SA is worst performer in Africa, says IMF
Only economy out of 20 nations to contract, growth next year to be lowest on continent
October 2, 2009
By Ethel Hazelhurst
South Africa is the worst performing economy in Africa this year, according to the World Economic Outlook of the International Monetary Fund (IMF), released yesterday.
Of the 20 African countries listed, it is the only one whose economy is expected to contract - by 2.2 percent.
And its expected growth of 1.7 percent next year is the lowest on the continent.
The IMF said growth in Africa's total gross domestic product (GDP) would decline from an average of 6 percent over the past five years to 1.75 percent this year, before accelerating to 4 percent next year.
Zimbabwe, considered the basket case of Africa, is starting to recover as the benefits of tentative policy reform feed through. The IMF forecasts growth of 3.7 percent this year and 6 percent next year - after a 14.1 percent contraction last year and 6.9 percent shrinkage the year before.
Leon Myburgh, the sub-Saharan Africa strategist at Citi, said the discrepancy between South Africa's growth prospects and those of other countries was partly explained by the fact that a number of other economies were growing off a very low base.
However, he also identified "structural rigidities" in South Africa such as the rigid labour market, as well as the fact that the local economy has run into an unexpected "bottle neck".
Where most countries in Africa have already made provision to expand their infrastructure to keep up with economic growth, South Africa failed to expand capacity at its electricity utility Eskom.
"In Nigeria, for instance, which produces very little electricity, businesses have been running on generators.
"But in South Africa, where businesses have relied on Eskom, the economy has still to adjust," said Myburgh.
The IMF said a sharp drop in exports from Africa would subtract from growth but the region's performance had been "relatively encouraging" in view of the external shock.
"An important factor behind this outcome has been that many governments in the region have been able to use fiscal balances as shock absorbers, sustaining domestic demand and helping to contain job losses," the fund said.
Growth in South Africa would be "supported by expansive fiscal and monetary policies and the projected recovery in global trade".
And it referred to the recent "pick-up in capital flows" which "is also expected to contribute to the recovery".
The global economy "seems to be on the verge of recovery", said the IMF. It predicted advanced economies would contract by 3.4 percent this year before growing by 1.3 percent next year. page 8
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