As leaders of African nations meet Wednesday and Thursday to discuss growth, the two nations that account for almost half of sub-Saharan Africa’s gross domestic product are proving to be a damper on the region’s economic expansion.
Nigeria and South Africa, which vie with each other to be the continent’s biggest economy, both released second-quarter growth data on Tuesday. The figures show South Africa dodged a recession and Nigeria’s growth quickened, however growth figures indicate expansion at a limp pace.
Big Players Lagging- Africa’s two biggest economies are among the slowest growing
The publication of the data comes as political and business leaders from at least 28 African countries prepare to meet in Cape Town on Wednesday at the World Economic Forum on Africa. The discussions will focus on how Africa, which has some of the world’s fastest-growing economies in Ghana and Ethiopia, can expand its potential.
It is obviously going to be a major drag on the continent’s growth if the two largest economies are not performing,” said Ronak Gopaldas, a director at the Cape Town-based consultancy Signal Risk.
The data is expected to show the South African economy grew an annualized 2.5 percent from the first quarter, and Nigeria’s expanded by the same margin year-on-year. While the slowing global expansion is contributing to South Africa and Nigeria’s tepid growth, the two nations’ economic woes are largely of their own doing.
The African National Congress-led government in South Africa has failed to decisively deal with the finances of debt-laden power utility Eskom Holdings SOC Ltd., which is straining the nation’s budget and caused a contraction in GDP in the first quarter. Nigeria’s failure to diversify its economy, which relies on oil for 90 percent of its foreign exchange, leaves it vulnerable to international price movements.
“Investor confidence and sentiment toward both of these economies is weak at the moment and that’s largely self-inflicted,” said Gopaldas. “Both countries, through their policy-making own goals, have made bad situations worse than they needed to be.”