Crypto News: Next Africa: Escaping debt

Welcome to Next Africa, a weekly newsletter on where the continent stands now — and where it's headed.

At the start of 2022, sub-Saharan Africa was reeling from Covid-19. The year is ending with many nations staring down another crisis: unsustainable debt.

It's been in the making for years with long-term loans more than doubling to $636 billion in the decade to 2021 — that exceeds the combined gross domestic product of more than 40 African nations.

The pandemic worsened the situation while Russia's war in Ukraine pushed some economies to the brink by closing access to financing, depleting foreign-exchange reserves and throwing national budgets into disarray.

Little wonder that the International Monetary Fund said the region is "living on the edge."

Ghana has joined Zambia and Ethiopia in trying to restructure its liabilities, and heavyweights Nigeria and Kenya are weighed down by choking debt.

While African policy makers can't influence the global headwinds, they can take steps to build resilience. Rising prices of commodities in a continent endowed with everything from diamonds, iron ore, bauxite, cobalt, copper to platinum offer a chance to create stabilization or sovereign wealth funds to insulate against future shocks.

The key to building savings is to have proper governance — by some estimates Africa has 20 such funds already, but not all have delivered.

An employee displays an uncut diamond at DTC Botswana. Photographer: Chris Ratcliffe

Botswana's Pula Fund is one that's worked. The world's second-largest diamond producer has used sales of the gems to create a $4 billion fund, a quarter of the size of its economy. That, along with a fiscal consolidation plan, helped the southern African nation weather the Covid-19 slump and offers its 2.4 million people enough buffers, the IMF says.

African wealth funds can also help finance much-needed infrastructure projects by underwriting loans, and investing in infrastructure debt funds, according to the United Nations.

The only thing missing is the political will to look beyond the short-term election cycle.

— Arijit Ghosh

Here's what may be the focus for 2023 in different parts of Africa, as seen by our bureau chiefs in Nairobi, Lagos, Johannesburg and Accra.

One of Africa's biggest challenges could emerge from the Great Lakes region in 2023 should a dispute between Rwanda and the Democratic Republic of Congo escalate into war.

Congolese President Felix Tshisekedi accused Rwanda's Paul Kagame of backing rebels against his government (Kagame denies it). The men have hurled insults at each other amid heightened tensions, prompting the East African bloc to launch its first-ever peacekeeping mission, in Congo.

Fighting would affect millions of people and disrupt mining in Congo, the world's biggest source of cobalt. And that's as the nation prepares for an election in December.

A mother and her malnourished child in the Xaarxaar camp in Somalia. Photographer: Simon Marks/Bloomberg

There is hope a peace deal will hold in Ethiopia, but Somalia needs urgent aid to stave off a possible famine. Those two countries top the International Rescue Committee's watchlist of 10 nations most at risk of a deteriorating humanitarian crisis (Congo is fourth).

On the economic front, Kenya's new President William Ruto will seek to tackle a worrisome debt burden, and things are looking up for Tanzania as it moves closer to signing key agreements on a $40 billion natural gas plan. Civil works on the Uganda-Tanzania crude pipeline are scheduled to start in preparation for exports expected in 2025.

Click here to read our explainer on the Ethiopia war, and here for one on the drought in East Africa.

— David Malingha

Nigerians will go to the polls on Feb. 25 to choose a new president as Muhammadu Buhari completes his final four-year term.

The vote will be keenly watched and for the first time, a third-party candidate may unseat the two dominant parties that have ruled the continent's biggest economy and most populous nation since 1999. Opinion surveys put the Labor Party's Peter Obi ahead of Bola Ahmed Tinubu of the All Progressives Congress and Atiku Abubakar of the Peoples Democratic Party.

Obi's supporters during a rally on Sept. 24. Photographer: Kola Suilamon/AFP/Getty Images

Still, it would be surprise if he wins without the financial muscle and national infrastructure to support the mass campaigns and mobilization needed for electoral victory in Nigeria.

For whoever prevails, there will be little time to celebrate.

The economy is barely growing and liabilities are climbing — debt service costs are about to exceed revenue. The decision to revamp the nation's banknotes risks a mess and the official naira rate may need to be devalued by at least 20%, while inflation is at a 17-year high.

And, the new leader will have to figure out what to do with a fuel subsidy that could cost $14 billion next year (about a third of total spending).

The fixes needed won't make the next president very popular.

Click here to read our explainer on Nigeria's clampdown on its cash economy.

— Anthony Osae-Brown

The electricity crisis that's hobbled South Africa for more than a decade shows no sign of easing (in fact, the risk of the grid collapsing has grown). It's likely to continue to choke an economy that's been stuck with pedestrian growth since the global financial crisis.

In 2022, South Africans endured rolling blackouts for more than half the days of the year and 2023 could be worse.

The malaise will persist unless President Cyril Ramaphosa's government can find managers to turn around flailing state companies, including power provider Eskom and freight-rail operator Transnet.

A street vendor during a blackout in Johannesburg. Photographer: Ilan Godfrey for Bloomberg Markets

All eyes will be on whether the president can unlock the economic reforms he's trumpeted (but failed to implement) after securing a decisive win in the ruling African National Congress's leadership contest — giving him a stronger mandate for change.

The early part of the year may see an overhaul of his cabinet, and investors will be watching for detail of a plan for the government to take over as much as two-thirds of Eskom's more than $23 billion of debt.

Also, the nation will hear if it will be added to the global financial "gray list" for failing to properly ward off illicit money flows. That would make doing business even harder.

With national elections in 2024, the ANC has a long to-do list and little time to win back voters who are increasingly deserting the governing party.

Click here to read our explainer on the crisis that risks Ramaphosa's presidency.

— Amogelang Mbatha

Having contended with surging inflation and a plunging currency, Ghanaians face the prospect of austerity measures in 2023 as the government navigates a debt crisis and an IMF program — its 17th since the 1960s.

Inflation has climbed to more than 50%, and the central bank reckons it hasn't peaked. A reliance on imports will leave the economy vulnerable to external shocks. Only boosting self-reliance and exports will help stabilize the cedi — still one of the worst performers in Africa for 2022, despite a late rally.

A farmer cuts down cocoa pods from a tree in Azaguie, Ivory Coast. Photographer: Andrew Caballero-Reynolds/Bloomberg

New European Union rules will pose a challenge for Ghana and Ivory Coast, the world's biggest cocoa producers. They will need to improve the traceability of agricultural exports to prove that no child labor was used and no trees lost in the production process for the chocolate ingredient.

Producers of oil, palm oil, beef timber, coffee, rubber and soy will also have to clean up their supply chains and keep detailed records, enabling the bloc to trace their purchases all the way to the farms where they originated.

Jihadist violence and the threat of military coups may continue to haunt the region after the exit of Western troops from Mali, a hotbed of terrorism. Transitional, army-led governments could try to cling to power in Mali, Guinea and Burkina Faso, testing the authority of the Economic Community of West African States.

Click here to read about Ghana's debt crisis.

— Yinka Ibukun

Jan. 3 Angola reserves data for December, PMI release for Nigeria
Jan. 4 PMI for Uganda
Jan. 5 PMI releases for South Africa, Mozambique, Kenya, Zambia and Ghana
Jan. 6 South Africa's ANC reconvenes its national conference to decide policy direction

"The right way to think about Africa, in my view, is that it's the continent of the 21st century," Microsoft President Brad Smith said in an interview with Bloomberg TV's Jennifer Zabasajja. "And we still have 78 years to go."