By Jackie Cameron
- South Africa’s economy slumped into a second recession in consecutive years as power cuts weighed on output and business confidence dropped. Gross domestic product shrank an annualised 1.4% in the last quarter of 2019. State power utility Eskom implemented the deepest electricity cuts yet in December, dragging down factory output. Business confidence that’s near a three-decade low continues to weigh on fixed investment spending as private-sector companies are wary to commit large sums of money to projects. Gross fixed capital formation decreased by an annualised 10% in the quarter.
- Nigeria’s economy is on rocket fuel, expanding as South Africa’s contracts, which means Nigeria’s gross domestic product (GDP) is the largest in Africa. Nigeria’s economic growth beat forecasts in the fourth quarter, helping its economy to expand the most in four years in 2019 as oil output increased and the central bank took steps to boost credit growth, reports Bloomberg. GDP in the West African country stood at $476bn or $402bn, depending on the rate used, says the news wire. South Africa’s economy went the opposite direction, slumping into a second recession in consecutive years. As Bloomberg notes, power cuts weighed on output and business confidence and, based on an average rand-dollar exchange rate of 14.43 for the year, GDP was $352bn. Projections show Nigeria’s economy will continue to grow faster, says Bloomberg which reports on the International Monetary Fund forecast for Nigeria’s 2020 growth at 2% and South Africa’s at best at around 0.8%.
- Coronavirus, or Covid-19 as the current threat is labelled, is likely to be a bigger risk for Europe than Africa say medical experts in the reputable The Lancet journal. South Africa, along with Algeria and Egypt, are the African countries at greatest risk of importing coronavirus from China, according to a modelling study in The Lancet. China is Africa’s leading commercial partner; thus, there are large travel volumes through which severe acute respiratory syndrome coronavirus could reach the continent, says the publication. Egypt recently confirmed the first coronavirus case on the continent. Overall, the risk of imported cases of COVID-19 reaching Africa (1%) is lower than that of Europe (11%) because of reduced travel to and from China but, notes the study, response and reaction capacity are also lower. For more on that, visit BizNews.com.
- President Cyril Ramaphosa is worried about the economic impact of the coronavirus outbreak on the South African economy, he told journalists in a briefing after it emerged that the country is officially back in recession. Although South Africa has yet to have a confirmed case of the coronavirus, Ramaphosa expects it to have a “huge, huge impact” on the global economy, with a negative knock-on effect domestically. He said this to journalists at a briefing in Cape Town, where he also repeated reassurances that the government will fix debt-stricken Eskom, which supplies about 95% of the nation’s power, and restructure the energy industry to ensure private producers played a bigger role. Ramaphosa, says Bloomberg, emphasised that consideration should be given to selling some of Eskom’s older power plants to private investors who could operate them more effectively, he said. “Our power generation has now entered a new era, a new era that should not be driven by ideology, but by pragmatism,” he said. Ramaphosa described a plan proposed by the Congress of South African Trade Unions, the country’s biggest labour group, for pension funds to either assume part of Eskom’s R456bn in debt or take a stake in the company, as “quite compelling,” but said final details still needed to be worked out. Cosatu wants the government to underwrite any losses incurred by pensioners and the implications that would have for the nation’s finances would have to be worked out, he said.
- About 10,000 more job cuts are likely as Eskom keeps the lid on economic growth. Electronics company Ellies is the latest to start the process of reducing its headcount due to ongoing financial losses. Jobs are also at risk at companies including Telkom SA, the country’s largest fixed-line operator, and Walmart’s local unit, Massmart, after slumps in earnings, according to Reuters.
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