The growth potential in Africa’s five sleeper economies
Despite facing challenges such as corruption and threats from insurgencies, five emerging nations in Africa are showing promising growth rates.
In a nutshell
- Cabo Verde and Namibia lead with strong governance and literacy
- Angola’s natural resources and reforms point to potential growth
- Challenges like corruption and conflict persist in Senegal and Tanzania
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Africa is a continent teeming with a youthful population. It is also undergoing swift urbanization and is rich in natural resources. According to the African Development Bank Group, it had 11 of the world’s 20 fastest-growing economies in 2024. The continent’s real gross domestic product (GDP) growth is projected to average 3.8 percent in 2024 and 4.2 percent in 2025, exceeding global averages of 2.9 percent and 3.2 percent, respectively. It will continue to be the second-fastest-growing region after Asia.
Despite its potential, only a few of its 54 countries – such as Mauritius, Botswana and Seychelles – have consistently demonstrated strong economic performance over the years. While larger economies like South Africa and Nigeria face considerable challenges, several smaller nations have displayed promising growth trajectories. From 2013 to 2023, Guinea, Ethiopia and Ivory Coast recorded the highest GDP growth per capita in Africa, starting from a low base.
However, the backdrop for the continent’s development is becoming increasingly complex as jihadist insurgency spreads from the Sahel to Mozambique, and various other conflicts continue to affect the region. In this landscape, which emerging or sleeper economies might rise to prominence and surprise with positive economic growth in the near future?
Facts & figures
What is a sleeper economy?
A sleeper economy is a nation or region with untapped potential for significant economic growth. Although these economies may currently have lower investment and recognition than most, they possess favorable conditions that could lead to rapid future growth.
There are compelling reasons to closely monitor five African nations pursuing growth strategies: Angola, Namibia, Senegal, Tanzania and Cabo Verde. Each has developed a growth plan that showcases a practical approach to tackling the key barriers to economic expansion in Africa.
These emerging economies share several common traits, such as political stability, natural resources, a pro-Western stance and a relative lack of jihadist insurgencies. They have made significant progress in enhancing economic freedom, upholding the rule of law and addressing corruption. Each of these countries is committed to improving energy access for both their citizens and businesses.
Moreover, research has demonstrated a strong correlation between economic performance and adult literacy rates. To sustainably increase productivity and innovation, countries should strive for 70 to 80 percent adult literacy rates. Of the five emerging African nations, only Senegal has a literacy rate below this benchmark, whereas Cabo Verde and Namibia have rates exceeding 90 percent.
Along with improvements in literacy rates, advancements in political and economic liberalization highlight the growth potential of these countries. While they have not reached their goals yet, they are certainly moving in the right direction.
African sleeper economies to watch
Since its political and economic liberalization in 1990, Cabo Verde has experienced substantial economic progress, largely tourism driven, accounting for 25 percent of GDP. Its political landscape has evolved since the end of one-party rule and socialism. In 2021, the business-friendly Movement for Democracy party was re-elected, with Ulisses Correia e Silva continuing as prime minister. Cabo Verde’s government now aims to eliminate extreme poverty by 2026. In 2023, the country saw a growth rate of 5.1 percent, driven by 1 million tourist arrivals that boosted the services sector.
Namibia is pinning its hopes on energy as a driver of growth, particularly following the discoveries in the Kudu gas field. Yet, the recent withdrawal of Shell from the project’s concessions, citing unprofitable production, raises concerns. On a positive note, energy companies like Portugal’s Galp are still investing, suggesting that Namibia could potentially strike it rich with gas resources.
Angola, providing the nearest port access for Democratic Republic of the Congo (DRC) and itself endowed with vast natural resources, appears poised for steady growth, propelled by privatization efforts, the Lobito Corridor enhancing export activities from DRC and Zambia, and a decline in corruption.
