Ivan Fallon: Africa’s tiger economies have stopped roaring
CAPE TOWN // Remember Africa Rising? It was the hopeful narrative propounded by The Economist and others back in 2011 that held that, after decades of slow growth, Africa had a real chance to follow in the footsteps of Asia.
The investment world was desperately seeking new tiger economies to drive global economic growth for the next decade, and Africa seemed to have them. In the first decade of the new century, six of the world’s 10 fastest-growing countries were African. In eight of those years, Africa had grown faster than East Asia, including Japan.Africa had averaged 5.4 per cent growth between 2000 and 2011, and the IMF projected it to grow by 6 per cent a year for the next decade, faster than any other part of the world.
The commodities boom was the major driver, of course, but the African renaissance was becoming much more widely based and sustainable as country after country developed healthy manufacturing and service economies.
And the reason for this sudden spurt of hope and confidence? “All this is happening partly because Africa is at last getting a taste of peace and decent government,” said The Economist.
Sadly, it has not worked out like that. Governments have not turned out to be so decent after all, the commodities boom has collapsed and the continent’s economic growth rate dropped to 3.3 per cent a year for the period from 2010-15, just over half the projected rate. The non-resource-based economies such as Mauritius, Rwanda and Morocco have done relatively well, averaging growth of 5.8 per cent a year in 2010-15, but countries heavily dependent on commodities, particularly Nigeria, Angola and Zambia, have gone backwards.
However the biggest disappointment is in the performance of those countries which were expected to be the big drivers of growth, including Libya, Egypt, Tunisia and South Africa. These countries, accounting for 46 per cent of Africa’s GDP, have turned into what the global consultancy McKinsey, in a report called New Lions of Africa, last week labelled “slow growers”. They managed just 1.3 per cent average annual growth in 2010-15, less than the 2.9 per cent global average over the period – which itself is painfully slow by previous post-recession standards.
The country that has really let Africa, and itself, down most is the country that should be leading the way yet is trembling, for no other reason than its own incompetence and political infighting, on the brink of recession.
South Africa is the biggest and most developed economy on the continent, yet the parlous state of its economy is starkly emphasised by the arrival of representatives of the ratings agency Moody’s in Johannesburg yesterday to begin their latest, and most critical, assessment of the economy, which will decide whether or not to downgrade it to junk status.
Right now, Moody’s has South Africa at two notches above junk and on “negative watch” – which indicates which way it is thinking of going next. In advance of its latest visit, the agency placed five state-owned companies, including the electricity supplier Eskom, on immediate review. Moody’s has made no secret of its concerns about the level of corruption, but also of the warfare that continues to rage inside the president Jacob Zuma’s cabinet over the economic direction of the country.
Mr Zuma and his finance minister, Pravin Gordhan, are engaged in a battle that can only result in one or the other stepping down – and Mr Zuma is determined it is not going to be him. On Friday the two men appeared on the same stage together to announce a new initiative to head off Moody’s near-certain downgrade, a 1.5 billion rand (Dh391.3 million) fund to help small and medium-sized enterprises. As the two men sat next to each other, a clearly uncomfortable Mr Zuma announced a truce – an agreement had been reached, he said, to “refrain from public utterances that promote a negative narrative about the country and undermine confidence in the country”.
Mr Gordhan just glowered and said as little as possible – he holds the high ground as the man leading the fight against corruption and trying his best to put in place the structural reforms Moody’s, the IMF and the global investment world are looking for. While Moody’s is in the country, he is safe. Even Mr Zuma would not rise the financial meltdown which would follow his dismissal. But the impasse can’t last long – and in the meantime, the country is going nowhere but down.
In the Africa Rising context, it is all desperately disappointing. South Africa has so much going for it and should by rights be the engine of growth for the whole continent, the hub for its financial services, manufacturing and tourism. Instead it stands on the brink of a downgrade.
Ivan Fallon is a former business editor of The Sunday Times.
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Published: September 19, 2016 04:00 AM