Corporation approved a $553 million loan for the Lobito Atlantic Railway in June 2024. The Lobito Atlantic Railway consortium, comprising Trafigura, Mota-Engil, and Vecturis, was awarded the concession to operate the rail line. They plan to invest $555 million in the Angolan and Congolese railway operations over a 30-year management period.

China continues to accelerate its acquisition of crucial mining assets in Africa. The Chinese firm JCHX Mining Management is nearing completion of a deal to purchase 80% of Zambia’s Lubambe copper mine.

African countries are implementing regulatory reforms to attract global stakeholders and enhance value chains. Zambia has attracted $10 billion in mining investments over the past three years, driven by the 2022 Mineral Royalty Tax Reform. Zimbabwe has banned the export of raw lithium to encourage domestic value addition, aiming to capture 20% of global lithium demand and build a $12 billion economy by 2030.

Infrastructure deficits, particularly in transport and energy, are driving governments to engage in public-private partnerships and invest heavily in rail and logistics networks. West Africa faces some of the highest international transport costs, with container transportation costs ranging from 1.5 to 2.2 times higher than the global average.

Large-scale infrastructure projects are underway across the continent. Guinea’s $18 billion Trans-Guinean railway project involves a joint venture between the government, Rio Tinto Simfer, Winning Consortium Simandou, and Chinese investor Baowu. The project includes over 600 kilometres of railway and shipping infrastructure.

Africa holds significant reserves of critical minerals: 

• South Africa possesses 80% of the world’s platinum group metals and 70% of its manganese reserves;
• Morocco has 70% of global phosphate reserves; 
• The DRC boasts the largest cobalt reserves;
• Guinea-Conakry ranks second in global bauxite reserves; and
• Gabon holds the second-largest manganese resources.

In spite of this, it lags behind in terms of global critical mineral production.

Despite its potential, Africa has been underfunded in exploration compared to other regions, attracting only 10% of global exploration budgets in 2022. However, the continent’s estimated 30% share of global critical mineral reserves positions it to gain from rising demand for resources such as nickel, cobalt, and lithium, projected to increase up to ten-fold by 2050.

Countries like Kenya and Botswana are taking steps to improve their appeal to investors. Kenya is conducting large-scale geological mapping, while Botswana’s digital permitting reforms have cut permit times to 20-40 days.

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The global demand for critical minerals shows no signs of slowing, making it likely that investment in African infrastructure will increase. If countries can align their regulatory frameworks with global investor expectations and develop better infrastructure, this likelihood will become a certainty.

Heightened risks in the Strait of Hormuz and the Horn of Africa amid regional conflicts

Recent escalations in the Middle East presage maritime insecurity with far-reaching implications. At its heart lie the Strait of Hormuz and the Horn of Africa, both of which play crucial roles in international maritime security and global energy supplies.

The Strait of Hormuz: A strategic chokepoint

Tensions between Israel, Iran, and their respective allies have been a defining feature of Middle Eastern geopolitics for decades. Recent escalations have brought about – often asymmetrical – responses in retaliation.

The Strait of Hormuz is a key area caught in the crossfire. This narrow waterway, located between the Persian Gulf and the Gulf of Oman, is one of the most strategically important maritime chokepoints in the world. Approximately 20% of the world’s petroleum passes through the Strait of Hormuz, making it a critical artery for global energy supplies.

Historically, the Strait has been a flashpoint in the tensions between Iran and the United States. Iran has repeatedly threatened to close the Strait in response to perceived aggressions, particularly during times of heightened tension over its nuclear program. 

Although Iran has not explicitly threatened to blockade the Strait in the current context, its support for proxy groups such as the Houthis in Yemen, who have been active in attacking ships near the southern entrance to the Red Sea, indicates their disposition to disrupting global shipping to achieve its strategic goals.

