The IMF has downgraded forecasted growth for South Africa and Nigeria. Here’s how they may be able to bounce back.
The International Monetary Fund (IMF) has downgraded its forecast on global economic growth from 3.3 percent to 3.1 percent for the year 2015 from earlier projections of 3.8 to 3.6 percent for 2016.
According to the IMF report World Economic Outlook (WEO) for October 2015, Russia, South Africa, Brazil and Nigeria have been casted with the sharpest downgrades. WEO October 2015 outlines several reasons for this downgrade including currency depreciation as well as a slowdown in emerging economies.
As the report indicates, South Africa’s rand hit its weakest level on record last month, losing 26 percent of its value against the dollar over the past two years. According to the Financial Times, Nigeria’s naira has lost more than 20 per cent of its value since the oil prices fell in July 2014.
However, a few recent developments could be economic enhancers for both countries.
South Africa and Nigeria are both Sub-Saharan African countries with a background in agriculture, a sector that could be harnessed for better economic output. Increased, better and progressive improvements in the sector could attempt to close the economic gap both countries are experiencing.
A 2015 report from World Wide Fund (WWF) South Africa shows the organization’s commitment towards working with stakeholders to ensure effective maintenance of healthy, functioning ecosystems within South Africa’s farmlands through the development and implementation of sustainable production practices regardless of economic challenges.
In addition, in Nigeria, agriculture is receiving a boost from the government, the most recent being the federal government’s establishment of agricultural parks in Katsina state to promote poultry production, feed milling, aquaculture, open field cultivation and processing, vegetable preservation as well as bio-gas, bio-pesticides, bio-fertilizers, compost and organic manure production. The agriculture park project has created youth employment in the state.
South Africa and Nigeria have both experienced recent expansions from foreign companies. In 2014, India’s largest automotive company, TATA motors opened up a South African branch and it recently released two new automobile models in the country. President Buhari’s trip to France this week has illuminated France’s readiness to invest about 130 million Euros in Nigeria for infrastructural development, provision of electricity, and increased water access, despite the economic challenges the country faces.
Information Communication Technology (ICT) is another area that could enhance the economies of both countries. Telecoms networks have achieved ubiquitous national coverage wider than power grids, roads and other social infrastructure. Telecoms is fastest growing contributor to Nigeria’s Gross Domestic Product; 10 percent average quarterly growth in 2014; 8.2 percent of Nigeria’s GDP (i.e. ₦6.62 trillion) contributed by telecoms in 2013, said Oyeronke Oyetunde, GM, Regulatory Affairs at MTN, during a Nigerian South African Chamber of Commerce forum.
According to the World Economic Forum (WEF) on its 2015 Global Competitiveness Index, South Africa ranks 50th in terms of technological readiness and 41st when looking at the availability of the latest technologies. In terms of overall ICT use, SA comes in 57th, and breaks into the top 20 at 19 when ranking Internet bandwidth. The country’s capacity for innovation is 32nd best in the world.
While the downgrade reflects a slowing of growth- both countries need to focus on diversification to pick things back up.