Senegal’s new government, led by President Bassirou Diomaye Faye, has launched a 25-year development plan to boost economic growth by enhancing competitiveness, sustainable resource management and good governance. Notably, Senegal became an oil producer last year, and gas production is set to start at the Greater Tortue Ahmeyim project led by BP.
Tanzania has moved from a low-growth socialist economy to achieve lower-middle-income status, aided by economic reforms and an 80 percent adult literacy rate. The economy is growing, with a GDP increase to 5.6 percent in the first quarter of 2024, up from 5.1 percent in 2023, driven by sectors like manufacturing, construction and tourism.
Corruption
Historically, widespread corruption in Africa has been closely associated with authoritarian regimes. However, in these five nations, corruption has diminished due to the emergence of more democratic governments and the relaxation of economic controls.
Open economies with minimal regulatory restrictions promote transparency and competition, reducing corruption. Countries like Cabo Verde and Namibia benefit from such environments. Their high literacy rates also contribute to lower corruption, as educated citizens are more aware of their rights and government accountability.
It is no surprise, then, that Cabo Verde and Namibia – two countries with open economies and high literacy rates – have the lowest levels of corruption among African nations. According to the 2023 Transparency International Corruption Perceptions Index (CPI), which ranks perceived public sector corruption, Cabo Verde ranked 30 out of 180 countries, while Namibia ranked 59.
Senegal came in the middle of the CPI, ranking 70, which suggests a moderate level of corruption, while Tanzania ranked 87, indicating ongoing issues with persistent corruption. Angola did not fare well, ranking 121 – nonetheless, its score has improved since 2015, highlighting the progress made in combating corruption since President Joao Manuel Goncalves Lourenco took office in 2017 and began opening up the economy. However, the country still faces corruption challenges, including low literacy rates.
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Rule of law
Effective governance fosters development by boosting economic growth. The rule of law is vital in shaping investment decisions, particularly regarding foreign direct investment and the protection of intellectual property.
According to the World Bank’s Worldwide Governance Indicators (WGI), rule of law is strong in Cabo Verde and Namibia. Cabo Verde consistently scores above the 70th percentile, highlighting its well-established legal system and dedication to the rule of law. Namibia’s WGI score in recent years has stayed around the 60th percentile, indicating a relatively robust legal environment. Senegal and Tanzania show moderate performance. Although Angola’s rule-of-law performance has significantly improved over the last 10 years, it remains notably low and faces considerable challenges regarding its legal frameworks and enforcement.
State control of the economy
Economic freedom fosters investment and economic growth. People can work, produce, consume and invest freely in such societies. Governments allow the movement of labor, capital and goods while minimizing interference, mostly stepping in to protect liberty and contracts.
On the Heritage Foundation’s Index of Economic Freedom, which measures the level of state intervention in the economy, Cabo Verde stands out with a relatively high score due to its policies that promote private enterprise and restrict state intervention. Namibia holds a moderate economic freedom score, benefiting from the presence of state-owned enterprises that are not overly dominant. Additionally, Cabo Verde ranks fourth in Africa on the Global Innovation Index, highlighting its commitment to innovation, with Senegal just behind it in fifth place.
Senegal and Tanzania are moving towards greater economic liberalization. Both countries have implemented reforms to decrease state control, attract foreign investment and boost private sector participation, although they still face challenges within their regulatory frameworks.
In contrast, Angola has a long history of considerable state control, especially in the oil sector, where the state-owned Sonangol Group has played a pivotal role. State interference has frequently resulted in inefficiencies and instances of corruption. In response to these challenges, recent reforms have aimed to lessen state intervention and promote privatization.
During the initial phase of its privatization reforms (the Propriv Program), the Angolan government aimed to privatize 195 public companies, including 32 major national entities. By the end of this phase, the government successfully privatized 96 companies, generating more than $1 billion in revenue. In 2023, the government expanded its efforts by adding 73 more assets and companies to the privatization list, with Sonangol being one of the most notable, targeting completion by 2026.