The spillover of violence in the Strait of Hormuz poses a serious threat to global energy supplies. Iraq relies entirely on maritime routes for its oil exports from Basra since its Mediterranean pipeline has been closed for over a year; it is highly dependent on passage through the Strait of Hormuz. Kuwait, Qatar, and Bahrain also have no alternative but to ship their oil through this critical waterway.

Most of this oil is destined for Asia, so Western polities are somewhat insulated. Saudi Arabia, the largest oil exporter through the strait, has recently diverted shipments to Europe using a 1,200 km pipeline across the kingdom to a terminal on the Red Sea, thereby avoiding the Strait of Hormuz and the southern Red Sea. Similarly, the UAE exports 1.5 million barrels of crude per day via a pipeline to the port of Fujairah on the Gulf of Oman. 

Nonetheless, the broader risk to global energy supplies remains prevalent.

The Horn of Africa: rising instability and the resurgence of piracy

While much of the world’s attention is focused on the Strait of Hormuz, another critical region is also experiencing rising instability: the Horn of Africa. This region has long been plagued by conflict and poverty, with unstable governance pouring fuel on the flames. 

For Somalia, the crisis in the Middle East is contributing to an apparent resurgence of piracy and armed robbery. Piracy off the coast of Somalia was a major international security concern in the late 2000s and early 2010s, with Somali pirates hijacking dozens of ships and demanding ransom payments that sometimes reached millions of dollars. 

Now, reports assert that the Houthi rebels, who control large parts of Yemen, have been implicated in attacks on commercial vessels in the Red Sea and the Gulf of Aden.

Unconfirmed reports also point to the Houthis exploring cooperation with Al Shabaab, the Al Qaeda-affiliated militant group that controls large parts of Somalia and has also been involved in piracy. Such unrest has created a security vacuum in Somali waters, straining regional navies and contributing to the rise in pirate attacks. 

Additionally, climate change has reduced fish stocks, increasing poverty and pushing more Somalis towards piracy. While Somali pirates are primarily motivated by economic gains, including ransom and control over local institutions, their objectives differ from the political and geostrategic ambitions of groups like the Houthis.

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Any disruption to shipping in the area—whether due to piracy or regional conflict—could lead to a sharp increase in oil prices, with ripple effects throughout the global economy. 

Repercussions are also severe for African states along the Red Sea, including Egypt, Eritrea, and Sudan, which have been forced to contend with reduced vessel availability, elevated freight costs, and increased insurance premiums.

The potential for these conflicts to spill over into other areas, such as North Africa or the Sahel, is a real concern, particularly given the existing security challenges in those regions.

Pangea Risk July 2024 briefing

In July 2024, five African countries (Côte d’Ivoire, Benin, Kenya, Senegal, and Cameroon) returned to the Eurobond market after a two-year hiatus, raising a total of $6.2 billion, demonstrating a renewed appetite for international bonds despite existing high debt levels. 

Data from the African Development Bank (AfDB) indicates that the continent’s total external debt increased from $1.12 trillion in 2022 to $1.152 trillion in 2023. This renewed borrowing spree, however, comes with challenges. 

Notably, the uncertainty surrounding the upcoming US presidential election has made African treasuries cautious. Political instability in the US could impact global markets, leading African nations to hedge their bets by stockpiling gold reserves, which is seen as a strategy to safeguard against potential volatility in the bond markets.

In addition, the high cost of borrowing remains a significant hurdle. For instance, Kenya issued a Eurobond in February with a yield of 10.375%, while Cameroon issued $550 million in international bonds at an even higher yield of 10.75%. These high borrowing costs reflect the urgent need for funds but also highlight the risk of further debt accumulation.

A common thread among the countries returning to the Eurobond market is their engagement in staff-monitored programmes with the International Monetary Fund (IMF). While the IMF’s policy support has attracted investors, the stringent fiscal conditionalities attached to these programmes have created domestic challenges. 

