/ 2 July 2024

East Africa’s growth projected to grow by 5% in 2024

Aerial View Of Nairobi Downtown. Nairobi. Kenya. Africa
Aerial view of Nairobi Downtown. Nairobi. Kenya. Africa. (Photo by: Leonardo Mangia/REDA&CO/Universal Images Group via Getty Images)

Africa is at a turning point; with a GDP nearing $3 trillion, the continent’s economic and development potential is undeniable. Contained in that growth is the burgeoning East Africa region where we see great potential for additional development. 

The African Development Bank Group (AFDB) notes that East Africa is set to grow at a projected 5.1% in 2024 and 5.7% in 2025. The projected growth acceleration of 1.6% in 2024 from 3.5% in 2023 reflects the anticipated strong economic performance of countries in the region, with seven economies projected to grow 5% or more in 2024. According to the Institute for Security Studies, the region contributed 14% in 2018 and 17% in 2022. This is expected to grow to a projected 29% by 2040.   

The East African economy has demonstrated remarkable resilience, buoyed by its diversification efforts, innovative spirit and collaborative mindset. This region has invested heavily in infrastructure development through public-private partnerships. Through the concerted infrastructure investment, a progressive move from traditional debt-led infrastructure projects to a joint approach that is cognisant of all parties. This is the best way to ensure development that best serves the people who benefit and use the infrastructure that is built.  

In a recent example of this collaborative approach, Stanbic Bank Kenya and MiDA Advisors, announced a partnership with real estate developer Acorn Holdings to facilitate a $700 million Kenya Shilling (KES) equivalent in long-term blended finance commitments for green, affordable student housing in Kenya. Upon approval, the transaction will comprise up to $180 million commitment from the United States Development Finance Corporation (DFC) and include raising funds from Kenyan Capital markets as well. The collaboration will result in the construction of 35 certified green housing projects, creating about 48,000 new student beds over the next 10 years. The initiative will create an estimated 15,000 direct jobs and 35,000 indirect jobs.

As the world seeks to transition to cleaner energy sources, East African countries have been using their rich natural endowments to harness renewable energy to meet their growing energy demands sustainably. Kenya, Tanzania, Uganda and Rwanda have been at the forefront of developing solar and wind power over the past decade. It is estimated that by 2050, clean energy could generate more than 26 million jobs in Africa. 

Beyond East Africa, the continent will account for 11 of the world’s 20 fastest-growing economies in 2024, according to the AFDB. Real GDP growth for the continent is expected to average 3.8% and 4.2% in 2024 and 2025, surpassing projected global averages of 2.9% and 3.2% respectively. 

This makes Africa the fastest growing region after Asia. 

In an increasingly fragmented world experiencing upheaval across geographies, the continent’s influence is growing as traditional powerhouses turn their eyes to emerging markets. This is most notably marked by the African Union’s recent entry into the Group of 20 nations — now the G21 — a grouping of country and regional bloc members shaping international economic cooperation. 

Populated by the world’s youngest demographic, Africa boasts the largest free trade area, recently punctuated by the African Continental Free Trade Area (AfCFTA). This has been ratified in 30 countries across the continent. Africa also has vast mineral deposits and natural resources, positioning it favourably for a dominant role in the global energy transition. This transition, dependent on extractive industries, is marked through the growth of alternative energy solutions for electricity and the growing electronic vehicle market, which stands at $15.8 billion, and which is expected to grow to $21.4 billion by 2027, according to market research by Mordor Intelligence. As the continent has grown, so too has the complexity of the requirements for services. African start-ups reportedly raised about $1.5 billion during the Covid-19 pandemic in 2020, more than $4 billion in 2021, and an estimated $4.5 billion in 2022. 

These are indicators that position Africa as the next growth frontier with untapped potential and opportunities for investors looking for long-term diversified value. 

Hasan Khan is the Standard Bank Group’s head of corporate and investment banking, Africa.