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With its economy projected to double in gross domestic product (GDP) size from $2 trillion in 2022 to over $4.5 trillion by 2040, a new research report by Euromonitor says sub-Saharan Africa (SSA) will offer tremendous opportunities to the global investor community in digital economy, green economy, natural resources, consumption potential and its improving value chains in the years ahead.

A GDP, in real terms, doubling between 2022 and 2040 is also on course to see East Africa perfectly laid on track to become one of the fastest growing regions globally with 193 percent GDP growth by 2040, says the Euromonitor International report. 

As a result, sub-Saharan Africa presents numerous opportunities which include the region’s digital economy, green economy, natural resources, consumption potential and improving value chains, the report added.

It noted that by 2040, the region is expected to have the second largest working-age population, behind only India, with a large, young, and growing urban population bolstering the region’s labour force, adding that SSA GDP is currently $700 billion less than it should be going by a pre-2015 growth trajectory due to a variety of challenges slowing down growth.

The research report, “Sub-Saharan Africa: A Rising Economic Frontier,” examined the economies of 46 countries in Africa as part of its research into the continent’s economic conditions, current and future. It found that rising consumption, commodity exports and foreign direct investment are expected to drive Africa’s economic growth, backed by a surge in the economies of East Africa where the region is expected to lead the way with 193 percent GDP growth forecast by 2040.

Such growth will be at a considerably faster rate than Central Africa (+128%), West Africa (+105%) and Southern Africa (+79%). The surge in East Africa’s economic growth is predicted to be one of the fastest globally, outpacing other emerging and developing markets such as India (+164%), Vietnam (+171%) and Indonesia (+130%). It is projected to become a $1 trillion economy by 2037 and is anticipated to overtake Southern Africa as the second largest regional economy by 2039.

According to the report, by 2040, East Africa is expected to account for 28 percent of SSA’s GDP, up from 21 percent in 2022. The region’s key heavyweight economies of Ethiopia, Kenya, Uganda and Tanzania will drive this economic growth, with average GDP across all four expected to surge by 200 percent over the forecast period.

It stated that continued foreign direct investment inflows into East Africa are anticipated to sustain the region’s strong economic momentum with investments expected to go to technology, energy, manufacturing and services sectors, as well as IT services and renewable energy solutions.

The research also found that in 2022, based on SSA’s growth over 2000-2014, its total GDP could have potentially reached $2.7 trillion, well above the current $2 trillion, noting also, that GDP per capita in SSA could have been 35 percent higher in 2022 based on growth trends over 2000-2014.

The failure to match these expectations were linked to political and economic instability, weak business appeal, financial inequality, inadequate infrastructure and a lack of education opportunities, factors which weakened the growth trajectory, and remain challenges that will need to be addressed by governments and businesses for the region to reach its full potential, the report advised.

Besides, it observed that whilst many parts of SSA have displayed slowing economic growth since 2015, some economies have continued to remain resilient, noting, for instance, that over 2015-2022, real GDP growth in Ethiopia, Cote d’Ivoire and Tanzania reached 7.6%, 6.2% and 6.0%, respectively, and that in CAGR terms, compared well to the SSA and world averages of 2.6% and 2.9%, respectively. This was even faster than the pace of growth in fast-growing emerging markets such as China (+5.9%) and India (+5.0%).

“While sub-Saharan Africa has its fair share of issues and hurdles to overcome, based on projections by Euromonitor International, it is well positioned to become the next global economic frontier, elevating this often-overlooked region of the world to a prominent powerhouse on the global stage by 2040,” Fransua Vytautas Razvadauskas, Insights manager at Euromonitor International, said.

According to Euromonitor, SSA has the potential to leverage its favourable landscape and climate to benefit from investments in green and sustainable energy, noting that this has become especially clear amid the war in Ukraine which has led to countries reevaluating their dependence on fossil fuels.

For instance, it refers to the International Renewable Energy Agency estimates that 90 percent of the world’s electricity can come from renewable energy sources by 2050, yet, as of 2022, only 26 percent of electricity output globally came from renewables.

In 2022, 70 percent of SSA’s electricity output came from fossil fuels. Yet over 2010-2022, wind and solar power energy generation in SSA collectively grew by 21,000 GWh and accounted for 23 percent of the total growth of electricity output generation, but the report added that feeding the region’s economic growth will require a more robust, affordable and sustainable energy sector, especially since in 2022 just 53 percent of SSA’s population had access to electricity.

It further stated that the global shift away from fossil fuels has created unprecedented demand for minerals and metals needed to build green technologies, which are resources Africa has in abundance, noting that it represents immense growth and large opportunities to develop mineral and metals supply chains in sub-Saharan Africa.

With a growing youth and middle class population in SSA Africa is also likely to necessitate investment from governments and companies in delivering sustainable energy, financial services and infrastructure that enables connectivity and growth in the region to meet rising consumer demand, Euromonitor also observed.

“For companies to thrive in this fast-growing, uniquely diverse region of the world, they need to do their due diligence and understand the nuances of the area and its countries. Stability needs to take precedence over fast growth, which in turn can help build regional brand awareness and improve prospects for future partnerships. As the middle classes grow across the region, companies need to adjust to the expectations of this new, young, and rapidly urbanising population,” Razvadauskas added.