Kenya, for example, attempted to raise taxes and cut subsidies to meet IMF requirements after refinancing a $2 billion Eurobond. The resultant political upheaval in Kenya, with protests turning violent, illustrates the social tensions arising from fiscal austerity measures.

The situation in Kenya is not isolated. 

Other African nations, including Nigeria and Uganda, face growing public unrest due to high living costs and fiscal consolidation efforts. Civil society groups in Nigeria are preparing for widespread protests, echoing the sentiments of the #EndSARS movement from 2020. 

High food price inflation in countries like Ghana, Angola, and Ethiopia is exacerbating socio-economic tensions and may lead to more protests. Authoritarian states, such as Uganda, have also witnessed civil unrest, with protests being forcibly suppressed.

Despite the challenges, the need for sustainable debt solutions remains critical. Several African nations will face significant Eurobond maturities from 2025 onwards and require continued fiscal consolidation. 

Emerging market local currency debt has been impacted globally by high US interest rates and geopolitical risks. 

South Africa stands out as an exception, with its local currency bonds performing well due to a market-friendly coalition government. This presents an opportunity for commercial lenders, possibly backed by development finance institutions, to offer alternative financing options to African sovereigns.

While Africa’s return to the Eurobond market in 2024 signifies a shift for the continent, decision-makers must navigate the complexities of high borrowing costs, political uncertainty, and social unrest to ensure sustainable economic growth and stability.

Maritime Insight: Red Sea trade diversions drive fresh investment in African ports

Houthi attacks in the Western Indian Ocean and the Red Sea have significantly escalated, leading to major disruptions in maritime traffic and global trade routes. Since November 2023, over 150 attacks have been reported, prompting stakeholders to seek alternative routes around the African continent. This shift has increased demand for services at African ports, revealing infrastructural deficiencies and creating new opportunities.

Ports in Mauritius, Madagascar, and Mozambique have strategically benefited from their locations, while South African ports struggle with outdated infrastructure and poor management. South African ports such as Durban, Port Elizabeth, and Cape Town have seen a 53% surge in maritime activity over three months, transforming them into key logistical hubs.

However, infrastructural deficiencies, including outdated equipment and lack of financial investment, have resulted in significant congestion and delays. Durban’s Pier 2 terminal has faced severe berthing delays, with backlogs escalating to crisis levels, leaving 79 vessels and over 61,000 containers at outer anchorage for weeks.

The diversion of global shipping from the Red Sea and Suez Canal has increased demand for bunkering and restocking services at African ports. This shift has exposed the inability of many African harbours to handle the increased freight volume, causing congestion and delays. Average wait times at these ports now extend beyond the global average of three days to as many as six days or more.

Djibouti, heavily reliant on its ports for revenue, has been significantly affected by the decline in shipping through the Bab Al Mandeb Strait and the Suez Canal. Despite substantial investments in port infrastructure, continuous attacks have threatened its strategic advancements. Major international shipping lines, such as Maersk, have taken precautionary measures, including avoiding bookings to Djibouti’s ports.

Elsewhere, African ports in Sudan, Eritrea, and Somaliland face challenges from reduced vessel availability, higher freight costs, and increased insurance premiums. This has adversely affected their maritime trade, reversing previous decisions to remove high-risk designations for areas like Kenya. As a result, five major carriers have withdrawn their vessels from operating in Somali and Kenyan territorial waters.

While the increased demand has highlighted the unpreparedness of African ports, it has also drawn global investors’ attention. Countries such as Tanzania, Kenya, Mozambique, and South Africa are at the forefront of port development, driven by both domestic initiatives and foreign investments. For instance, DP World plans to invest $3 billion in new port and logistics infrastructure in Africa over the next three to five years.

Mozambique’s ports have attracted substantial investments, with the port of Beira undergoing significant infrastructural improvements over the past 25 years. South Africa’s Transnet has entered a 25-year joint venture with International Container Terminal Services Inc. (ICTSI) to manage Durban’s container terminal, aiming to resolve longstanding congestion and inefficiencies.

