Harare - PoliticaL doubts in South Africa, security threats in Kenya and Nigeria, as well as uncertainty in the region’s ability to diversify its economy, will further jolt regional economies and occasion more difficulties for growth prospects.
Two economic think-tanks yesterday warned that this would muzzle growth and make 2016 another difficult year for the region. NKC Africa economist François Conradie said that “total exports of goods in 29 African countries dropped from $554 billion (R8.4 trillion) in 2012 to an estimated $361bn in 2015”.
Conradie said other regional countries, such as Zimbabwe, had tipped into deflation amid projected declines in output from agriculture, a major revenue earner for the country through tobacco exports.
“Many countries’ services sectors have historically been based on the sub-structure provided by the extractive industries, and will slow as inflows to those industries shrink. The next few years will be difficult for Africa’s major oil and metal producers,” Conradie said.
NKC had since cut its gross domestic product forecast for the eighth consecutive month and now expected the South African economy to expand by 0.8 percent this year and 1.5 percent next year.
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“The rand has come under pressure, mostly as a consequence of capital flight as investors fear that an apparently irresponsible executive will endanger South Africa’s investment grade rating, and as a consequence of the drought,” Conradie said.
In light of the currency weaknesses in South Africa, Zambia and other regional countries, most African central banks have had to act on interest rates. But this has also brought about undesirable effects. “High interest rates have made the business environment for firms substantially worse, and many of the affected economies have seen mass retrenchments.”
Another think-tank, FocusEconomics, said investment would be curtailed by electricity and water shortages. It said: “On the domestic front, political uncertainty in South Africa, security threats in Kenya and Nigeria, and an electricity shortage will keep growth under potential.
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“The electricity and water supply constraints will hamper growth by both interrupting production and discouraging investment. Moreover, a moderation in Chinese demand and low commodity prices will weigh on growth.”
South Africa is battling problems with waning perceptions on its ability to service its debt, which added to the $12bn hit it took on its trade balance from 2012 to 2015. This has been attributed to lower coal and iron ore prices, which pushed the rand down 55 percent from 2011 to this year.
Civil unrest
In Zambia, the trade balance has plunged from a $560 million surplus in 2012 to a $1.76bn deficit last year. However, the continent’s three biggest oil exporters – Nigeria, Angola and Algeria – have been spared the currency weakness meltdown experienced by resource-heavy economies.
Other experts said civil unrest across the continent was to be expected as there was a slew of elections set to take place in the next few years and Zambia’s request for aid from the International Monetary Fund would only come after elections in August.
They said “it is unclear how much of it will be driven by cost-of-living” considerations.
BUSINESS REPORT