A recent report from South Africa’s Standard Bank has highlighted numerous challenges faced by African businesses, particularly in the context of local currency depreciation, foreign currency shortages, and infrastructure deficiencies. The findings were published in the 2023 Standard Bank Trade Barometer report on Thursday.
The report provided insights into the business environment in ten African countries – South Africa, Nigeria, Kenya, Angola, Ghana, Mozambique, Namibia, Tanzania, Uganda, and Zambia. It revealed that seven out of these ten nations experienced currency depreciation against the US dollar between 2021 and 2022. The trend of weakening local currencies is expected to continue into 2023, primarily driven by interest rate hikes in the US.
The report also noted that many of these countries are witnessing exchange rate volatility and capital flight due to higher interest rates in advanced economies. This situation has led to increasing sovereign debt and exacerbating foreign currency shortages.
While most of these countries have seen robust economic growth following the COVID-19 pandemic, they have been affected by tightening global financial conditions. Other factors such as Russia’s invasion of Ukraine and persistent climate threats have also impacted these economies.
“Collectively, these headwinds are significantly impeding business growth and cross-border trade as enterprises struggle to acquire foreign currency to cover imports,” Philip Myburgh, Head of Trade & Africa-China at Standard Bank, said in the report.
The survey indicated that intra-African trade sentiment remains constrained due to negative perceptions of infrastructure, complex policies, and high import and export duties. Many businesses reported power supply issues, notably in South Africa, Tanzania, and Nigeria. Road and rail infrastructure was flagged as a significant obstacle in countries like Zambia.
Despite these challenges, business confidence has been improving in many surveyed countries. However, South Africa deviated from this trend due to a prolonged power crisis.
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This story originally appeared on Investing