The future of Africa’s ports sector will depend on various factors, including the extent of Houthi military operations, the capacity of African countries to advance their port infrastructure, and the international community’s response. Despite current challenges, African countries have the potential to become new hubs for global shipping, provided they can modernise and expand their port facilities.

Enhanced collaboration between African governments and international operators could improve the competitiveness of African ports, repositioning them on the global stage and providing vital logistical support to international shipping routes.

Growing demand for Africa’s critical minerals intensifies geopolitical rivalries

Growing demand for Africa’s critical minerals intensifies geopolitical rivalries

The global critical minerals market is adapting to heightened demand from renewable energy sectors and Fourth Industrial Revolution (4IR) technologies, leading to growing shifts in geopolitical dynamics. This includes major powers diversifying sources away from dominant suppliers such as China due to recent global events like the COVID-19 pandemic and Russia’s invasion of Ukraine.

In response, regions rich in minerals, such as Africa and the Middle East, are becoming focal points for new mining investments and strategic partnerships. Simultaneously, the United States and European Union Countries are reformulating policies to secure and stabilise mineral supply chains, reflecting the increasing importance of these resources for future technological advancements and economic security.

As the world’s clean energy transition and Fourth Industrial Revolution (4IR) technologies gather pace, the demand for critical minerals is expected to grow quickly. This heightened demand places Africa’s mining sector at the centre of geopolitical competition due to its pivotal role as a supplier of many critical minerals necessary for these energy transitions.

This shift is visibly marked by the United States’ (US) renewed engagement with African producers such as Zambia and the Democratic Republic of Congo (DRC). Deposits of graphite, lithium, and rare earth elements in these regions are experiencing an upsurge in exploration activity and competition from both Chinese and Western buyers. This trend is anticipated to extend benefits not only to established producers but also to mid-tier, smaller, or less explored mining markets in countries like Côte d’Ivoire, Mozambique, and Namibia, making them increasingly attractive to investors.

Despite these opportunities, Africa’s mining industry predominantly operates on a “pitto-port” model, where mineral ores are extracted and exported for processing elsewhere. The security and reliability of these critical mineral supply chains are of strategic importance to many countries, especially in light of the expected surge in global demand driven by clean energy technologies.

Historically, concerns regarding Africa’s mining sector have revolved around fears of Chinese dominance over the production of critical minerals and, more recently, Russia’s interests in West African gold. However, companies from Saudi Arabia and the United Arab Emirates (UAE), armed with substantial financial resources, have shown they can outbid more established players in the industry, as demonstrated by recent competitive activities in Zambia.

PANGEA-RISK assesses the geopolitical and economic factors influencing the global critical minerals sector, focusing on the challenges and opportunities within Africa and the Middle East and their implications for international markets and supply chains.

Learn more here

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Sponsored press release 

The Access Bank UK Limited proudly announces the establishment of its first fully owned subsidiary in Malta, The Access Bank Malta Limited. The subsidiary’s banking licence application has been approved by both the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA), signalling a significant step in enhancing trade connectivity between Europe and Africa.

The approval of The Access Bank Malta Limited as a credit institution marks a transformative milestone in bolstering   Europe-Africa trade flows.   Malta,   a renowned international financial   centre, and a gateway between the two continents, is strategically positioned to play a pivotal   role in advancing commerce and fostering economic partnerships.

This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa. It underscores the Access Group’s commitment to driving global trade, financial integration, and supporting businesses across these regions.

Jamie Simmonds, Founding Chief Executive Officer and Managing Director of The Access Bank UK Limited, commented, “Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA). With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets.”

Roosevelt Ogbonna, Managing Director and Chief Executive Officer of Access Bank Plc, 

and CEO of the Banking Group added, “By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World. It further enhances our Bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities.”

