The country also benefitted from economic reforms, including a three-year $12bn loan from the IMF, announced at the end of 2016, which lead to economic growth, reduced unemployment, increased foreign exchange reserves, and helped to lower the country's debt. To maintain this momentum and offset the impact of Covid-19, in 2021 Egypt announced it was working on its structural reform programme, building on existing economic reforms, and the country is targeting growth of 6–7% growth over the next three years. The IMF expects the country's economy to rebound strongly to 5.2% growth in the financial year 2021/22; however, this will be partially dependant on the recovery of the tourism industry.
The IMF expects Egypt's economy to rebound strongly to 5.2% growth in financial year 2021/22; however, this will be partially dependant on the recovery of the tourism industry.
Libya has the highest GDP per capita ($3,699) in North Africa due to its vast oil resources and small population. Despite continued political uncertainty following the fall of former president Muammar Gaddafi in 2011, the country has been showing signs of progress. Ihya Libya Vision 2030 is a working group hoping to build foundations to resolve key security, economic, human development and governance challenges facing Libya. To promote sustainable economic growth, the country acknowledges that it will need to diversify and become less reliant on oil revenues.
The Arab Spring has hit Tunisia’s economic growth, with GDP declining from $47bn in 2014 to $39.2bn in 2019. There was a small gain in 2020 but some way off pre-Arab Spring levels. Terror attacks in 2015 did little to help the economy, leaving tourism in the country suffering. Many were hoping Tunisia’s initial positive response to Covid-19 would be the foundation for future economic reform; however, in July 2021, President Kais Saied sought to seize power from the rest of the government. In August 2021, following a 30-day suspension of parliament, the prime minister was sacked and new economy and communications technology ministers were hired, leaving the future of Tunisia’s political scene, and its economy, very much unknown.
GDP per capita in Algeria has been declining. Having reached more than $5,000 between 2011 and 2013, GDP per capita fell below $3,000 in 2019 and 2020, with the dip in oil prices partially to blame. The country has announced numerous reforms in recent years but these have had little impact. Many in Algeria blame former president Abdelaziz Bouteflika for its economic stagnancy. Current president Abdelmadjid Tebboune was sworn in in 2019 and promised political and economic reforms. Covid-19 has impacted these reforms, although a rebound in gas production may prove beneficial.
GDP levels in Sudan have been declining since 2016. Between 2019 and 2020, GDP in the country declined 19%, more than double the 7% decline witnessed between 2018 and 2019. In 2020, inflation in Sudan increased to one of the highest levels in the world following increasing prices of goods including bread and vegetables, and transport fees. A shortage of essential goods drove prices up and a huge budget deficit contributed to the inflation hike.
In 2019, a new 11-member body – the Sovereign Council – was sworn in, signifying the first time that Sudan had not been under military rule since 1989. The council is expected to run the country for three more years, after which fresh elections will be held as part of the gradual transition to civilian rule. The outcome will be a significant factor in the future of Sudan’s economic growth. An additional boost for the country saw the US government's removal of Sudan from the list of 'state sponsors of terrorism' in December 2020.
GDP per capita in Chad fell to $614 in 2020, its lowest level since 2004. Following previous lows in both 2016 and 2017, the country had started to recover as oil and agricultural production increased. Covid-19 hit the economy hard, however, due to the temporary suspension of oil production. The landlocked country also struggled with a decline in trade following border closures, leading to deflation, as the supply of goods outweighed the demand. Chad has also had to contend with a coup d'état in 2021. The story is similar in Niger, where reductions in oil prices, a sector the country is heavily reliant on, combined with the effects of Covid-19, are expected to lead to economic recession.
In Mali, GDP has been increasing steadily from $10.6bn in 2010 to $17.4bn in 2020; however, population growth (2.97%) in the country is one of the highest in North Africa, which could pose a threat to agriculture and food security. Like Chad, Mali has experienced a coup d'état in 2021.
For all countries in North Africa, Covid-19 has had huge repercussions, not only to those economies that had been making gains in economic growth, but also to those which were already struggling. How each country responds will dictate its economic growth for the foreseeable future.
Where in North Africa attracts the most FDI?
Foreign direct investment (FDI) in North Africa is not spread evenly. The shining stars include Egypt and Morocco, which continually rank top for FDI projects in the region.
Despite its dominance in North Africa for FDI, in 2011 the Arab Spring led to a decline in investment in Egypt, with the country attracting half the number of projects that year (54 ) than it did in 2009 (108). Egypt did, however, bounce back relatively quickly compared with of its Arab Spring counterparts, with FDI rising again from 2014. Since 2016 and pre-Covid-19, Egypt attracted more than 10% of FDI into the whole of Africa, thanks to strong investment in its target sectors of automotive, financial services, agriculture and ICT.
