Speyside’s Predictions for 2023: Africa

As 2022 draws to a close, the Speyside team would like to wish all our partners and friends the very best for the holiday season, and of course a prosperous and peaceful 2023.

As has become tradition at this time of year, our teams around the globe have summarised some of their thoughts on the outlook for the year ahead across global emerging markets. We hope you find this an enjoyable and useful read.

Global Outlook

The debate still rages:

The bulls point to inflation slowing, China opening, energy prices easing, and the US economy increasingly likely to have a soft landing.

The bears point to the commitment of central banks to bring down inflation, the prospect of a long war in Ukraine, tech and crypto shocks and uncertainty around China.

Much of this discussion centers (understandably) on North America and Western Europe, but from our EM vantage point, there are reasons for optimism.

• China is opening fast and appears on a one-way track, releasing huge pent-up demand domestically and easing supply chain pressures globally

• India is posting stronger than expected GDP numbers and the fundamentals look good, with the government poised to stimulate growth further ahead of 2024 elections
• Latin America is a mixed bag, but there are reasons for optimism in Mexico which is benefiting (like India) from from “friendshoring” and strong fundamentals

None of this is to doubt the IMF, World Bank, OECD and others who are forecasting a very difficult global outlook with a global growth rate of around 1.2% in 2023, on par with 2009, when the world was only beginning its emergence from the financial crisis.

However, opportunities do exist, and many of them sit within global emerging markets, especially in Asia and Latin America.

Africa

 

South Africa: Turmoil in the ANC Hinders Government’s Ability to Overcome Structural Weaknesses

The year 2023 will see continued political turmoil within the ANC. With only a few weeks left in 2022, President Cyril Ramaphosa had seemed a shoe-in to be re-elected as leader of the ANC. Since then, the escalation of the Phala Phala scandal, with a scathing report into the president’s conduct, has blown the doors wide open on the political landscape for 2023. Ramaphosa may prevail; he has promised to fight the report, the ANC is relatively unlikely to oust him as leader, and the opposition unlikely to gain support for impeachment. However, he will likely face more open challenges within the ANC, most notably from ex-health minister, Zweli Mkhize, who is himself facing graft charges. While overall policy continuity is likely, Ramaphosa’s ability to push through his agenda, already in question, will likely be weakened.

The government’s focus in 2023 will be on resolving the acute crisis at Eskom, the public utilities provider, with frequent power cuts (costing up to R4bn rand per day) probably the most critical threat to South Africa’s economy. Improving basic public services is the government’s other pressing priority (especially with elections looming in 2024). Despite the pressing calls for investment, the imperative of maintaining debt stabilisation means that the National Treasury is likely to be parsimonious with spending in other areas.

Kenya: President Ruto Begins to Make His Stamp on the Economy

The push to implement newly elected President William Ruto’s economic vision will shape the political and economic landscape in 2023. The new economic policy is centered on bottom-up economic empowerment and promoting domestic industries, primarily agriculture and SMEs with his “hustler fund.” However, his populist tendencies are tempered by economic realities, exemplified by his early decision to scrap petrol subsidies. In order to bring the public finances onto a sustainable footing, Ruto will be looking to expand the tax base, take an industry-friendly approach, and control spending to secure IMF support.

On the political stage, there is likely to be an end to the quiet opposition seen during former President Kenyatta’s administration due to his alliance with opposition leader Raila Odinga. The opposition’s vocal protests against Ruto’s suspension of IEBC commissioners who contested his election and promised protests likely presage a more active role in parliament and civil society that may slow legislation and policymaking in 2023.

Overall, Ruto’s ability to deliver on some of his more ambitious objectives around economic and digital transformation will depend on his ability to execute on short-term economic policy that guides Kenya through the ongoing crunch.

Nigeria: Uncertain Elections Threaten Unstable Foundations

Nigeria’s political landscape in 2023 is defined by the federal elections on 25 February and state elections in March, where the successor to President Buhari will be elected. With the Labour Party’s Peter Obi leading in the most recent polls, some analysts have predicted the end of the PDP and APC’s duopoly on the presidency. However, these parties’ entrenched power gives them a decisive edge against upstart labour. In any outcome, the elections will likely lead to an outpouring of frustration from young voters or whiplash from the political establishment.

President Buhari’s successor will be forced to grapple with rampant insecurity and what some might even call early symptoms of state collapse, high unemployment and stressed public finances, and the struggle to shift the economy away from an overdependence on oil. Given the elections, it is unlikely that there will be significant policy developments prior to May 2023 at earliest, giving observers ample time to gauge the policy direction of the next administration.