SA and sub-Saharan region is facing the risk of recession

JOHANNESBURG – South Africa and its sub-Saharan African neighbours are vulnerable to the risk of a global recession in the short-term, according to the World Economic Forum’s (WEF) report on Regional Risks, Doing Business Report of 2019.       

The report – overseen by Mirek Dušek, the deputy head for regional and geopolitical affairs, and Emilio Granados Franco, the head of global risks and the geopolitical agenda – said South Africa faced at least five risk categories in common with its regional neighbours: unemployment or underemployment; failure of national governance; failure of critical infrastructure; profound social instability; and energy price shock.                    

“The signals of a global economic recession in the short term are strong and the impact that such a shock would have on current government policies is worrying the global business community. 

“It is also a major cause for concern that stakeholders worldwide might not be able to come together, if co-ordination has not begun already, to craft a global response to such a risk,” the report noted.

The report maps the risks landscape from a regional perspective to help stakeholders to hedge against the probability of lack of global cohesion.

It said the only issue that emerged as a major concern for business in the region was “fiscal crises”. 

“These findings reflect the fact that economic and governance concerns are felt deeply among executives and come at a time when sub-Saharan Africa faces opportunities, but also vulnerabilities, because of its growing population,” it noted.

Unlike other regions, the leading risks in 2019 in sub-Saharan Africa did not change from the prior year. 

“The state of youth employment may explain why 'unemployment or underemployment' is not only the top risk to business in sub-Saharan Africa, but also why nearly 60 percent of respondents identified it as such, making it the highest-scoring risk for any region. Moreover, it tops the list in 21 out of the 33 countries surveyed in the region, including the four largest economies: Nigeria, South Africa, Angola and Kenya,” it noted.

The only country where the issue did not rank within the top 10 was Lesotho, which has seen a constant decrease in unemployment rates over the past two decades.

Citing Transparency International figures, the report said 55 percent of Africans believed that corruption increased in the past year.

“Failure of critical infrastructure” ranks as the third risk for doing business in sub-Saharan Africa, mostly due to responses from Nigeria, where two out of every three business leaders selected this risk as one of their most pressing concerns. Underinvestment in infrastructure is a handicap for business in the region.

According to the African Development Bank, the region’s “infrastructure needs $130 billion (R1.95 trillion) to $170bn a year – leaving a financing gap of as much as $108bn.

Despite notable economic and social progress, the region's electrical infrastructure is in need of significant strengthening and expansion.

BUSINESS REPORT