Renald Theuma, Managing Director and Chief Executive Officer of The Access Bank Malta Limited, emphasised the significance of this expansion. “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”

The Access Bank Malta Limited will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.

About Access Bank Plc

Access Bank Plc, a wholly owned subsidiary of Access Holdings Plc, is a leading commercial bank operating through a network of over 700 branches and service outlets across 3 continents and 60+ million customers.

Access Bank Plc employs 28,000 people in its operations in Nigeria, Africa, the United Kingdom (with Branches in Dubai, Paris and Hong Kong), and the representative offices in China, Lebanon and India. Access Bank Plc is a diversified financial institution which combines a strong retail customer franchise and digital platform with deep corporate banking expertise and proven risk management and capital management capabilities. The Bank serves its various markets through three business segments: Corporate and Investment, Retail and Commercial.

Access Bank Plc has enjoyed what is arguably Africa’s most successful banking growth trajectory in the last twenty-two years. Following its merger with Diamond Bank in March 2019, Access Bank Plc became one of Africa’s largest retail banks by retail customer base. In honour of its defining roles across the African continent, Access Bank Plc has been accorded recognition by reputable domestic and global organisations. Some of these recognitions include: 2023 National Quality Order of Merit Award “Most Innovative Banking Sustainable Development Company of the Year”; 2023 Lagos Green Awards “Environmental Leadership in Business”; 2023 Global SME Banking Innovation Awards, “Best SME Bank for Women Entrepreneurs in Africa”; 2023 The Industry Award “Best Company in Gender Equality”; 2022 Finance Derivative Award “Best Sustainable Bank Africa”.

About The Access Bank UK Limited

The Access Bank UK Limited is a wholly owned subsidiary of Access Bank Plc. Authorised by the Prudential Regulation Authority (PRA) and regulated by both the Financial Conduct Authority (FCA) and the PRA, The Bank is strategically positioned to support opportunities in the Organisation for Economic Co- operation and Development (OECD) markets for Access Bank Group and its customers.

Serving as the Group’s OECD operational hub, The Access Bank UK Limited facilitates the flow of investments into Nigeria and broader African markets. The Bank is also authorised by the Dubai Financial Services Authority (DFSA) to operate within the Dubai International Finance Centre (DIFC). This enables the provision of tailored financial solutions to meet trade and investment requirements between Africa and the Middle East and North Africa (MENA) region. Additionally, the Bank’s Hong Kong Branch, situated in the Central District of Hong Kong Island and regulated by the Hong Kong Monetary Authority (HKMA), delivers a comprehensive range of products and services to support trade and corporate needs in Africa and Asia.

The Access Bank UK Limited is committed to fostering long-term relationships by collaborating with its customers to understand their goals and provide tailored strategies. The Bank’s focus on staff development is evidenced by its Platinum Status accreditation from Investors in People (IIP), reflecting its dedication to excellence in people management. Led by a team of seasoned professionals with extensive experience in African, MENA, European, and global markets, the Bank delivers superior financial solutions to businesses and individuals. Its moderate risk appetite, emphasis on customer service, and commitment to sustainability underpin its strategic approach. Aligned with the Group’s vision of becoming “the world’s most respected African bank,” The Access Bank UK Limited prioritises sustainable growth by strengthening customer relationships rather than pursuing unsustainable yields. It continues to play a pivotal role in advancing Access Bank Group’s mission and values while fostering a business model that supports the environment in which it operates.

About The Access Bank Malta Limited

The Access Bank Malta Limited offers a broad range of products and services to assist with trade and corporate needs in Africa and Europe. The Branch is situated in Sliema and is licensed and regulated by the Malta Financial Services Authority (MFSA).

The Access Bank Malta Limited offers bespoke services tailored to meet customers’ business requirements, and the Relationship Managers are dedicated to delivering excellent customer service and working closely with customers to fully understand their business requirements. As the UK Parent, the Malta team believe in building long term relationships with customers so that they receive the best possible service and tailor their products to specific requirements and work with customers to meet varied and evolving needs as their businesses grow.

