If Nigeria and South Africa keep growing at their current paces, Nigeria could replace South Africa in the Group of 20 (G20) countries within nine years, according to Stanlib chief economist Kevin Lings. In a recent note he says: “It is entirely feasible that, by then, Nigeria’s economy will have overtaken South Africa’s, making it eligible for G20 membership, possibly at the expense of South Africa. “
The G20 is a group of 19 advanced and developing countries plus the EU, set up in 1999. South Africa is the only African country to be represented.
Lings points out that 20 years ago, the domestic economy was 7.5 times the size of the Nigerian economy, in dollar terms. But by the end of 2012 it was only 1.4 times the size of Nigeria’s.
“This narrowing of the gap is mainly because Nigeria’s economic growth rate has accelerated meaningfully in recent years, though off an extremely low base, while South Africa’s growth rate has moderated.”
According to Nigeria’s central bank, growth in gross domestic product (GDP) averaged 6.8 percent between 2005 and 2013. From 2005 until the global recession of 2008/09, South Africa’s growth rate averaged a little over 5 percent. Since then it has not topped 3.5 percent.
Nigeria’s central bank said the fastest growing segments were wholesale and retail trade, and telecommunications. Nigeria’s 170 million people make it the most populous country in Africa and the seventh-biggest in the world.
This creates a massive market, attracting investment from across its borders, including from South Africa, which is becoming increasingly aware of the opportunities in servicing this population.
In contrast, South Africa’s population is estimated at 51.1 million (5.7 percent of the population in sub-Saharan Africa), making it the fifth most populated country in Africa, Lings says.
Location, location, location
A study carried out by economists from Economic Information Services and led by Capetonian Barry Standish has “proved” that the property industry maxim “location, location, location” is spot on.
Standish’s team, commissioned by the V&A Waterfront to uncover its economic impact on the local environment, used the “Hedonic methodology”, which employs the comparative price per square metre to arrive at it findings that on average Cape Town’s waterfront increased neighbouring property values by R2.8 billion.
The study found that residential properties within a 1.5km radius of the waterfront were worth R123 056 more than similar properties elsewhere, and commercial properties were worth R1.14 million more.
Residential properties within the V&A Waterfront precinct were worth R3.6m more than similar properties elsewhere in Cape Town.
Standish reported: “There is anecdotal evidence to suggest the V&A Waterfront provided the catalyst for the significant upgrading of surrounding suburbs such as Green Point and De Waterkant.”
Reacting to these findings, V&A Waterfront chief executive David Green said: “Aside from the obvious benefit to property owners, the report also highlights the knock-on effect for the city of Cape Town in respect of property rates, which in turn has a benefit for residents and businesses in greater Cape Town. In addition to this ripple effect, the V&A Waterfront is the city’s largest ratepayer.’’
The total potential annual rates generated within a 1.5km radius of the waterfront has been estimated at just short of R250m in 2012. In more than 10 years, the waterfront had added nearly R200 billion to the GDP. It had created about 17 000 jobs directly and a further 16 000 indirectly.
Success also drives success. Recent residential sales for the new Silo residential development is 80 percent sold in little more than three months, which is about three times the pace at which developments are sold outside the waterfront.
It proves that the waterfront’s economic “ripple effect” works too.
Banking on reputation
Banks in South Africa have emerged from the global financial crisis with their reputations not only intact but generally enhanced.
It was not entirely of their own doing, of course, but they managed to avoid becoming embroiled in the sorry mess that was the subprime crisis. Thus there has been no discussion here of banks being too big to fail as there has been in Europe and the US.
However, when it comes to bank results’ season, it is impossible not to realise how big our banks are.
They are enormous and complex entities that have their fingers entwined in every aspect of the economy.
But, while it no doubt pleases the local regulators that they have big entities to oversee, the size of the four major banks makes it virtually impossible for journalists to do anything other than a superficial job in covering their results. Not so much a case of too big to fail as too big to cover.
The need to focus on the big picture means that lots of fascinating information tends to be overlooked.
Such as way back on page 90 of the FirstRand results released yesterday, you discover that “building and property development” has the highest rate of non-performing loans as a percentage of advances. It has 7.16 percent compared with mining, which has a rate of 0.54 percent.
Agriculture’s non-performing loan rate is down to 2.96 percent from 3.40 percent, which either means that the farmers are better off this year or that FirstRand has cut back its lending to them.
And then there’s the 2 500 innovations reported at FNB. This is an amazing “fact” and in line with what you’d expect from an innovation leader.
Of course, the big question for many FNB clients is whether or not its horrendous new website is included as one of the 2 500. page 19
Edited by Banele Ginindza with contributions from Ethel Hazelhurst, Donwald Pressly and Ann Crotty.