July - September 2016 •
The Lion King
• 9
T
he prospects of economic growth
in the fourth quarter across Africa
still remain highly subdued as
Africa’s major economies still battle
with low commodity prices. Nigeria,
South Africa and Egypt remain the
elephants in the room which slow eco-
nomic growth is expected to continue
to act as a drag on the economic
prospects of the entire continent in the
last quarter of 2016.
While the entire African continent
is expected to only grow by 1.4%
in 2016, Nigeria, which used to be
Africa’s largest economy will see its
economy contract by -1.7% accord-
ing to the International Monetary Fund
(IMF) while South Africa, Africa’s larg-
est economy will only see a growth
of 0.1%, missing a recession by a hairs
breath.
In its latest global economic report
published in October 2016, the IMF
BY ANTHONY OSAE-BROWN
AFRICA STILL TO SUFFER
FROM COMMODITY
SHOCK EFFECTS IN Q4
notes that “resilience in Côte d’Ivoire,
Kenya, Senegal, and Tanzania will
not be enough to offset weakened
growth in sub-Saharan Africa”, led
by Nigeria, where production was
disrupted by shortages of foreign
exchange, militant activity in the Niger
Delta, and electricity blackouts as well
as in South Africa where growth has
remained flat, despite the improve-
ments in the external environment,
notably stabilization in China.
The IMF state that economies in sub-
Saharan Africa will increasingly expe-
rience multispeed growth. “While
growth projections were revised down
substantially in the region, they mostly
reflect challenging macroeconomic
conditions in its largest economies,
which are adjusting to lower com-
modity revenues.”
Economic activity is projected to con-
tract 1.7 percent in 2016 in Nigeria,
reflecting temporary disruptions to oil
production, foreign currency short-
ages resulting from lower oil receipts,
lower power generation, and weak
investor confidence which has not
been helped by a conflicting policy
on foreign exchange regulations that
has led to crippling shortages of dol-
lars in what used to be Africa’s biggest
economy.
In South Africa, policy uncertainty is
making the adjustment to weaker
terms of trade more difficult, and so
GDP is projected to remain flat in 2016,
with only a modest recovery next in
2017 as the commodity and drought
shocks dissipate and power supply
improves.
Angola is also adjusting to a sharp
drop in oil export receipts. It is not
expected to grow in 2016 and will
experience only feeble growth even
in 2017 according to the IMF.
However, it is not all bad news as sev-
eral of Africa’s non-resource export-
ers, including Côte d’Ivoire, Ethiopia,
Kenya, and Senegal, are expected to
continue to expand at a very robust
pace of more than 5 percent this year,
benefiting from low oil prices and
enjoying healthy private consumption
and investment growth rates.
The African economies that will push
for a diversification of their economies
from its over-dependence on com-
modities whether it is crude oil or other
commodities will win in the long run.
The current commodity price slump
has once more shown many African
economies that they are still not in
control of their economic destinies
due to their over reliance on com-
modities which they have no control
over their pricing.
Q4 2016 OUTLOOK
| BUSINESS