The national investment promotion agency is promoting Egypt’s Vision 2030 development plan as a means of continuing to attract FDI. In addition, in 2019 the Egyptian government announced the establishment of seven new free zones as part of plans to attract more investors and increase exports and productivity.
Morocco’s stable economy and low labour costs have encouraged manufacturers to set up in the country. Morocco ranks above Egypt when analysing FDI data per 100,000 of the population, with 0.17 projects created in Morocco per 100,000 people, compared with 0.05 projects in Egypt. The 2014–2020 Industrial Acceleration Plan in Morocco laid out plans for the creation of 500,000 jobs, half of which were to come from FDI and the other half from a renovated national industrial base. During this period FDI increased, with a peak of 111 projects in 2019, helping to offset the blip in 2018 when the number of FDI projects fell to 71, the lowest level since 2013. Covid-19 will have impacted the final year of the plan, and further policies look likely to be introduced to help Morocco continue to attract FDI.
In contrast, oil-rich Libya has struggled to attract FDI in recent years, failing to attract any projects from 2015 to 2017. Since the Libyan civil war in 2011, the country’s appeal as a destination for FDI has been almost non-existent, with unrest still rife. FDI projects into Libya peaked in 2008.
Sudan, which does not have a strong record of attracting FDI projects, introduced the Investment Encouragement Act 2021 in April. The act is designed to promote investment into the country in line with the targets and priorities of Sudan. The availability of agricultural land and mining opportunities present significant opportunities for the country to attract investment and trade.
Tunisia, which has failed to reach pre–Arab Spring levels of FDI, attracted 31 FDI projects in 2019. While this falls short of the levels it reached between 2008 and 2010, it highlights growing business confidence following structural reforms since 2011 to improve the country’s business climate. In 2021, following the appointment of a new government, Tunisia provided international partners with draft reform programmes, but further steps and detailed strategies are still required if the government aims to continue attracting investors.
Where in North Africa is best for doing business?
In Egypt, 100% of the population has had access to electricity since 2016; however, internet adoption has been slower. Fixed broadband subscriptions (per 100 people) and individuals using the internet have, however, been increasing, rising 12% and 22%, respectively, in 2020. In June 2020, the Egyptian government announced a plan to improve the infrastructure for internet services by increasing the country's average internet speed.
The time taken to start a business in Egypt was 12.5 days in 2019, below the northern African average of 20.3 days, while corporation tax has remained at 22.5% since 2019, further highlighting the country's investor friendliness. It came third in North Africa in the World Bank's Doing Business ranking in 2020 with a score of 60.1/100, an increase on its 2019 score.
Morocco ranked top in North Africa in the Doing Business ranking in 2020 with a score of 73.4/100, improving on its score of 71.7 in 2019. A further positive for investors looking to Morocco is the average time to start a business of nine days, although the country's corporate tax is relatively high at 31%. In 2020 Morocco ranked second in North Africa in the Corruption Perceptions Index, although its performance dropped marginally from 2018 and 2019 levels, highlighting delays in progression against corruption.
In Mauritania it only takes an average of six working days to start a business, a significant improvement from the 82 days back in 2003. Access to electricity, fixed broadband subscriptions and individuals using the internet have been slowly improving in the country, although its infrastructure is still found wanting, especially in remote areas. In 2018 a satellite telecommunications system was established to link capital city Nouakchott with Mauritania's regional capitals.
Sudan and Libya rank bottom in terms of business corruption in North Africa, with both countries still struggling to recover from the environments created by long-standing dictators.
Liveability and North Africa's leading locations
Despite its relatively small population and high GDP per capita, Libya has the highest unemployment rate in North Africa, having remained around the 18–19% mark between 1991 and 2020. The country's reliance on oil and a lack of diversity in its economy mean that its job offering is reliant on too few areas. Quality of life in Libya is slowly improving, however, with life expectancy reaching 73 years in 2020, above the region's average of 68. Improvements in basic infrastructure mean Libya ranks second in North Africa, behind Egypt, for percentage of people with access to basic drinking water services, reaching close to 100% coverage.
