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Johannesburg – South Africa is the laggard among emerging markets and its low growth situation is self-inflicted, said an analyst.
Dr Martyn Davies, managing director of emerging markets & Africa for Deloitte Africa, spoke to Fin24 ahead of the World Economic Forum (WEF) Africa 2017 to be held in Durban this week. He discussed the growth prospects for regions across the African continent.
Davies pointed out that countries in the East of Africa such as Kenya, Ethiopia and Rwanda were reporting growth levels greater than 5%. This is significantly greater than the International Monetary Fund’s projection for South Africa’s growth which is at 0.8%.
“South Africa is in a structural economic decline, largely or almost entirely due to self-inflicted own-goals,” he said.
He added that Nigeria, an oil-based economy is currently going through a “painful correction” due to low oil prices.
Davies said that since the first quarter of the year, there has been growth and support for emerging markets. However, South Africa has not benefited from this.
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India, for example, is expected to achieve growth between 7% and 7.5% and China recently reported a quarterly growth of 6.9%.
“South Africa is the emerging market laggard. There has been so much tailwinds for emerging market recovery and growth,” he said.
Davies added that South Africa should be experiencing a “strong impetus” of growth. However, the structural constraints in the South African economy are due to “political mismanagement”. The recent dismissal of former finance minister Pravin Gordhan has been to the disadvantage of the economy.
“The political leadership of the country has decided not to take advantage of the global tailwinds for emerging markets, and have taken a conscious decision to move in the opposite direction,” he said.
Lessons from East Africa
Davies said that Ethiopia and Rwanda are the “best economically managed” countries on the continent. This is because their states are run efficiently, and they have also reduced or eliminated corruption.
He explained the importance of having effective delivery which will drive growth and of creating conducive environments for businesses to thrive.
Using Kenya as an example of a country with an economy driven by business and not resources, Davies showed the importance of diversification.
Economies which are “enslaved” by the commodity cycle like Angola and Nigeria have to be “price takers”, he said. However, Davies cautioned that diversification cannot happen with a flick of a switch.
“Diversification does not come about through state intervention. It comes about through state enablement,” he said.
In South Africa, there is a “fantastic cluster of corporates”; however, politicians make it difficult for capital and business. This is contributing to the country’s low growth situation, said Davies. “Make it easy for business, make it easy for capital. Encourage business, don’t beat up on business.”
The example of Rwanda shows why government needs to be responsive to capital, he added.
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