Faced by diverse challenges in the recent years, the SA Economy has relinquished its holds as the second best economy in Africa moving down to the third position.
SA economy which has been struggling to regain its hold, now drops backward to the third position behind Nigeria and Egypt says KPMG‚ citing data from the International Monetary Fund (IMF) that suggests Egypt has overtaken SA — mainly due to the rand’s slump.
SA economy first lost its status as the continent’s largest economy in 2014 when it finished an exercise to rebase its economic data. This boosted its gross domestic product 80 percent higher for 2013, to $510 billion. At the time, SA’s nominal economy was $356 billion but now, due to the weakening rand and other challenges, it is forced to still lose its status to Egypt.
According to KMPG’s Christie Viljoen, the IMF World Economic Outlook (WEO), released in mid-April, provided more sobering GDP statistics for SA.
“Not only did the multilateral organisation suggest that the South African economy would grow by a mere 0.6% this year‚ but also that the country is now only the third-largest economy on the continent behind Nigeria and new silver medalist Egypt,” Viljoen said
Nigeria’s rebasing exercise two years ago proved that the oil-dependent economy was almost twice as big as was previously thought. Viljoen explained further that the country’s National Bureau of Statistics (NBS) ensured greater measurement of the informal sector, the inclusion of 46 industries from a previous 33, as well as methodological changes to measuring service sector activity with the rebasing.
In addition,Viljoen said backward adjustments to GDP indicated that Nigerian GDP in US dollar terms surpassed its South African equivalent in 2011. By the end of 2015, Nigeria’s GDP was measured at $490 billion compared to South Africa’s estimate of $313 billion.
Egypt on its part, has expanded its GDP by an average of 7.5 percent a year during 2012-15. “The Egyptian pound’s depreciation during 2012-15 was at a notably slower pace compared to that of the rand,”she said,
“Since early in 2011, the Central Bank of Egypt (CBE) has tightly managed the pound, resulting in a milder depreciation compared to the free-floating South African currency. This contributed to Egyptian GDP eclipsing its South African counterpart during 2015.
For south Africa, due to the depreciation of the rand and the slowing real growth (in local currency terms), its economy has between 2012-15, lost its values in the US Dollar.
“The South African currency weakened from an average of R8.20/$ during 2012 to an average of R12.74/$ in 2015 – that is a depreciation of more than 50 percent. As a result, the nominal US dollar value of South Africa’s GDP declined by an average of almost 7 percent per annum over the past four years.” Viljoen explained.
“Were it not for the rand’s slump‚ SA would not have surrendered its second place during 2015‚” the KMPG report said.
Business Monitor International (BMI) has‚ however‚ made some exchange rate assumptions and its data points to south Africa’s inability to retake the continent’s second-place position anytime soon.
“Admittedly‚ SA economy remains the continent’s most developed and has a more diversified economic base than the Egyptian economy. However‚ its fall from first and now second place among the continent’s giants is of great concern‚ especially as this development is largely attributed to weakness in the rand that‚ in turn‚ has largely been as a result of domestic issues.”