It’s a rough ride in the 'New normal' for the Sub-Saharan economies

03 Dec 2018

BY PORTIA NKANI

GRAHAMSTOWN, SOUTH AFRICA – As curtains continues to fall for the year 2019, new data is also suggesting that economic opportunity in Sub Saharan Africa is suddenly slowing down. 

The slow-motion has been attributed to the slow economic growth in some of the major economies. Tensions are uphill as some are going into general elections in 2019. 

According to the latest Sub Saharan Africa Research conducted by Absa group, SSA in 2018 is expected to grow at 1.5 percent rate. SSA’s economy therefore continues to face significant uncertainties and downside risks from the global performance. Global uncertainties including the US trade and monetary policies, capital outflows, domestic political risks, fiscal vulnerabilities, volatile weather conditions and weak policy implementation continue to weigh on the outlook. 

As a result of the more challenging environment, the region's growth is likely to be stuck in the 'new normal' of low growth for somewhat longer. 

The research shows that, for the last five years South Africa, the second fastest growing economies in the world has grown slowly at 5-6 percent. Nigeria which is also Africa's biggest economies has been growing at 6-7 percent, it then slowed and went deeper into recession. South Africa, Angola and Nigeria are 2/3 of the continent's GDP. 

Sharing the research with international media this week in Grahamstown, South Africa, Absa Chief Economist said, "the economic opportunity is suddenly going less. The African aggregation is not going to be helpful."

In South Africa  growth falters with elections looming. South Africa  entered its first recession in Q2 2018 as GDP contracted 0.7 percent from quarter to quarter,since the global financial crisis. General elections are likely in April/May 2019, and while the factional divide within the African National Congress remains, the party seems unlikely to lose its majority, according to Absa researchers. 

Another powerhouse, Nigeria, the political landscape is increasingly overshadowing economic developments as the country prepares for the 2019 elections. Gabble observed that with elections in full swing, "we expect political and ethno-religious tensions to escalate, particularly when campaigning for the presidential elections kicked off in mid November. We expect the disruption to growth to be minimal and the consumer demand to continue into 2019 as there is unlikely to be a let up in tight monetary policy conditions in the near term."

The economy therefore remains fragile, with the oil sector's growth slipping into negative territory in Q2, while non oil sector's growth appears to be broadening. 

However, the ongoing infrastructure investment in the continent, improved mining output and agriculture are somewhat expected to be the key drivers of growth in 2019 at a rise of 3.4 percent. 

Meanwhile Botswana's economic growth gained momentum in the second quarter of 2018 driven by improved consumer and investment spending. 

It is therefore expected for the real gross domestic product to expand to 4.6 percent from 2.4 percent in 2017, as both the mining and non mining sectors support growth. 

Having recovered from the impact of the emerging market currency fallout on the South African Rand in the last few months, Botswana Pula is expected to strengthen to 10.63 US dollar by year end. 

Absa's Chief Economist, Gabble, "we are somewhat puzzled by the official data on consumer demand, with mixed messages coming from the various government entities. Statistics Botswana data suggest consumer spending is robust, while Bank of Botswana continues to attribute modest inflation to subdued domestic demand."  Nonetheless, Gabble said it is encouraging to see that economic performance was not solely reliant on the mining sector but also supported by improved consumer and business health.