2016 outlook for Africa

2016 outlook for Africa

The short term outlook continues to be bleak for economies across Africa. According to Imara Africa Securities, 2016 will be another difficult year for African exchanges.

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The short term outlook continues to be bleak for economies across Africa. According to Imara Africa Securities, 2016 will be another difficult year for African exchanges.

External factors

Whilst Imara Africa Securities continues to believe that the continent will continue to grow in the long term and is therefore still a great opportunity for investors, they are still raising some concerns across the region as a whole, stating that the amount of pressure being placed on the stability and value of the African currencies directly increases in line with the rising value of the dollar.

Imara Africa Securities says, “One of the most immediate impacts of the aforementioned factors was that most emerging and developing market currencies came under significant pressure as the dollar strengthened, with SSA being no exception”.

The continuing falls in commodity prices, notably oil, copper and diamonds, along with the forecasted interest rate increases and further monetary tightening in the US, as well as and the continuation of the declining economy in China, are all causing major problems for African currencies and as a result their economies as a whole.

Many experts expect commodity prices to stabilize over the next 12 months however it is also generally excepted that they will continue to be low right into 2017 and perhaps even beyond that.

There are expected to be huge variations across the region and the World Bank has stated that it expects to see some significant challenges both in the short and medium term in Sub-Saharan African stock markets.

Internal factors

Increased political uncertainty and other factors including poor decision making are also adding to the challenges facing the banks and the countries resulting economies at this time. Whilst GDP figures are still growing in some countries in the region, in others their growth has not only faltered but in some instances actually started to go backwards.

The high levels of debt are also a concern as are the current problems with the stability of electricity supplies. The issues with the stability of the electricity supplies in Africa are also expected to continue into 2017 and potentially significantly longer.

High levels of both foreign and domestic debt continue to negatively impact on the economies across the region, as do the droughts and floods across the region caused by the intense weather conditions triggered by the El Nino.

A number of the banks across the Sub-Saharan African region are struggling to control both their exchange rates and inflation levels at this time and those countries whose economies still heavily rely on single commodity, such as Ghana, Zambia, Angola and Nigeria are at the most risk of seeing their levels of debt levels increase and their currencies therefore struggle to hold their value.

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