Lion Economies

What Are the Lion Economies?

Lion economies are an epithet for Africa's developing economies, which had a collective Gross Domestic Product (GDP) of generally $1 trillion of every 2021. These economies frequently include:

• Ethiopia
• Ghana
• Kenya
• Mozambique
• Nigeria
• South Africa

Key sectors contributing to Africa's collective GDP growth incorporate natural resources, retail, agriculture, finance, transportation, and telecommunications. Improvements in political stability and economic changes have supported growth however globalization, previously a boon to the continent, has as of late had a negative impact.

Figuring out Lion Economies

The International Monetary Fund (IMF) appraises that the lion economies of sub-Saharan Africa will develop by 3.8% in 2022 and 4% in 2023, better than they fared in previous many years yet well below the expected growth rates of emerging market economies overall.

Among the countries with the highest expected growth rates for the next two years are Ethiopia, Ghana, Tanzania, Uganda, and Kenya, according to the IMF — however various investors and think tanks list various countries as "lions."

Nigeria, Africa's biggest economy with a GDP of $376 billion, developed just 1.5% in 2021 subsequent to experiencing a recession in 2016 and the waiting effects of COVID19 soon after. It is projected to develop at around 2.9% a year over the course of the next two years, well off figures of 7% annual growth through 2030 by McKinsey and Co. just quite a while back.

The utilization of the moniker "lion economies" is practically equivalent to the "tiger economies" used to portray several flourishing economies in Southeast Asia. The Asian tiger economies regularly incorporate Singapore, Hong Kong, South Korea, and Taiwan.

Headwinds for Lion Economies

Nigeria, the biggest oil producer on the African continent, is the most incredibly glaring illustration of how the lion economies are attempting to keep away from financial crises. When considered one of the more dynamic areas of economic growth in creating markets, which incorporate both emerging and frontier economies, sub-Saharan Africa has been harmed as of late by falling commodity prices, a slowing Chinese economy, and the rising cost of outer debt.

Commodity exports are the backbone of African countries and still can't seem to recover from the oil price shocks of 2015 and 2016 that flagged the finish of the commodity super-cycle. The commodity price slump has made African currencies debilitate, inflation to rise, equity markets to decline and bond spreads to enlarge, raising the cost of borrowing and diminishing a countries' access to the sovereign bond market. A slowing Chinese economy has caused quite a bit of this commodity weakness as its demand for primary goods, for example, industrial metals mined in Africa has loosened.

African economies encountered the most exceedingly terrible recession recorded in modern times due to the fallout from the COVID-19 pandemic, falling back to 2013 levels of economic output in the space of just a couple of months. Africa, too, encountered a somewhat sluggish recovery as low vaccination rates and inconsistent access to finance disrupted everything.

Investing in the Lions

Given the economic discomfort overhanging a considerable lot of the lion economies, Africa has moved from a growth investment to a turnaround story.

Investors seeking exposure to the lion economies have just one far reaching ETF to consider, the GDP-weighted Market Vectors Africa ETF (AFK) puts resources into South Africa (29%), Morocco (12%), Kenya (8%), Nigeria (8%) and Egypt (8%), with the remainder in developed and emerging market companies operating in Africa. The biggest African ETF is the iShares MSCI South Africa ETF (EZA), while more modest ETFs target Nigeria (NGE) and Egypt (EGPT).

China in Africa

While a significant part of the West had disregarded Africa as an important economic center, China has committed to laying out a strong traction there. Since the 1970s and advancing rapidly through the 2000s, China has been investing in Africa, frequently through direct investment in infrastructure and energy projects. Without a doubt, throughout the course of recent many years, the Chinese have constructed in excess of 6,250 miles of streets and 3,700 miles of railways across the continent. That is generally 20% of Africa's thruways and 10% of its all rail routes.

For China, they benefit from laying out trade relations to import raw materials, and furthermore help to grow a bigger consumer class to purchase Chinese-made goods. Simultaneously, African economies become dependent on Chinese imports and financing while at the same time owing a developing amount of debt to China. China accounted for almost one-fifth of Africa's overall international trade in 2020. China was additionally the source of $153 billion in cumulative loans to African countries somewhere in the range of 2000 and 2019.

Features

• The "lion economies" alludes to several thriving economies on the African continent.
• Investors seeking better than expected growth potential might shift focus over to the lions, with several ETFs and market indices tracking assets in those economies.
• All things considered, numerous countries in Africa stay poor and underdeveloped.
• China has made huge investments in Africa throughout the course of recent many years.
• Developing economies in Africa incorporate Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Uganda, and South Africa — which have an aggregate GDP of more than $2 trillion.

FAQ

What Is the Poorest Country in Africa?

The poorest countries in Africa, in terms of per-capita income, are Burundi and Somalia.

What Is the Safest Country in Africa?

The most secure country in Africa as estimated by the Global Peace Index (GPI) is Mauritius (which is likewise the 28th-most secure country in the world). Mauritius is a multicultural island nation that is family-accommodating and secure. Mauritius is a haven for travelers. The second-most secure country in Africa is Ghana.

What Country in Africa Has the Largest Economy?

Nigeria is Africa's biggest and most-developed economy, followed by South Africa and afterward Egypt.