Johannesburg - The rebasing of the Nigerian gross domestic product (GDP) data stripped South Africa of its title as Africa’s largest economy, but it did not fundamentally change much as South Africa’s economy remained strong, experts said yesterday.
After the inclusion of new sectors into Nigeria’s GDP calculation and the re-benchmarking of its national accounts, Nigeria was announced as the largest economy in Africa and the 26th largest economy in the world.
While the new statistics were expected to affect perceptions of both South Africa and Nigeria, economic commentators did not foresee this casting South Africa in a bad light.
“Because it’s a rebasing exercise, not sudden growth… I don’t know if anything will fundamentally change because of this. When you look at broader challenges, road congestion, governance issues, Nigeria still has a lot to catch up with South Africa,” Charles Brewer, the managing director of DHL Express sub-Saharan Africa, said. DHL has operations in both economies, which are its biggest markets in Africa, where it has operated for more than 35 years.
The Nigerian economy has grown faster than South Africa’s over the past few years in terms of volume. Its GDP growth averaged 6.8 percent between 2005 and 2012, reaching a high of 8.6 percent in the fourth quarter of 2010.
After the rebasing exercise, in which it expanded the number of sectors captured in the data to 46 compared with 33 in the previous series, Nigeria’s nominal GDP rose by 89 percent to $510 billion (R5.4 trillion). This passed South Africa’s GDP of around $350bn, and beat analysts’ expectations.
The ministry of finance, which could have taken the news bitterly after the DA’s suggestions that this reflected the government’s failure to achieve growth, said this was a positive story for the continent.
“South Africa has been and will continue to benefit from faster economic growth in the rest of the continent… South Africa will continue to nurture mutually beneficial trade and investment ties with Nigeria and other African countries,” it said yesterday.
A healthy Nigerian economy would be beneficial if domestic companies were able to strengthen their business links with the country, as it was a market for value-added goods, Neren Rau, the chief executive of the SA Chamber of Commerce and Industry, said.
“This development is also an important signal that South Africa is not the only investment destination in Africa. South Africa will now face stronger competition from Nigeria for foreign investment.
“To enhance certainty in the business environment, the motivation for each policy proposal should be linked to the National Development Plan.”
Although Nigeria’s rise has been seen as the awakening of a competitive continent, local economists said the two countries were not directly comparable in most parts.
“The comparison between us and Nigeria is a bit silly. Nigeria is a bigger market than we are, with more than three times… [the] population,” Nicky Weimar at Nedbank said.
Goolam Ballim at Standard Bank said people should not just look at GDP size and the lead table rankings. “The fact that Nigeria overtakes South Africa represents a far wider suite of things that on the whole speak to an Africa renaissance and, therefore, is something… [to] celebrate.” - Business Report