The slowdown in China and the associated ending of the commodity super cycle is having a major influence on the immediate growth prospects for Africa says Professor Mthuli Ncube,
the former African Development Bank chief economist. He forecasts growth rates coming under pressure this year and next.
Ncube, now a public policy professor at Oxford University, anticipates African growth of 4.5% this year and says that the region’s economy is unlikely to expand by more than 5% in 2016.
This is a material pullback from rates of well above 5% over the past few years. The IMF has warned of increased risks to emerging markets, including lower growth in China, which could either take the form of a moderate slowdown, or a “harder landing”, which would “produce sizeable spill overs, slowing global trade and putting additional downward pressure on commodity prices”.
Ncube says the slowdown in China’s economy is already acutely affecting oil exporting countries, such as Angola and Nigeria, which he expects to grow by 4.5% and 4.8% respectively. The impact will also be felt in slow-growing South Africa.
China’s slowdown is affecting African economies through lower commodity prices and declines in trade and foreign direct investment levels. Ncube estimates that for every percentage point decline in Chinese growth, Africa’s growth weakened by 0.35 of a percentage point.
Chinese economic performance is thus the most important risk factor facing the continent at present.
African governments will need to focus on improving macroeconomic management, implementing cross-border infrastructure programmes and raising intraregional trade to mitigate the effect of the slowdown.
Intraregional trade in Africa is about 15% of total trade, well below levels of other regions globally. Intraregional trade accounts for about 50% of all trade in Asia.
Overall, Ncube believes Africa’s growth will remain resilient, despite the downturn and the end of the super cycle. Oil exporters such as Nigeria, Angola, Gabon, and Republic of Congo, will experience a drop in economic growth, but Cote d’Ivoire, Kenya, Rwanda and Tanzania should be strong performers during 2015.
