The so-called "lion economies" are a nickname for Africa's growing economies, which had a collective 澳洲幸运5官方开奖结果体彩网:Gross Domestic Product (GDP) of roughly $1.1 trillion in 2023. These economies often include:

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

Key sectors contributing to Africa's collective GDP growth include natural resources, retail, agriculture, finance, transportation, and telecommunications. Improvements in political stability and economic reforms have aided growth. But 澳洲幸运5官方开奖结果体彩网:globalization, previously a boon tꦅo the continent🥃, has recently had a negative impact.

Understanding Lion Economies

A 2022 澳洲幸运5官方开奖结果体彩网:International Monetary Fund (IMF) report estimated that the lion economies of sub-Saharan Africa would grow at a pace better than they fared in the previous decade, but still well below the expected growth rates of 澳洲幸运5官方开奖结果体彩网:emerging market economies overall.

Among the countries with the highest expected growth rates are Ethiopia, Ghana, Tanzania, Uganda, and Kenya, according to the IMF report, though different investors and think tanks list different countries as "lions."

Lion economies have underperformed expectations set in the early 2010s. While projections varied, some analysts had anticipated average annual growth rates in excess of 6 to 8% for these economies. However, actual growth has been more modest, with the IMF now projecting an average growth rate of 3.5 to 4.5% for sub-Saharan Africa from 2025 to 2030, subject to factors such as global economic conditions, commodity prices, and domestic policy reforms. In fact, the highest growth is expected from smaller economies in the West of Africa rather than from the "lions."

South Africa was the largest lion economy in 2023, with a GDP of $378 billion. That, however, is roughly where its economy stood back in 2007 after adjusting for inflation. Nigeria was Africa’s second-largest economy in 2023, with a GDP of $363 billion. The country has also remained fairly stagnant, after suffering a recession in 2016 and dealing with the lingering effects of COVID-19 in the following years.

Key Drivers and Challenges

Several factors are influencing the growth projections for these economies:

1. "Demographic dividend:" Africa has the world's youngest and fastest-growing population, which can be a significant driver of economic growth.
2. Urbanization: Rapid urban growth is creating new economic opportunities and markets.
3. Innovation: Many African countries are seeing bold innovations in sectors like fintech and 澳洲幸运5官方开奖结果体彩网:clean energy.
4. Natural resources: The continent's rich natural resources continue to be a key economic driver.
5. Infrastructure development: Ongoing investments in infrastructure are supporting economic growth in many countries.
6. Political stability: Countries with more stable political environments tend to have higher growth projections.
7. Global economic conditions: Factors like 澳洲幸运5官方开奖结果体彩网:commodity prices and global trade patterns significantly impact these export-oriented economies.
8. Debt and fiscal challenges: Many African countries are grappling with high debt levels and fiscal deficits, which can constrain growth.
9. Climate change: Extreme weather events and environmental challenges pose risks to agricultural productivity and overall economic stability
   

Headwinds for lion economies

Nigeria, the largest oil producer on the African continent, is the most glaring example of how the lion economies are struggling to avoid financial crises. Once seen as one of the more dynamic areas of economic growth in developing markets, which include both emerging and frontier economies, sub-Saharan Africa has been hu♔rt recently by falling commodity prices, a slowing Chinese econ🍌omy, and the rising cost of external debt.

Commodity exports are the lifeblood of African countries and have yet to recover from the oil price shocks of the mid-2010s that signaled the end of the commodity super-cycle. The commodity price slump has caused African currencies to weaken, inflation to rise, equity markets to decline and bond spreads to widen, raising the cost of borrowing and reducing some countries’ access to the 澳洲幸运5官方开奖结果体彩网:sovereign bond market. A 澳洲幸运5官方开奖结果体彩网:slowing Chinese economy has caused much of this commodity weakness as its demand for primary goods, such as industrial metals mined in Africa, has slackened.

Investing in the Lions

Given🦋 the economic malaise hanging over many 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 continent-wide ETF to consider, the GDP-weighted Market Vectors Africa ETF (AFK) invests in South Africa (41%), Morocco (15%), Egypt (5%), Kenya (4%), Nigeria (3.5%), Zambia (2%), and Tanzania (1%), with the remainder in developed and emerging market companies operating in Africa, as of Q3 2024.

The largest countr🐭y-specific is the iShares MSCI South Africa ETF (EZA), while smaller ETFs target Nigeria (NGE) and Egypt (EGPT).

China in Africa

While much of the West had ignored Africa as an important economic center, China has committed to establishing a strong foothold there. Since the 1970s and accelerating through the 2000s, China has been investing in Africa, often through direct investment in infrastructure and energy projects. Indeed, over the past two decades, China has built more than 6,250 miles of roads and 3,700 miles of railroads across the continent. That is roughly 20% of all of Africa's highways and 10% of its railways.

China benefits from establishing trade relations to import raw materials and also helps to grow a larger consumer class to purchase Chinese-made goods. At the same time, African economies become dependent on Chinese imports and financing while owing a growing amount of debt to China. China accounted for nearly one-fifth of Africa’s overall international trade in 2020. China was also the source of $153 billion in cumulative loans to African countries between 2000 and 2019.

China's 2024 pledge of over $50 billion in financial aid to Africa by 2027, announced by President Xi Jinping at the Forum on China-Africa Cooperation summit, represents a significant continuation of China's economic engagement with the continent. China has now established strategic partnerships with 53 out of 54 African countries, i🧜ndicating a broad-based approach to deepen꧒ing ties across the continent

The Bottom Line

The lion economies, also known as "African Lions," refer to a group of large and economically promising countries in Africa, particularly in sub-Saharan Africa, including South Africa, Nigeria, Kenya, and Ethiopia, among others. While growing, lion economies have generally underperformed initial projections from the early 2010s that predicted explosive growth. Macroeconomic headwinds, high inflation, currency depreciation, geopolitical conflict, and the lingering effects of COVID-19 have put a damper on those predictions. Still, growth is expected to resume over the next several years as China has committed tens of billions of dollars in investment and aid. Investors looking to capture this geographic sector can look to ETFs that track the continent or specific African countries,