Energy access
Energy access varies widely across these countries. Cabo Verde stands out with one of the highest electrification rates in Africa, nearing universal coverage. Senegal has also made significant strides, achieving an electrification rate of 67 percent in 2022, thanks to infrastructure improvements and regional initiatives. Namibia is also progressing, currently reaching around 56 percent of electrification; however, electricity access in rural areas remains limited, at only about 35 percent.
Despite having abundant oil resources, only 48 percent of Angola’s total population has access to electricity. The country struggles to provide reliable energy access for its population, especially in rural areas that remain significantly underserved. However, 76 percent of urban residents have electricity, highlighting both the challenges and opportunities presented by rapid urbanization. Meanwhile, Tanzania has made significant strides, increasing electricity access from 7 percent in 2011 to over 45 percent recently.
These five emerging economies are forging ahead, but their pace of progress differs markedly. Each faces significant challenges, from authoritarian governance to low literacy rates, which could hinder progress.
Scenarios
Unlikely: Growth continues smoothly for all five sleeper economies
Cabo Verde and Namibia are well-positioned to maintain their strong standings due to solid governance, high literacy rates and open economic policies.
Economic diversification in plans in Cabo Verde include a greater focus on digitalization, climate resilience and enhancing telecommunications competition, along with increasing renewable energy production. The government is also promoting sustainability in fisheries and greater economic participation for women. Cabo Verde boasts an impressive 88 percent literacy rate and a robust tradition of political and economic freedom, putting the nation in a strong position to reach its objectives.
The crucial issue at hand in Namibia is whether the newly elected President Netumbo Nandi-Ndaitwah, the country’s first female president, from the SWAPO party, will uphold a market-driven economy while also tackling the pressing problem of youth unemployment. Failure to address these issues could lead to economic stagnation, reduced foreign direct investment and potential youth-driven political instability.
Angola’s GDP is projected to reach $107 billion in 2025, making it the eighth largest economy in Africa. The key question for Angola is whether it can effectively curb corruption, enhance its literacy rate from the relatively low level of 72 percent, and implement rule of law reforms to draw in substantial capital and foreign direct investment. The 2027 election will be crucial as President Lourenco is expected to step down in line with constitutional term limits.
In Senegal, the government faces significant challenges, particularly with an adult literacy rate of just 52 percent. One of the key goals is to raise electricity access from the current 84 percent to full coverage, and pushing toward energy self-sufficiency. Although the International Monetary Fund reduced its growth forecast to 6 percent, the country is still on a positive trajectory, albeit with risks from jihadist insurgency, and potential political instability if unemployed youth become disillusioned.
Tanzania’s inflation has decreased from 3.3 percent in July 2023 to 3 percent in July 2024, below the central bank’s 5 percent target. However, challenges remain from currency fluctuations and potential jihadist spillover from northern Mozambique, particularly with the 2025 national elections approaching.
Likely: Energy and literacy as drivers, corruption and instability as barriers
Cabo Verde and Angola, both Portuguese-speaking nations, are poised for significant growth, as is Angola’s southern neighbor, Namibia. Cabo Verde excels in literacy and governance, with Namibia closely trailing behind. While Cabo Verde needs to diversify its economy, Namibia stands to thrive thanks to its robust oil, gas, mining and tourism sectors, as long as it continues to promote high literacy rates and encourages a competitive political and economic landscape.
Angola holds significant short-term promise due to its rich energy resources and the ongoing privatization of state-owned companies. However, the country faces challenges such as low literacy rates and a history of state control. Corruption remains a serious issue, and with an election in 2027 that demands fresh leadership, Angola’s potential for growth might be at risk.
While Senegal has ambitious growth plans centered around oil and gas and new political leadership, the question remains whether stability can be sustained. Yet it is Tanzania that has the biggest hill to climb despite an 80 percent literacy rate due to the abovementioned reasons.
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