Africa Economic Update April 2026

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Making Industrial Policy Work in Africa

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Sub-Saharan Africa’s economic recovery from successive global shocks is losing momentum, with growth projections for 2026 revised downward from those published in October 2025. Spillovers from the conflict in the Middle East, high debt service burdens, and structural weaknesses are limiting growth prospects and job creation.

Against this backdrop, the report argues that Africa’s growth challenge is structural, reflected in low investment, weak productivity, and limited job creation. While interest in industrial policy has revived, past efforts often failed due to weak implementation capacity, fiscal and institutional constraints. The report proposes a pragmatic, ecosystem‑based approach that aligns policy tools with country capabilities to deliver productivity gains and durable structural transformation.

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Main Messages

1. Growth in Sub‑Saharan Africa is projected to remain at 4.1% in 2026 – the same pace as in 2025 -- with projections revised downward by 0.3 percentage points compared to estimates published in October 2025. Rising fuel, food, and fertilizer prices, combined with tighter financial conditions, are likely to push inflation higher, disrupt economic activity, and disproportionately affect the most vulnerable households, which spend a larger share of their income on food and energy.

2. Geopolitical risks—including the conflict in the Middle East—alongside high debt-service burdens and long-standing structural constraints continue to weigh on the region’s capacity to accelerate growth and create jobs. High public debt and rising debt service continue to crowd out development spending, while declining external financing—especially development assistance—adds pressure on low‑income countries. After falling from 4.4% in 2024 to 3.7% in 2025, median inflation is projected to rise to 4.8% in 2026, largely due to spillovers from the Middle East conflict. These challenges are compounded by global policy uncertainty, rising trade tensions, and the risk of tighter global financial conditions that could weaken exports and restrict access to finance.

3. In the short term, governments should target scare resources to protect the most vulnerable households while maintaining macroeconomic stability—through controlled inflation and prudent fiscal management—to manage the current shock and position African countries for a faster recovery once the crisis subsides.

4. Well‑designed industrial policy can help countries expand priority sectors and capture growing demand for African goods—from critical minerals to pharmaceuticals—while moving toward higher‑value activities and better jobs. Success depends on realistic design, strong implementation capacity, and integration with broader ecosystems, including infrastructure, skills, finance, and regional markets.

Innovation Capacity and Technology Transfer are Constrained by Low R&D Spending

Spending on R&D constrains the type of industrial policy likely to succeed in a given country context. Firms are reluctant to invest in activities that require skills that are not present in the local labor market. For example, agro-processing with quality standards requirements, light manufacturing for export markets, and digital services all require technical competencies that general secondary education systems rarely produce at scale. The African Union’s benchmark of 1% of GDP invested for R&D spending remains unmet in most Sub-Saharan African countries, which are mostly in the 0.1–0.4% range. Only Kenya (0.81%), Senegal (0.58%), and South Africa (0.62%) have approached the target threshold.

R&D Spending (% of GDP)

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Source: UNESCO Institute for Statistics, 2024.
Note: GDP = gross domestic product; OECD = Organisation for Economic Co-operation and Development; R&D = research and development; SSA = Sub-Saharan Africa.