The Access Bank Malta Limited seeks to differentiate itself from other banks currently operating in Malta through excellence in customer service, with a focus on establishing strong relationships with all its customers. The strong links that the Bank has with Africa and Europe ensure that it has an in-depth knowledge of the marketplace and can assist customers with their transactions.

For more information: https://www.theaccessbankukltd.co.uk/the-access-bank-malta-limited/

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This is one of the most consequential US elections in history, which has been mainly determined by what’s at stake in an ideological or geopolitical domain.

But we at TFG think it’s essential to fully explore what Donald Trump’s second presidential victory may mean for the world of trade, treasury, and payments. It’s with this regard that President Trump can redefine the world.

We recorded an emergency livestream with four industry heavyweights:

◾ Dr Rebecca Harding, Independent Trade Economist, REBECCANOMICS LIMITED
◾ Dr Robert Besseling, CEO, PANGEA-RISK
◾ Simon Evenett, Professor of Geopolitics & Strategy, IMD Business School, Co-Chair, World Economic Forum Global Future Council on Trade & Investment
◾ Dr Alisa DiCaprio, Former Chief Economist, R3

What was covered:

• How Trump’s trade policy differs from Biden’s (if at all).
• US-China trade relations and economic wargaming – how increasing tariffs on 818 categories of Chinese goods impacts 2025 policy.
• How a second Trump presidency could impact trade relations between the US and Africa and the Middle East.
• What does the decline of multilateral trade agreements mean for ongoing negotiations and existing trade pacts (think: withdrawal from the Trans-Pacific Partnership and replacing NAFTA with the USMCA agreement)?
• Money markets: with US stocks surging and European renewable stocks falling, how Trump’s stance on climate change and energy policy might impact global commodity markets and trade flows.
• What we can expect Trump’s impact to be, on trade and SCF.
• What regions are likely to be singled out from a more combative trade policy, and what methods there are for assessing and monitoring as the effects of Trump become realised.
• The impact of protectionist trade on currency markets and international capital flows.

The post TFG hosts emergency broadcast: Global trade according to President Trump appeared first on Trade Finance Global.

Absa has secured a $150 million trade finance facility from British International Investment (BII), the development finance institution.

The facility will be used to extend credit to businesses across African markets, with a particular focus on small- and medium-sized enterprises (SMEs) involved in regional and international trade, according to people familiar with the deal signed in Washington DC.

The trade finance gap in Africa is estimated to be $120 billion, constraining cross-border commerce on the continent.

BII, the UK’s development finance institution, has previously worked with Absa to provide more than $1 billion in trade finance since 2019 across markets including Ghana, Nigeria and Kenya. The relationship helped maintain liquidity during the pandemic when traditional financing sources contracted.

While the African Continental Free Trade Area agreement has helped to boost intra-regional trade, banks have struggled to meet demand for financing, especially from smaller businesses.

Anneliese Dodds, UK development minister, said the facility would help address “a pressing challenge” in African trade finance. The deal comes as development finance institutions face growing pressure to demonstrate impact amid scrutiny of their effectiveness in emerging markets.

Absa has said the plan would align with the bank’s broader sustainability targets, extend liquidity to clients across various geographies, and high-demand trade product sects. It seeks to reverse the detrimental effects of the COVID-19 Pandemic on regional liquidity.

Admir Imami, Director, Head of Trade & Supply Chain Finance at BII said, “We are delighted to continue our partnership with Absa which is based on a shared ambition to progress inclusive and economic development, particularly for underserved groups including SMEs and women.”

The post Absa signs $150m African trade finance deal with BII appeared first on Trade Finance Global.

The COVID-19 Pandemic threw a spanner in the workings of the entire global economy. But the African continent, where the financial market ecosystem was fledging, was hit adversely hard. In response, policymakers, exchanges, and regulators have been inching back the mileage that was lost.

