A Closer Look at Economic Growth in Zambia, Ghana, and Kenya

Key Takeaway

• Zambia's GDP is projected to rebound to 6% in 2025, recovering from a severe drought, with $500 million secured for mitigation.
• Ghana's trade surplus narrowed by 47% due to a significant drop in cocoa revenue, despite increases in gold and oil exports.
• Kenya signed a $3.6 billion deal with Everstrong Capital for the Usahihi expressway and announced major investments from Microsoft and Coca-Cola.

Zambian Economic Growth Outlook

Zambia's economic growth is projected to recover significantly next year following the adverse effects of the worst drought in at least four decades, according to Secretary to the Treasury Felix Nkulukusa. During a virtual briefing from Lusaka, Nkulukusa stated that the Gross Domestic Product (GDP) is expected to expand by approximately 6% in 2025 and maintain a similar growth rate the following year. This year, the economy is anticipated to grow by 2.3%.

The El Niño-induced drought has severely impacted the production of corn, Zambia's staple food, curbing overall output. To mitigate the effects of the drought, the government has secured commitments totaling about $500 million from its partners. Nkulukusa also expressed confidence that eurobondholders would approve the proposed restructuring of the nation's debt ahead of a meeting with creditors next month.

Ghana's Trade Surplus and Economic Indicators

Ghana's trade surplus narrowed in the first four months of the year due to a decline in revenue from cocoa exports. The trade gap for the period ending April decreased by 47% from a year earlier to $744.3 million, according to the Bank of Ghana's summary of economic and financial data. This marks the sixth consecutive month that the trade balance of the world's second-largest cocoa producer has failed to expand compared to the previous year.

Revenue from gold exports rose by 37% to $3 billion, and oil shipments increased by 9% to $1.3 billion. However, cocoa income decreased by 49% to $599 million during the period. The decline in cocoa output is attributed to a mix of weather conditions, disease, and a shortage of fertilizer. Ghana's cocoa harvest for 2023-24 is projected to total about 422,500 to 425,000 tons, which is half of the country's initial forecast.

Other key economic indicators from the Bank of Ghana report include:

• Total exports for January to April increased to $5.8 billion from $5.6 billion a year earlier.
• Imports grew to $5.1 billion from $4.2 billion.
• Gross international reserves rose to $6.6 billion at the end of April from $5.2 billion year-over-year, covering three months of imports versus 2.4 months the previous year.
• The budget deficit for the first three months through March widened to 2.6% of GDP from 1.8% a year ago.
• Total public debt grew to 658.6 billion cedis at the end of February from 570.8 billion cedis a year earlier, with the debt ratio easing to 62.7% of GDP from 67.8%.
• External debt increased to 380 billion cedis from 320.9 billion cedis.
• Banks' loans rose to 77.9 billion cedis at the end of April from 72.4 billion cedis the previous year, with loan growth slowing to 7.7% from 20.2%.
• The banking industry's capital adequacy ratio improved to 15.5% from 14.8%.
• Non-performing loans increased to 25.7% from 18%.
• Monthly mobile-money transactions grew to 203 billion cedis in April from 138.8 billion cedis in April 2023.

Kenya's $3.6 Billion Expressway Agreement

Kenya has signed a $3.6 billion agreement with Everstrong Capital LLC to construct a 440-kilometer expressway linking Nairobi and Mombasa. This toll-road project, named Usahihi, will feature four to six lanes and traverse an expansive wildlife reserve. The project is structured to operate independently from the Kenyan government's balance sheet, posing no financial risks to the government. It is expected to be financially self-sustaining.

President William Ruto, during his US visit, emphasized the importance of private investment in Kenya. This visit marks the first state visit by an African leader to Washington in 16 years. "The construction of the Usahihi expressway poses no financial risks to the Kenyan government, as it is structured to operate independently from the government of Kenya’s balance sheet and is projected to be financing self-sustaining," according to an emailed statement.

Additional Investment Deals

Several other investment deals were announced during President Ruto's US tour. Microsoft Corp. and G42, the United Arab Emirates' leading artificial intelligence firm, plan to build a $1 billion geothermal-powered data center in Olkaria, Kenya. This data center will have an initial capacity of 100 megawatts and is expected to be operational within two years, eventually requiring up to one gigawatt of electricity from the grid. Microsoft President Brad Smith stated, "This is the single biggest step to advance the availability of digital technology in, I think, the country’s history."

Additionally, Coca-Cola Co. announced a $175 million investment to expand its operations in Kenya. The US International Development Finance Corp. is also expected to announce several hundred million dollars in new investments in Kenya, bringing its portfolio in the country to over $1 billion.

Management Quotes

• Felix Nkulukusa, Secretary to the Treasury of Zambia:

  "Gross domestic product is expected to expand by about 6% in 2025 and by a similar amount the following year... The economy is expected to grow 2.3% this year."
  "The government has received commitments totaling about $500 million from its partners to deal with the effects of the dry weather."
  "The government is confident that eurobondholders will approve a proposed restructuring of the nation’s debt."