If Nigeria moves, the whole of West Africa moves with it – at least that’s how the saying goes. And now the International Monetary Fund (IMF) and others are predicting a major slowdown in the Nigerian economy – Africa’s largest.
A drop of more than 50% in the oil price over the past year has hit Africa’s biggest oil exporter very hard, and its currency – the naira – has taken a tremendous knock. Things are now at the point where the Central Bank of Nigeria is restricting the import of certain goods to keep money inside the country, and police are trying to crack down on black market currency traders. In a survey, service firm Deloitte found that Nigeria only grew 2.57% in the second quarter of 2015: not a good rate at all when compared to the rate of almost 8% in previous years.
Things are not looking too rosy on the rest of the continent either. Ghana is also suffering terribly because of its weak currency and the drop in the oil price, Zambia is sliding due to a much lower copper price, and South Africa continues to grow at a snail’s pace, with gloomy short-term growth prospects.
China’s huge appetite for Africa’s commodities had fuelled the latter’s export boom in the past decade – but is also starting to show signs of weariness. In a recent report, Standard Bank estimates that Chinese imports from Africa in 2015 will decline by 25%, or by US$60bn, from its 2014 levels.
The IMF is predicting overall growth in sub-Saharan Africa of just below 4% – the lowest in Africa since 2009. At a press conference earlier this month, the IMF director for Africa, Antoinette Sayeh said ‘the very strong growth momentum evident in recent years has dissipated in quite a few countries’. Greater detail is expected when the IMF releases its Africa growth projections for the region at an Institute for Security Studies (ISS) event tomorrow.
While South Africans seem to have come to terms with the sorry state of their currency, the rand, (holidays in Europe or the USA are now a thing of the past for most), Ghanaians and Zambians are still dumbstruck at how little their money is now worth. Angolans are also obliged to dig deep in their pockets for imported goods, with a kwanza worth 25% less than a year ago against the dollar. Exceptionally, Francophone Africans are at a slight advantage when it comes to the currency game. The CFA Franc, used in most of former French colonies in West and Central African countries, is pegged at a fixed rate to the Euro.
Compounding the negative picture is the threat of terrorism; lingering conflict in areas like South Sudan, the Central African Republic, Nigeria and Somalia; and political uncertainty surrounding a number of important upcoming elections in places like the Democratic Republic of Congo (DRC) and Uganda next year.
Long-serving leaders have taken heart from the dismal example of Pierre Nkurunziza in Burundi, and a range of constitutional amendments to allow for third terms appears to be on the cards.
Does this mean the end of Africa’s impressive economic ascent? While political analysts and global institutions see things in a rather grim light, those who are in business and looking at the longer term seem to be more optimistic. Speaking at an event at the Johannesburg Chamber of Commerce and Industry earlier this month, experts concluded that while things are not as good as they seemed a few years ago, the ‘Africa rising’ narrative might have been too simplistic, based largely on average growth on a continent of 55 countries.
Standard Bank economist Yvette Babb said while giants such as Nigeria and South Africa are now dragging the average rates on the continent downwards, 15 markets on the continent are growing by more than 5%. ‘We need to look beyond GDP-growth,’ she said. ‘There are companies that are thriving, from Burkina Faso to Malawi,’ Babb told delegates at an event organised by the not-for-profit organisation, Good Governance Africa. ‘Some ask whether the Africa rising narrative is losing its shine. But development is much more complex than that.’
Improvements in the banking sectors across Africa, infrastructure development, an increase in intra-African trade and the telecommunications boom are all factors that contribute to greater prosperity on the continent.
While oil producers like Nigeria, Angola, Gabon, Cameroon and Ghana will certainly lose out due to the low oil price, some importers of oil might conversely benefit from this. This excludes countries like Uganda, who have banked on new oil projects that might now have to be put on hold. Economic stars on the continent are Ethiopia, Côte d’Ivoire, the Democratic Republic of the Congo and Mozambique. This is according to a rating by Moodies earlier this year. Other surveys would include Kenya, Nigeria, Uganda, Rwanda and the Republic of Congo in the world’s top 20 best performing African countries.
A new survey from Deloitte also showed that many chief financial officers (CFOs) – those who are often the penholders when it comes to tricky business decisions – are relatively optimistic about investment opportunities in East and West Africa. ‘CFOs in South and Southern Africa are anxious about the future and anticipate subdued economic growth over the next three years. This is in contrast to East and West Africa where CFOs are far more positive about their growth prospects,’ says the firm in a statement released last week.
At a recent Business Sweden conference in Dubai on the Middle East and Africa, ISS Executive Director Jakkie Cilliers presented a long-term growth forecast for the continent that reaffirmed the view that Africa is the growth pole for the future in the medium to long term.
West Africa has the potential for most rapid growth. According to Cilliers, ‘sub-Saharan Africa is expected to grow at an average rate of close on 7% per annum over the next 20 years, with the potential to add an additional 1.8% to that forecast given the right policy choices.’
Research by the African Futures Project at the ISS also shows that although it is unlikely that extreme poverty will be eliminated by 2030, the first target of the recently unveiled Sustainable Development Goals, poverty levels will continue to decline. Countries like Sierra Leone, Ethiopia, Rwanda, Zambia, Nigeria and Mozambique have the potential to grow particularly rapidly, Cilliers said.
‘The good news is that Africa is rising, although not for all Africans. We need to work harder if we are to end conflict and grow inclusively and sustainably across the continent’, he argued.
Liesl Louw-Vaudran, ISS Consultant