Botswana and other Southern African Customs Union countries are exposed to “negative spillovers” if China’s growth slowed or if its demand for commodities fell, the International Monetary Fund (IMF) has warned. The IMF sees growth in China’s GDP slowing next year to 7.3 percent from 7.6 percent this year, which implies a slowing in the country’s fixed investment. This, in turn, means less demand for the exports of resource African countries.
In its regional economic outlook, the IMF said the impact of the linkages varied. Resource rich countries, particularly oil exporters, were the most vulnerable to changes in China’s domestic investing patterns. The IMF said part of the impact was indirect, “working through global growth and commodity prices”. But direct trading links were also important in the top five resource-rich countries ÔÇô as ranked by exports to China as a share of gross domestic product (GDP).
The countries are Angola, South Africa, the Republic of Congo, Equatorial Guinea and the Democratic Republic of Congo. In these countries, a 1 percentage point increase in China’s domestic fixed investment growth brought a 0.8 percentage point increase in their export growth rate, according to the IMF. The impact of slower growth would spill over into South Africa’s neighbours in the Southern African Development Community, especially those in the Southern African Customs Union (Sacu): Botswana, Lesotho, Namibia and Swaziland. These countries would be hit if remittances from nationals working in South Africa were to fall and if trade taxes, which are shared with Sacu, were to underperform.