Look Forward — 17 November 2025
Unlocking Africa’s economic potential for faster long-term growth
Faster growth in Africa is needed to increase upward economic mobility opportunities for the continent’s rapidly expanding population.
By Elijah Oliveros-Rosen, Thea Fourie, and Valerijs Rezvijs
Highlights
Economic growth in Africa is expected to be slow but stable in the coming years. Declining global interest rates, slowing inflation and higher metals prices will benefit the region.
Most African economies have low direct exposure to rising US tariffs, as they trade more with China.
Per capita income levels in Africa remain among the lowest globally. Faster economic growth is required to improve average income as the population expands.
One potential path is to capitalize on the region’s vast critical mineral resources. This will require Africa to move up the value chain ladder, from extracting to refining these resources. Demand for critical minerals is likely to increase as global electrification efforts expand, which could position Africa favorably for investment.
Most African economies are expected to grow slowly but steadily in 2025 and 2026, averaging close to the 3.8% observed since the end of the COVID-19 pandemic. The region will benefit from more benign inflation dynamics, helped by lower food and energy prices, as well as from a weaker US dollar, reducing the cost of imports. Declining global interest rates will alleviate near-term financing constraints. Most African economies are sheltered from ongoing tariff-related tensions, as the US accounts for only 5% of total exports. Beyond the next few years, faster economic growth is needed to improve living standards for a rapidly growing population. Africa has the opportunity to unlock its vast critical mineral resources to accelerate growth and narrow the large income gap between the region and the rest of the world.
External factors support steady growth in 2025 and 2026
S&P Global projects that GDP growth rates in most African economies over the next couple of years will be similar to those averaged in the post-COVID-19 period between 2021 and 2024. We expect household spending to remain a key growth driver for most African economies. Household spending accounts for more than 60% of Africa's GDP.
Inflation in the region is subject to significant volatility. However, due to heavy reliance on energy and food imports, the recent decline in the prices of these commodities will support household spending in the coming quarters.
Food purchases account for the largest component of household expenses across most African economies — in some cases, more than 50% of the total consumer basket. Prices for food imports such as corn, wheat and rice are 10%-15% below recent highs. The price of crude oil is averaging nearly 15% lower in 2025 than in 2024. Considering the strong correlation between energy prices and food prices (due to transportation and fertilizer costs), lower energy prices should further reduce food inflation.
A weaker US dollar and lower interest rates support growth
The US dollar’s recent weakness should have a positive impact on the region's inflation dynamics. The dollar’s depreciation has been broad-based, with most major African currencies strengthening year to date. We expect the dollar to remain relatively weak in the coming quarters due to lower US interest rates. A weaker dollar helps lower import costs, amplifying the benefits of lower food and energy prices on noncore inflation, as most of these goods are priced in dollars.
The US Federal Reserve’s recent resumption of interest rate cuts, which we expect to continue through 2025 and into 2026, should help lower financing costs in most African economies. However, a few of these economies are in debt distress, limiting their ability to fully benefit from lower US interest rates. Furthermore, the region will continue to face significant financing shortages even as US interest rates fall. A reduction in official development assistance in recent years, traditionally a major source of funding for the region, has amplified financing challenges.
A surge in metal prices can support Africa’s exporters
Prices for metals such as copper, gold and platinum — key exports for several African economies — have surged in 2025. Copper is a crucial export commodity for the Democratic Republic of Congo and Zambia, constituting about 75% and 70% of total exports, respectively. In South Africa, gold and platinum group metals, the prices of which have increased substantially in 2025, account for about 50% of total exports.
Rising gold prices benefit several African economies. Amid high geopolitical uncertainty, gold’s safe-haven status could keep prices elevated in the coming quarters. Uncertainty in US trade policy, which is likely to persist, is also contributing to high gold prices.
African exposure to US tariffs is relatively low
Africa’s exposure to US tariffs is limited as the US accounts for about 5% of Africa’s total exports. There are, however, some exceptions. Affected markets include South Africa’s auto and citrus exports; textiles exports of countries including Kenya, Tanzania, Ethiopia, Madagascar, Lesotho and Mauritius; and the cocoa exports of Côte d'Ivoire, Ghana and Nigeria. But even in those cases, the direct GDP exposure from US tariffs is much smaller than in other developing economies, such as those in Asia and Latin America.
Most African countries trade more with China than with the US. Trade between China and Africa reached $273.6 billion in 2024, up from $260.3 billion in 2023, according to S&P Global Market Intelligence data. In June, China eliminated all import tariffs on goods from African countries. African exports to China are expected to remain concentrated on oil and copper, while imports from China will continue to focus on manufactured goods.
In July, the UK reformed its Developing Countries Trading Scheme (DCTS) to simplify market access for developing nations, particularly in Africa. This initiative aims to provide zero or reduced tariffs on thousands of export products and enhance trade in services including the digital, financial and legal sectors. While the reforms are expected to improve market access and encourage diversification in the export portfolios of some African countries, their overall impact is likely to be limited. Challenges include the specialized nature of manufactured exports needed to meet UK standards and existing nontariff barriers, such as regulatory compliance and market saturation, which may hinder smooth entry into the UK market.
Nigeria and Angola already benefit from tariff-free access for their crude oil and natural gas exports, minimizing the positive impact of the UK’s reforms. For South Africa, while most agricultural products are not subject to tariffs in the UK, the removal of the 4.2% effectively applied Harmonized System tariff could help sustain momentum in vehicle exports to the UK, according to data from the World Integrated Trade Solution. This market alone is unlikely to offset the adverse effects of US tariffs on South African car exports. Conversely, the textiles and apparel sector stands to gain significantly from the DCTS reforms, which could help offset the impact of US tariffs on countries such as Lesotho.