Niger has the lowest unemployment rate in North Africa and one of the lowest in the world. This is in part due to its young population, most of whom are not yet of working age, as well as the low life expectancy in the country. It also has a large agriculture industry, which tends to mean that many of the jobs on offer are seasonal. Niger’s age dependency ratio – the ratio of dependants to working age population – remains above 100%. The country lags on quality of life, with less than half the population using at least basic drinking water services due to lack of resources and access. This is further highlighted by the 4% tertiary education enrolment and 65% illiteracy rate.
Chad has many similarities to Niger, in that it has a low unemployment rate, sitting at 2.3%, but a high age dependency ratio (96%). This, combined with a low literacy rate, low tertiary education enrolment and lack of water services, highlights the lack of access to basic resources and education in the country.
Egypt, Morocco, Tunisia and Algeria have made more progress in these areas, offering better access to basic amenities such as drinking water and healthcare.
Egypt’s unemployment rate fell below the North African average between 2018 and 2020, having sat above this level between 2011 and 2017. As its population continues to grow, the government is keen to move the country out of what it calls ‘learning poverty’ and is focusing on its Education 2.0 reform programme. Algeria has the second-highest literacy rate (81%) in North Africa, and the country has seen education reforms in recent years including new curricula in response to criticisms of poor-quality schooling.
Despite Tunisia having the third-highest literacy rate in North Africa, tertiary education enrolment in the country has been declining, falling to 32% in 2019 from 35% in 2009. In 2015 a World Bank study highlighted that it took an average of six years for a university graduate to find a stable job in Tunisia.
Morocco’s literacy rate climbed to 74% in 2018 and the percentage of people enrolled in tertiary education rose to 39% in 2019, more than double the 14.57% rate ten years prior. Education remains a key element of Morocco’s reform with a 2015–30 education vision plan in place and a new education act passed in 2019 to increase the quality and accessibility of education in the country.
How green are North Africa's countries?
While more than 80% of electricity generation in Morocco came from fossil fuels in 2018, the country is one of the most diverse in terms of outputs in the region, with a strong showing in renewables. Following the establishment in 2018 of the 500MW Noor solar complex, the biggest concentrated solar power plant project in the world, Morocco is aiming to maintain its leadership in renewable energy. The country is targeting an increase in its renewables capacity, to reach 52% of its total energy output by 2030 (20% solar, 20% wind, 12% hydro).
Morocco has also committed to reducing its greenhouse gas emissions by 42% below business-as-usual levels by 2030, provided it receives the relevant support. This would lead to a total reduction of 527 million tonnes of carbon dioxide (CO2) equivalent between 2020 and 2030.
Despite being one of the more progressive countries in North Africa, Algeria’s renewable energy output was almost non-existent in 2018, with fossil fuels accounting for 98.98% of electricity generation. The country, a leader gas producer, recognises the benefits of shifting towards renewable energy and aims to reach 15,000MW of electricity generation capacity based on renewable resources by 2035, with a new law on energy transition being prepared. The country is keen to attract foreign investors and its position off the Sahara Desert could make it a key player for solar investments.
Tunisia, which also lacked renewable outputs in 2018, with 97.26% of electricity from fossil fuels, aims to achieve a target of a 30% reliance on renewable energy by 2030. In 2016 the country announced the launch of the Tunisian Solar Plan 2030, with the goal of increasing the share of renewables in the electricity generation mix from 3% to 30%. Construction of the Sidi Mansour wind farm, the first privately owned wind farm in Tunisia, is expected to start in late 2021. It will have the capacity to generate approximately 30MW of electricity and help prevent the emission of 56,645 tonnes of CO2 throughout its lifespan.
Egypt’s Integrated Sustainable Energy Strategy 2035 focuses on increasing the use of renewables and improving energy efficiency in the country's power sector. It is targeting renewables to make up 42% of the country’s electricity by 2035, with a focus on solar and wind.
Mali was the lowest producer of electricity from fossil fuels (35.36%) in North Africa in 2018. According to the International Renewable Energy Agency, Mali contributes to less than 0.1% of the world’s greenhouse gas emissions. The country is being urged to consider a focus on solar and wind farms to offset the reliance on hydropower during dry seasons.
In Sudan, following the loss of oil reserves when South Sudan split from the country, the focus shifted towards hydropower. Power cuts remain frequent in the country, however, highlighting electricity shortages. A shift towards renewable energy outputs would help with electricity demands in Sudan; however, this is just one of many issues the country’s new Sovereign Council faces.
While progress has been made across North African countries, political instability and slow reforms are still preventing many of them from reaching their investment potential. Shifts away from reliance on oil alongside changes in political systems and economic policy reforms will help with further development.
Christine Patton is senior economist at Investment Monitor and a global expert on cross-border investment.