Nigeria and South Africa might be holding back Africa's economy

Ahead of the World Economic Forum (WEF) in Africa summit in Cape Town this week, Bloomberg data has indicated that South Africa and Nigeria are holding the broader regional economy back. Ronak Gopaldas at Cape-Town-based consultancy Signal Risk says the two economies have only themselves to blame.

Nigeria and South Africa are the two largest economies in Africa respectively, and have long been touted as drivers of economic growth across the region. However, while a number of countries in Africa have been going through a vibrant and exciting phase of growth, both the economic giants have been struggling.

Both countries suffer from rampant unemployment, and have been navigating a period of economic stagnation and recovery, which was brought about by the global decline in oil & commodity prices half a decade ago. While both economies have since stabilised, their growth rate is moderate when compared to other economies in the region.

The African Development Bank and the International Monetary Fund both predict average GDP growth of nearly 4% across Africa this year, while their predictions for Nigeria and South Africa do not exceed 2%. Growth in the region is being driven by other regional stalwarts, such as Ghana in the West and Kenya and Ethiopia in the vibrant region of East Africa.

The WEF in Africa summit is approaching, where representatives from governments, businesses and investors are likely to assemble and discuss the best way forward for the region, in terms of growth and innovation. The progress of the region’s two largest economies is no doubt going to be a cause for concern among those present. 

“It is obviously going to be a major drag on the continent’s growth if the two largest economies are not performing. Investor confidence and sentiment toward both of these economies is weak at the moment and that’s largely self-inflicted,” said Ronak Gopaldas, Director at Signal Risk.

In addition to managing the Cape-Town-based information services consultancy, Gopaldas is a political economist and a commentator on economic issues. “Both countries, through their policy-making own goals, have made bad situations worse than they needed to be,” he explains.