JOHANNESBURG – Years of rapid economic growth across sub-Saharan Africa fuelled hopes of a prosperous new era. To many, the continent was emerging with economies that were no longer dependent on the fickle global demand for its raw resources.
But as China’s economy slows and its once seemingly insatiable hunger for commodities wanes, many African economies are tumbling — quickly. Since the start of this year, the outlook across the continent has grown grimmer, especially in its two biggest economies, Nigeria and SA. Their currencies fell to record lows this month as China, Africa’s biggest trading partner, announced that imports from Africa plummeted nearly 40 percent last year.
“We can see what drove the growth in Africa when demand goes away,” says Greg Mills, director of economic research group the Brenthurst Foundation. “Well, demand has gone away, and it’s not pretty.”
The International Monetary Fund has in recent months sharply cut its projections for the continent. Credit rating agencies have downgraded or lowered their outlook on commodity exporters such as Ghana, Angola, Mozambique and Zambia, which were the darlings of global investors just more than a year ago.
Nigeria, Africa’s biggest oil producer, is reeling from the crash in crude prices, at the same time as President Muhammadu Buhari tries to deal with Islamic extremist group Boko Haram.
With oil accounting for 80 percent of state revenue, the government may also lack the resources to quell potential unrest in the Niger Delta, the source of the country’s oil.
Its currency, the naira, collapsed this month after the central bank placed restrictions on the sale of US dollars to protect its shrinking foreign reserves. The currency fell to about 300 naira to the dollar in Nigeria’s black market, down from about 240 naira early last month.
Weakening currencies will make it harder for Nigeria — and many other African governments — to repay China for loans used to build large infrastructure projects.
The tumbling naira and China’s downturn are also reverberating across private businesses, large and small.
Happiness Awonegbe, a businessman in Lagos whose companies import paper, tyres and other goods from China, says the restrictions on the dollar make it difficult for him to place orders, and it takes longer for Chinese suppliers to fill them, apparently because of reductions in their workforces. “What happens in China affects Nigeria,” Mr Awonegbe says.
As the slumping economies have underscored the continent’s growing vulnerability to changes in China, they have quieted much of the heady talk of “Africa rising”.
Growing consumer demand and an emerging middle class, while real in many African nations, are insufficient to offset a fall in the continent’s main driver of growth, which remains commodities.
But experts also see bright spots on the map. While previously high-flying commodity exporters, such as Angola, have been hardest hit, other countries are showing resilience.
“The ‘Africa rising’ narrative wasn’t true, but neither is the diametrically opposed argument that Africa is no longer rising,” says Simon Freemantle, a senior political economist at Standard Bank. “The truth is obviously in between.”
He expects to see more fragmentation and divergence across the continent in future. “And what’s going to determine that divergence is how prudent countries have been during the good times. Have they embedded macro reforms? Have they saved?”
Mr Freemantle says East African countries, including Kenya and Ethiopia, which have been forced to diversify their economies in part because of their dearth of commodities, will probably continue to enjoy robust growth.
Still, experts say, most nations failed to take advantage of the boom years to carry out long-term changes to their economies. They failed to deal with some of the biggest obstacles to sustained growth — such as the severe lack of electricity — and spur industries that would create jobs.
Zambia, whose economy depends on copper exports, has suffered from waning demand from China and a drop in copper prices. Mines have closed, and thousands of jobs have been lost in recent months.
Critics say Zambia could have taken advantage of the boom by negotiating better terms with Chinese companies, including securing technology transfers or employment for infrastructure projects.
Zambia used revenue from copper to increase the salaries of civil servants but did not invest in potential growth industries, notably tourism and agriculture.
Edith Nawakwi, a former finance minister in Zambia and now leader of an opposition party, says leaders could have asked the Chinese to build infrastructure that would have furthered regional integration, business and trade.
“What we need is a change in the way we approach China,” Ms Nawakwi says. “You get from China what you ask for.”
“The Chinese are not romantic anymore about their relations with Africa — far from it,” Ibbo Mandaza, a political analyst and businessman in Zimbabwe. “For them, it’s purely economic.” – NYTimes