Years of rapid economic growth across sub-Saharan Africa fuelled hopes of a prosperous new era. To many, the world’s poorest continent was finally emerging, with economies that were no longer dependent on the fickle global demand for Africa’s raw resources.
But as China’s economy slows and its once seemingly insatiable hunger for Africa’s commodities wanes, many African economies are tumbling, quickly.
Since the start of this year, the outlook across the continent has grown grimmer, especially in its two biggest economies, Nigeria and South Africa. Their currencies fell to record lows this month as China, Africa’s biggest trading partner, announced that imports from Africa plummeted nearly 40 per cent in 2015.
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“We can see what drove the growth in Africa when demand goes away,” said Greg Mills, the director of the Brenthurst Foundation, a Johannesburg-based economic research group. “Well, demand has gone away, and it’s not pretty.”
The International Monetary Fund has in recent months sharply cut its projections for the continent. Credit rating agencies have downgraded or lowered their outlook on commodity exporters like Angola, Ghana, Mozambique and Zambia, which were the darlings of international investors until just over a year ago.
Many economists expect South Africa, the continent’s most advanced and diversified economy, to slide into a recession this year, a projection disputed by the government. As Africa’s biggest exporter of iron ore to China, South Africa is suffering from a slump in mining, as well as in other sectors like manufacturing and agriculture.
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Like the currencies of many commodity-exporting nations, South Africa’s rand has declined sharply in recent months because of the worldwide fall in prices of raw materials and because of poor government policies.
The weak rand will make it more painful for South Africa, which is experiencing the worst drought in a generation and is usually an exporter of agricultural products, to import corn, the nation’s staple.
Higher food prices could pose a challenge to the government of President Jacob Zuma. Nigeria, Africa’s biggest economy and oil producer, is reeling from the crash in crude prices, at the same time President Muhammadu Buhari tries to deal with Boko Haram, the Islamic extremist group that has long terrorised the nation.
With oil accounting for 80 per cent of government revenue, the government may also lack the resources to quell potential unrest in the Niger Delta, the source of the country’s oil.
Weakening currencies will make it harder for Nigeria — and many other African governments — to repay China for loans used to build large infrastructure projects.
As the slumping economies have underscored the continent’s growing vulnerability to changes in China, businessmen have quieted much of the heady talk of “Africa rising,” a catchphrase that symbolised the continent’s fortunes.
But experts also see bright spots on the map. While previously high-flying commodity exporters, like Angola and Zambia, have been hit hardest by China’s slowdown, other countries are showing greater resilience.
“The ‘Africa rising’ narrative wasn’t true, but neither is the diametrically opposed argument that Africa is no longer rising,” said Simon Freemantle, a senior political economist at Standard Bank, a South African bank.
Mr. Freemantle said East African countries, including Kenya and Ethiopia, which have been forced to diversify their economies in part because of their dearth of commodities, will probably continue to enjoy robust growth. — New York Times News Service