The silver lining of such a disjunct period is that foundational cracks are brought to the fore. Otherwise, infrastructure may have been constructed on uneven ground, perhaps leading to a more dramatic collapse. 

Now, African stability has become more relevant than ever before. Decades-old trade networks (through Russia and the Middle East) contend with geopolitical spillovers, turning eyes to the Global South. 

To track how the continent has responded to changing demands and challenges placed upon it by the international community, the Johanessburg-based bank Absa and the Official Monetary and Financial Institutions Forum (OMFIF) launched the Absa Africa Financial Markets Index in 2017. 

The primary intention of the index, which records the openness and attractiveness of financial markets in 29 African countries, was to make African markets more resilient to ‘sudden stops’. But since, its methodology has mapped financial best practices across the board. 

African financial markets are displaying remarkable vigour, with more than four-fifths of countries across the continent reporting improvements in market accessibility and depth, according to the latest Absa Africa Financial Markets Index.

Market depth

South Africa continues to reign supreme as the continent’s financial powerhouse, but Botswana’s striking transformation has caught investors’ attention. The landlocked nation has witnessed its stock market capitalisation surge to 255% of gross domestic product (GDP), up from 140% last year, cementing its position as Africa’s second-largest market relative to economic output. The convergence of dual-listed shares with their international counterparts has driven much of the repricing of Botswanan assets.

The embrace of environmental, social, and governance (ESG) instruments has emerged as a defining trend, with sustainable finance products now available in 12 African nations. Absa Botswana issued Botswana’s first domestically listed sustainable bond in December, earmarking funds for affordable housing initiatives.

Egypt, despite its macroeconomic challenges and proximity to disruptions in North Africa and the Middle East, has demonstrated commendable market depth. Egypt recorded the continent’s highest equity market turnover at 70.3%, whilst its sovereign bond market expanded significantly following the introduction of treasury bill trading last September.

Substantial upgrades have been made to market infrastructure across the region. The Ethiopian Securities Exchange, set to debut by year-end, represents perhaps the most ambitious development. As one of only three countries in the index without a securities exchange, its launch could unlock significant capital formation opportunities in Africa’s second-most populous nation.

Islamic finance is also gaining prominence, with Kenya’s inaugural domestic sukuk issuance in November highlighting the growing appetite for Shariah-compliant instruments. Tanzania has followed suit with various Islamic financial products, whilst Uganda is developing its regulatory framework for sukuk bonds.

However, external debt remains a significant concern, with the International Monetary Fund identifying 18 countries as either in or at risk of debt distress.

Access to foreign exchange

A wave of sweeping currency reforms is reshaping Africa’s financial landscape, as the continent’s largest economies move to tackle chronic foreign exchange (FX) shortages and mounting external pressures.

The reforms come as the continent’s FX landscape becomes increasingly bifurcated: while some countries are building comfortable buffers, others are skating on particularly thin ice.

On the east African coast, Ethiopia announced a dramatic shift to a free-floating exchange rate regime. The National Bank of Ethiopia’s move allows commercial banks to trade FX at market-determined rates, breaking with long-standing distortions. Even the Bank of Tanzania, traditionally conservative in its approach to currency markets, adopting 52 of the 55 principles from the international FX Global Code introduced a new interbank FX market code of conduct.

Some bright spots are emerging in capital market access. Côte d’Ivoire, Benin, Kenya, and Senegal successfully tapped international markets for $5.7 billion in Eurobonds during the first half of 2024, marking a return to global capital markets after a quiet 2023. In 2023, Madagascar’s interbank FX liquidity soared to over 250% of total trade, driven by new mining activities and public sector projects. The Indian Ocean nation now ranks second in the index’s FX accessibility measures.

