Mixed fortunes for Africa’s economies

2015-01-18 15:00

The fortunes of sub-Saharan countries will be a mixed bag this year as lower oil prices and decreasing commodity prices hit oil-exporting nations and resource-heavy economies.

Yvonne Mhango, Renaissance Capital’s sub-Saharan Africa economist, said this week that oil-exporting countries like Nigeria and Angola will come under increasing pressure and this will affect the growth of the continent.

She said it would be a more positive story for consumers in oil importing countries like Kenya and South Africa.

“Metal exporters are [also] going to be as badly affected as oil exporters, and we have already seen a downward revision of those fragile [resource heavy] economies,” Mhango said.

“Consumers are going to see a lot of relief in oil importing countries, and there will be a slowdown in growth in oil exporting countries. I think growth in sub-Saharan Africa will be closer to 5% rather than 5.5%.”

The International Monetary Fund (IMF) will release its world economic update tomorrow, and Axel Schimmelpfennig, the IMF’s representative for South Africa, is very optimistic about the continent’s growth prospects.

In its October 2014 update, the IMF predicted 5.7% growth on the continent in 2015.

Schimmelpfennig said the three broad trends that would support economic growth in sub-Saharan countries this year were infrastructure investment, strong agricultural production and a buoyant services sector.

“We’ve seen a lot of improvement in infrastructure on the continent in the past 10 years, especially with information technology infrastructure,” he said.

“Less impressive is electricity and, on the continent, that supply gap still exists, just like in South Africa.”

He said growth in South Africa this year would be lacklustre, especially with our energy security issues, and that this might offset oil price gains.

While trade linkages between China and Africa have increased dramatically, the reliance on commodities and minerals trade may put a damper on growth on the continent as commodity prices tracking the oil price are also set to decrease.

This has already been seen in copper prices, which slumped to 2009 levels, raising concern. Mhango said this would affect heavy copper-exporting nations like Zambia, which will now see decreased government revenue.

Trade between African countries continues to be slow, and this also hampers growth.

Denys Denya, executive vice-president of finance at the African Export-Import Bank, said intra-Africa trade is only at 11% and infrastructure was the biggest reason for this.

“Africa needs about $93?billion [R1?trillion] annually to close the infrastructure gap and only about $50?billion is funded,” Denya said.


Sylvia Chahonyo, the local country manager for Moody’s Investor Services, says Mozambique, Ethiopia and Tanzania are among those to watch in 2015.

The IMF predicted in its October 2014 update that Mozambique will grow 8.2% in 2015. Chahonyo believes Ethiopia, benefiting from the shift away from Western countries whose economies are oil-based, will attract more investors. She believes Tanzania will also benefit from the shift from the West as investors seek a higher return.


Nigeria is dependent on oil for 70% of government’s revenue, so a sliding oil price is bad news. Add to this its battle against Boko Haram and it looks like a tough 2015.

Zambia has been hit by a sliding copper price and has already seen yields on its bonds reach record highs.

Equatorial Guinea will have to accelerate plans to diversify its economy. The country has already entered a recession and its woes are likely to deepen as the oil price tumbles.

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