Africa’s two biggest economies emerged from recession in the second quarter as Nigeria limped out of its first contraction in 25 years while South Africa returned to growth despite political turmoil.
After contracting 0.7 per cent at the start of the year, South Africa’s economy rebounded, growing 1.1 per cent year-on-year in the three months to June.
Nigeria, Africa’s biggest crude oil producer, expanded 0.55 per cent year-on-year following a recovery in oil production, slower than most analysts had been expecting. The economy contracted 1.6 per cent in 2016.
Political crises have damped economic activity and sapped appetite for reform in both countries, which make up half of African economic output. Their poor performance has damaged investor enthusiasm for the continent and taken the wind out of the “Africa Rising” narrative, although other economies, including Ivory Coast, Tanzania and Ethiopia, have continued to grow strongly.
Jacob Zuma, South Africa’s president, has been battling a scandal over his ties to the Gupta family as a leadership struggle looms in his ruling African National Congress, which will choose a new head in December. Muhammadu Buhari, Nigeria’s president, has returned to the country after a second lengthy period of medical treatment in London. Economic policy is generally thought to have improved in his absence.
Razia Khan, Africa chief economist at Standard Chartered, said there was “little to indicate strong growth in the quarters ahead” in South Africa, adding that the recovery in manufacturing might prove shortlived. “A restoration of investor confidence remains important for a sustained recovery,” she said. “For now, that is still elusive.”
Nigerian growth was also less than robust, although Uzoma Dozie, chief executive of Diamond Bank, said there were signs of a recovery in investor confidence thanks to greater liquidity in foreign exchange markets. Lack of foreign exchange had crippled many industries and the return of liquidity had allowed manufacturers to recover somewhat, he said.
One top Nigerian official said he was worried the recovery could be cut short if oil prices fell again, something he thought likely. The oil sector, which has been battered by low prices for crude since 2014, grew 1.6 per cent in the quarter, largely because of increased production in the volatile Niger Delta region. Agriculture, the next largest growth driver and a focus of government policy, expanded 3 per cent.
With crude production increasing, the economy is expected to grow 2.5 per cent in 2017, still well below the 6 per cent or so Nigeria was achieving a few years ago. Growth is barely outpacing annual population expansion of about 2 per cent.
South Africa’s recovery from its second recession in a decade was powered by a surge in agricultural production. Farming added 0.7 percentage points to overall growth after the sector expanded 34 per cent thanks to a bumper maize harvest following last year’s severe drought.
The South African Reserve Bank has said it expects the economy to grow 0.5 per cent this year. In July the central bank cut rates for the first time in five years amid concerns about flagging growth.