10:54 am
21 October 2016

If Africa was a football team, most of its top 11 economies would be on the bench. Luckily, the strikers are on form

THE big football leagues in Europe are almost coming to the end of the season, and with their huge popularity in Africa, it means quieter sports bars in the coming weeks, and low season for sports betting companies.

But if Africa was a football team, most of its 11 biggest economies would be on the bench, battling some kind of injury, and it looks like things will get harder before they get better.

Four of the top 11 – Nigeria, Algeria, Angola and Sudan – are facing painful revenue squeezes as the price of oil, their major money-spinner, crashed in late 2014 and has mostly languished below $40 a barrel, and could only marginally  rise for the near future.

In Nigeria’s case, President Muhammadu Buhari’s controversial insistence on keeping the Naira pegged at 197-199 to the US dollar has been blamed by analysts for worsening the crisis.

Foreign investors are shunning the country’s bonds and stocks until there is a devaluation, while local businesses are struggling to import essential raw materials.

In Algeria, the government has been forced to dig deep into its reserves to fund public spending that helps keep the peace.

As unrest spread in North Africa in 2011, there were also riots in Algeria, which the government first responded to with force, and then with increases in subsidies and wages. Now, that promise is increasingly difficult to deliver.

What makes it worse is the political uncertainty surrounding President Abdelaziz Bouteflika’s succession. He has been ailing and is rarely seen in public. In January, authorities had to concede to some political reforms, including a proposed re-institution of term limits, after they were abolished in 2008.

Angola’s economic growth is expected to decelerate from 4.5% in 2014 to 3.8% in 2015, according to data from the African Development Bank (AfDB); the government has had to respond by slashing the budget by a quarter, and devalue the kwanza twice.

All the respondents from Angola of a recent PwC report, where oil accounts for 70% of all revenue, rated the price of oil as having the biggest effect on business over the next three years.

Sudan is also facing a fiscal squeeze in the wake of collapsed oil prices, and is also reeling from the effects of having Africa’s highest inflation rate in 2013-14, averaging 36.9%. Though it dropped to an estimated 21.8% in 2015 on the back of a tight policy stance, build-ups of inflationary pressures are worsening the already high rates of poverty and unemployment.

The non-oil exporters are having their own troubles too. South Africa is struggling as structural flaws, policy blunders and political intrigue shake the country’s economic footing.

Money is pouring out at a record pace as inflows dwindle, and hanging in the balance is the investment-grade credit rating South Africa sweated to achieve in 2000. For an economy that is as heavily financialised as South Africa, that is something that the country is desperate to avoid.

Egypt is keeping its head above water on the currency front; the Central Bank of Egypt allowed the biggest one-time depreciation of the pound since 2003 on March 14, and authorities promised to adopt a more flexible exchange rate.

‘Evil forces’

But terrorism continues to loom large, with an increasingly repressive crackdown on political dissent. President Abdel-Fattah al-Sisi last week said that “evil forces” are attempting to isolate Egypt and ruin its institutions.

Doing moderately well among the top 11 are Morocco, Kenya and Tunisia.

Morocco has strong prospects for economic growth, and measures to strengthen the macroeconomic base have reduced the budget and current account deficits, a recent note by the African Development Bank says.

The government continued improving the business climate and adopted a 2014-20 industrial strategy to support structural change and boost the country’s position in global value chains.

Morocco has made significant efforts to meet social challenges and regionalisation has speeded up to improve living conditions, but regional and spatial disparities are still considerable.

Low commodity prices had a net positive impact in Kenya in 2015; growth is projected to rise to 5.9% in 2016 and 6.1 % in 2017, according to the World Bank.

The gains through low oil prices and the rising earnings from tea offset the loss in earnings from other exports, primarily coffee and horticulture. As a result, the current account deficit contracted from 10.4% to 7.1% of GDP.

But the country has racked up a lot of foreign denominated debt, which analysts are keeping an eye on.

Tunisia’s political transition made steady progress in 2014, overcoming political deadlock to adopt a new constitution, and holding both parliamentary and presidential elections.

Still, economic activity has been slow in the post-revolutionary period. Tunisia’s economy is significantly influenced by the European Union, and the recovery in external demand has been small, reflecting developments in the EU.

Two quarters

But the biggest blows were the two dramatic terrorist attacks of the Bardo Museum and the Sousse holiday resort in the first half of last year that plunged the economy into two consecutive quarters of negative quarter-on-quarter growth (-0.2 percent and -0.7 percent).

That leaves the first eleven with two relatively decent strikers – Ethiopia and Tanzania.

Ethiopia has notched up Africa’s fastest growth in the past decade – nearly 10%, according to the International Monetary Fund, mostly on an extensive infrastructure binge of roads, railways, dams and commercial buildings.

But government plans to expand the city of Addis Ababa into the surrounding region of Oromia were met with bitter protests in the last few months; activists say it would involve the unfair eviction of farmers.

Security forces killed as many as 140 people at the “generally peaceful” protests, New York-based Human Rights Watch said in January. The government, which hasn’t provided a death toll, said last month it was abandoning the integration plan, but the episode suggests that there is much underlying social tension in the country.

That leaves Tanzania in pole position, fuelled by “Magufuli magic”. The country has been energised, both domestically and in its regional image, by the blustering, no-nonsense work ethic of President John Magufuli.

Ball possession

A fortnight ago, the president inaugurated Nyerere Bridge, much to the delight of social media commentators; the impressive 680m long toll bridge is the longest cable stayed bridge in East Africa and Tanzania’s first cross-sea bridge.
However, Magufuli’s big goal has been scoring the Uganda pipeline deal – Tanzania and Kenya have for years courted landlocked Uganda for the deal, but he put the ball definitively past the net as Kenya argued superior ball possession.

Uganda’s reserves are conservatively estimated at some 1.7 billion barrels, expected to come on stream by 2025. According to a Ugandan experts’ report dated April 11, the Tanzanian project won the argument because the “Tanga port in Tanzania is fully operational while Lamu port in Kenya is still to be built”.

The experts also highlighted the fact that the port at Tanga is protected from winds by several offshore islands, which is not the case for Lamu, raising fears of navigational hazards for oil tankers near the future Kenyan port.