World Economy

Fragile Uptick for Two African Economic Giants

Fragile Uptick for Two African Economic GiantsFragile Uptick for Two African Economic Giants

Africa’s two largest economies, South Africa and Nigeria, this week managed to climb out of recession. However, their recovery is seen as fragile.

This was highlighted in South Africa this week as the South Africa Chamber of Commerce and Industry Business Confidence Index fell to its lowest level since 1985, Fin24 reported.

Political uncertainty, high unemployment, poverty and junk status are inhibitors to local growth.

Ruben Nizard, an economist at credit insurer Coface, said: “Exposed to internal and external headwinds, Nigeria and South Africa’s economic woes are not over; the recovery is still fragile.” The return to growth in sub-Saharan Africa’s two biggest economies could prove short-lived, he said.

“Prospects for the South African economy are still bleak. A high cost base and uncertainty surrounding the introduction of a new Mining Charter could weigh on the mining sector, which has been crucial in the rainbow nation’s return to positive growth,” Nizard said.

South Africa, the continent’s second largest economy, saw contraction in its economy in the last quarter of last year and the first quarter of this year, which meant the local economy had entered recession–two consecutive quarters of negative growth.

However, Stats SA this week reported that the local economy had expanded 2.5% quarter on quarter in the second quarter, largely due to a maize crop of 16.4 million tons and a soya bean crop of 1.3 million tons after a devastating drought last year. The agriculture, forestry and fishing industry increased by 33.6% quarter on quarter.

Research firm NKC African Economics said real economic output in the second quarter grew by a mere 0.5% compared with the second quarter of last year, and provided “a clue that all is not well”.

The second quarter’s figures mean that, since the start of 2014 until the end of June, South Africa has had five quarters that have seen contractions in growth.

Mamello Matikinca, FNB senior economist, said the bank was forecasting growth at less than 1% this year. Investec is forecasting growth this year of 0.5% compared with 0.3% last year.

Nigeria, Africa’s largest economy, expanded in the second quarter, ending its worst slump in 25 years as agricultural and oil output increased.

GDP in Africa’s largest crude producer grew 0.55% in the three months through June from a year earlier, compared with a revised 0.9% contraction in the first quarter, the Abuja-based National Bureau of Statistics said.

This ends five straight quarters of contractions that also saw the economy decline 1.6% last year, the first such drop since 1991. The International Monetary Fund forecasts growth of 0.8% this year as output of oil climbs and as supply of foreign currency, needed by manufacturers to import inputs, continues to improve.

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