South Africa’s role in Africa is under threat. At current growth rates, Nigeria will overtake South Africa as the continent’s largest economy within 12 years if not sooner, according to Azar Jammine, the chief economist at Econometrix.
“Over the past 15 years, Nigeria’s economy has already grown from 40 percent of South Africa’s economy to 70 percent,” Jammine said yesterday at a presentation in Johannesburg on country risk, arranged by trade solutions company Coface.
The International Monetary Fund (IMF) forecast Nigeria would grow by 6.9 percent this year, almost twice the 3.5 percent expected for South Africa.
Nigeria’s ascendancy could come sooner, depending on the relative exchange rates of both countries against the dollar. “If the rand were to depreciate in real terms, from its current levels, then the switch over could occur in less than 10 years,” Jammine said.
He identified the price of oil – Nigeria’s main export – as another variable. The higher the oil price, the greater the growth Nigeria will experience.
A report from the IMF on sub-Saharan Africa, released yesterday, also highlighted South Africa’s shrinking role in the region (see article below). The country’s gross domestic product (GDP), as a percentage of the GDP of sub-Saharan-Africa, fell from 47.4 percent in 1995 to 31.8 percent, while its share of the GDP of the Southern African Development Community fell from 77.8 percent to 60.8 percent in the same period.
Jammine identified internet penetration as one measure of relative performance. In South Africa, 10.8 percent of the population has access to the internet, compared with 28.9 percent in Nigeria. In this respect South Africa not only lags Tunisia (34 percent), Nigeria, Morocco (33 percent), Egypt (21.2 percent) and Algeria (13.6 percent) but also its struggling neighbour Zimbabwe (12.2 percent).
He said the ambitious New Growth Path (NGP), proposed by Economic Development Minister Ebrahim Patel, was not likely to be achieved.
The NGP aims to create 500 000 “decent” jobs a year – permanent, full-time jobs offering employment benefits such as medical aid and pension fund contributions.
Jammine asked how this could be achieved, “especially when organised labour is pressing for double digit wage increases”, and said at the forecast growth rates, only 263 000 jobs of any kind would be created this year.
Little more than 40 percent of adults in South Africa are employed. This is compared with more than 80 percent in Uganda and Ethiopia and between about 75 percent and 80 percent in Rwanda, Tanzania, Malawi, Mozambique, Angola and Madagascar.
South Africa’s growth is being held back by a number of deficiencies, including constraints on industry because electricity supplies are unreliable and costly; lack of investment in infrastructure; poor education; and the government’s failure to support small businesses. - Ethel Hazelhurst