On the other hand, in 2023, 14 African countries witnessed declining reserve coverage. Six countries — Zimbabwe, Ethiopia, Democratic Republic of Congo, Mozambique, Malawi, and Ghana — maintain reserves below the critical threshold of three months’ import cover, deterring foreign portfolio investors despite strong underlying market performance.

And some bold interventions, whilst theoretically a step towards a more predictable investment climate, came at the expense of citizens’ livelihoods: as was the case in the larger economies of Nigeria, Egypt, and Kenya.

In Zimbabwe, the introduction of the gold-backed ZiG currency in April — aimed at stabilising its volatile FX market — faced an early test with a 40% devaluation by September. The shockwaves of their 2008 hyperinflation crisis, which peaked at 79.6 billion per cent month-on-month and 89.7 sextillion per cent year-on-year, will take some time to fully subside.

ESG 

The burden of the global climate crisis falls adversely heavily on the African continent. Temperatures are warming faster than the global averages; in 2023, the continent contended with deadly heatwaves, rains, floods, cyclones, and multi-year droughts; and on average, African countries are losing 2-5% of GDP in response to extreme climates.

In response, the index has reported that 23 countries across the continent now have sustainability-focused policies in place. The number of jurisdictions conducting climate stress tests has jumped to eight, up from just South Africa = in 2021.

Rwanda and Zambia are frontrunners in climate risk management. Rwanda’s central bank mandating financial institutions to incorporate climate risks into their frameworks took a bold step in March 2024. Meanwhile, Zambia’s central bank conducted stress tests to assess the financial impact of the El Niño-induced drought, propelling both countries into the index’s top 10.

The push towards ESG integration coincides with broader improvements in market transparency. Corporate credit ratings, which provide investors with a detailed analysis of creditworthiness, have seen a marked increase.  The total number of international corporate ratings in indexed countries rose to 343 in the year to June 2024, up from 307 a year before. Focus on credit rating improvement, according to a Ugandan survey participant, will ‘improve borrower credibility and facilitate better access to financing’ for both SMEs and corporates. 

Charles Russon, interim CEO of Absa Group, described the improved scoring for 23 of the 29 countries as a “welcome respite” after the “higher domestic inflation and financing costs” that the COVID-19 pandemic brought. But per the results of the index, rather than one of respite, Africa seems to be in a period of opportunity and growth.

Africa’s vulnerability is now being mitigated by robust capital market structures, upon which to build. With this stability – of strong markets, improved FX access, and an ESG-centric approach to growth and climate change – capital flows should naturally divert to Africa in the coming year. 

The post “A welcome respite”: Absa African Financial Markets Index 2024 appeared first on Trade Finance Global.

MANSA, a global decentralised finance (DeFi) platform providing liquidity to cross-border payment companies, has reported transaction volumes exceeding $3 million in its first month of operations.

The company, which launched its first liquidity pool on Base in September, aims to address financing challenges faced by payment providers, particularly in emerging markets. 

Cross-border payment companies often grapple with high transaction fees, lengthy settlement times, and regulatory complexities across jurisdictions.

Mouloukou Sanoh, CEO and co-founder of MANSA, said, “Surpassing $3 million in transaction volume just one month after launch demonstrates the significant role decentralised finance can play in supporting payments companies globally.”

MANSA’s client base includes Bitmama, a company facilitating multi-currency cross-border payments for businesses and individuals. While initially focused on African payment companies, MANSA plans to expand into Asian, Middle Eastern, and Latin American markets over the next year.

The company’s growth comes amid ongoing challenges in the cross-border payments sector. According to industry data, international payment fees currently average 1.5% for corporates and as much as 6.3% for remittances. MANSA aims to leverage blockchain technology to reduce financial and logistical barriers in this space.

MANSA’s early traction in the DeFi sector may signal growing interest in blockchain-based solutions for traditional financial services challenges. However, the long-term viability and regulatory landscape for such services remain areas of ongoing discussion in the financial industry.

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