China's Star over Africa No Longer So Bright; Continent Has to Come to Terms with the Fact That It Remains Largely a Primary Goods Exporter

Cape Times (South Africa), September 3, 2015 | Go to article overview

China's Star over Africa No Longer So Bright; Continent Has to Come to Terms with the Fact That It Remains Largely a Primary Goods Exporter


BYLINE: Vuyani Ndaba

Disappointing growth in Africa's two biggest economies has highlighted the role of China in the expansion of recent years, now that China's own economy is slowing.

Expectations of more than 4 percent growth in Nigeria, Africa's largest economy, are probably now too high, and South Africa's prospects also look in need of revising.

Second-quarter growth for both countries was worse than the most pessimistic forecasts - in South Africa's case, by the biggest margin in at least half a decade.

Their slowdown is similar to other emerging market economies in Latin America and Asia, and a sign that China's appetite for raw materials is now waning.

On Tuesday, the latest purchasing managers' data showed the weakest growth in six-and-a-half years for small- to medium-sized China manufacturers and the weakest in three years for larger enterprises.

Economists have long been aware that commodity-exporting countries would be troubled by China's rebalancing to a more consumer-driven economy. They have been warning since the shift began that investors would have to make do with slower growth.

"With growth slowing in Nigeria and collapsing in South Africa, our prediction that 2015 would be Africa's most difficult year so far this century seems, unfortunately, to be playing out," said John Ashbourne at Capital Economics.

Structural problems

"The key point is that high oil prices over the past decade may have led both investors and policymakers to ignore the deep structural problems within Nigeria's economy. Now that prices have fallen, those flaws have been exposed."

In addition, the Federal Reserve expects inflation to accelerate, making an increase in US interest rates more likely. But many emerging market policymakers say they are ready for a US rate rise, and they are now focused on dealing with a slowing Chinese economy. …

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