Progress on regional trade integration has been modest
Intraregional trade in Africa is underdeveloped, and regional trade under the African Continental Free Trade Area (AfCFTA) agreement has been slow, hampered by nontariff barriers, insufficient infrastructure, and a high risk of terrorism and civil unrest, particularly in Central and West Africa. S&P Global Market Intelligence data shows that regional trade in Africa accounted for approximately 13% of the continent's total trade in 2024, an increase from 10.8% in 2010.
The Pan-African Payment and Settlement System (PAPSS) was launched in 2022 as a collaboration between the African Export-Import Bank, African Union and AfCFTA secretariat. PAPSS aims to reshape Africa's cross-border transaction landscape, permit deeper economic integration and improve regional financial sovereignty by developing critical infrastructure and facilitating cross-border payments between local African currencies through connected domestic electronic payment systems.
PAPSS is on a sizable expansion path. It has grown from its initial six-country pilot phase to a network connecting 18 central banks and 150 commercial banks. The integration of Morocco’s Bank Al-Maghrib in July 2025 brought a major North African economy into its network. This was swiftly followed by the onboarding of the Bank of Algeria in August 2025. The most significant validation of the system's architecture and potential is its adoption outside the continent, demonstrated by the October 2023 decision of all 11 central bank governors of the Caribbean Community to adopt PAPSS.
Opportunities for faster long-term growth are available
Faster real GDP growth is necessary to prevent income per capita gaps between sub-Saharan countries and the rest of the world from widening further. This will be critical as population growth in the region is forecast to be among the highest globally. In 2025, about 12% of the global working-age population (aged 15-64) is in sub-Saharan Africa. According to UN population projections, this will rise to 15% in 2030 and 25% in 2050. Ensuring economic opportunities are available for this large cohort of workers is vital to support social and political stability in the region.
Improving productivity growth will be key to unlocking faster economic growth. Most African economies have lower productivity growth rates than other frontier and emerging markets due to challenges around infrastructure, logistics and energy, among other factors. In Angola, Zambia, South Africa and Nigeria, productivity growth has slowed over the last decade as infrastructure development and maintenance have not kept up with the needs of their fast-growing populations. In several cases, political and social instability have also hindered improvements in productivity.
In some economies, productivity growth could be boosted by the availability of natural resources for which demand is likely to increase, such as energy transition minerals. For economies that are not rich in resources, or for those that do not capitalize on their natural resources, productivity improvements will rely on reforms that improve the business environment and attract investment. Given rising debt-servicing burdens and more challenging fiscal dynamics since the COVID-19 pandemic, financing investment will likely require significant participation from the private sector.
Greater demand for transition minerals could boost productivity
According to the International Energy Agency, demand for transition minerals — especially lithium, cobalt, graphite and nickel — is expected to increase significantly in the coming years. Lithium, cobalt and graphite are crucial for electric battery production, while nickel is heavily used in low-carbon energy generation, particularly wind energy. Demand for copper is also expected to climb, given its importance in the production of electricity networks and power lines. Several African economies are well positioned to benefit from this rising demand, which could unlock higher long-term economic growth.
Under a net-zero scenario, current production levels for most transition metals are inadequate to satisfy future demand, according to the International Monetary Fund. Considering the possible supply-demand mismatch, this implies significant upward pressure on prices.
Sub-Saharan African reserves for some transition minerals are among the largest in the world, and relatively low investment in exploration means these numbers may be underestimated. According to data from the US Geological Survey, the DRC holds about 50% of the world's reserves of cobalt and lithium. South Africa holds more than 80% of global platinum and palladium reserves, and about 40% of global chromium reserves. South Africa, Gabon and Ghana combined account for approximately 70% of global magnesium reserves. Proven reserves for some metals, particularly lithium, have been steadily increasing, especially in Zimbabwe, although there have also been notable, albeit smaller, lithium discoveries in Ghana and Nigeria.
The export outlook for several sub-Saharan African countries could improve as a result, particularly in southern Africa, where the concentration of these minerals is the highest and such commodities are already a large share of overall exports. The most notable examples are the DRC, where copper and cobalt together comprise up to 95% of the country’s total exports (about 25%-35% of GDP), and Zambia, where copper constitutes 70% of exports and 25% of GDP. The share of transition metals exports for other economies remains low, but it could increase rapidly in the coming years if the significant reserves are accessed.
However, most of these minerals — except those from South Africa — are exported unprocessed. This means they do not benefit from being exported as high-value-added goods, which generate greater returns to the domestic economy. The transition metals processing industry is led by China, which is also the main importer of transition metals from the region. Aside from South Africa, only the DRC has significant processing capabilities, with 8%-9% of the world’s raw copper processed there.
Looking forward
Supportive inflation dynamics could bolster economic growth in most African countries over the next couple of years amid a weak US dollar and falling global interest rates. Beyond that, the continent will likely continue facing the same structural challenges that have impeded progress. As the growth of African populations surpasses that of most other countries, capitalizing on the drivers of this growth will be crucial for income convergence. Otherwise, the region risks falling further behind. The good news is that Africa’s vast critical mineral resources could unlock higher economic growth, as global demand for these commodities is likely to continue rising. The region will need to move up the value chain from extraction to refining and manufacturing to fully benefit from its resources.
This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.
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