SA drops into third place in Africa

Lesotho Times - - Business -

JOHANNESBURG — South Africa’s strug­gling econ­omy is now not even the sec­ond­largest in Africa any­more‚ says KPMG‚ cit­ing data from the In­ter­na­tional Mon­e­tary Fund (IMF) that sug­gests Egypt has over­taken SA — mainly due to the rand’s slump.

SA has been known as the con­ti­nent’s sec­ond-largest econ­omy since Nige­ria re­based its gross do­mes­tic prod­uct (GDP) data in early 2014.

How­ever‚ KMPG said the IMF World Eco­nomic Out­look (WEO), re­leased in mid-april, pro­vided more sober­ing GDP sta­tis­tics for SA.

“Not only did the mul­ti­lat­eral or­gan­i­sa­tion sug­gest that the South African econ­omy would grow by a mere 0.6 per­cent this year‚ but also that the coun­try is now only the third-largest econ­omy on the con­ti­nent be­hind Nige­ria and new sil­ver medal­ist Egypt.”

Nige­ria’s re­bas­ing ex­er­cise about two years ago re­vealed that the oil-de­pen­dent econ­omy was al­most twice as big as pre­vi­ously thought.

The coun­try’s Na­tional Bureau of Sta­tis­tics (NBS) en­sured greater mea­sure­ment of the in­for­mal sec­tor‚ the in­clu­sion of 46 in­dus­tries from a pre­vi­ous 33‚ as well as method­olog­i­cal changes to mea­sur­ing ac­tiv­ity in the ser­vice sec­tor.

Back­ward ad­just­ments to GDP in­di­cated that Nige­rian GDP in dol­lar terms sur­passed SA’S in 2011. By the end of 2015‚ Nige­ria’s GDP was mea­sured at $490 bil­lion com­pared with SA’S es­ti­mated $313 bil­lion.

SA recorded a de­cline in the dol­lar value of its econ­omy dur­ing 2012-15 be­cause of slow­ing real growth (in lo­cal cur­rency terms) as well as a de­pre­ci­a­tion in the value of the rand.

The South African cur­rency weak­ened from an av­er­age of R8.20/$ dur­ing 2012 to an av­er­age of R12.74/$ in 2015 — a de­pre­ci­a­tion of more than 50 per­cent. As a re­sult‚ the nom­i­nal dol­lar value of SA’S GDP de­clined by an av­er­age of al­most 7 per­cent a year over the past four years.

In the mean­time‚ Egypt’s nom­i­nal dol­lar GDP ex­panded by an av­er­age of 7.5 per­cent a year dur­ing 2012-15. The Egyp­tian pound’s de­pre­ci­a­tion dur­ing 2012-15 was at a no­tably slower pace than the rand’s.

Since early in 2011‚ the Cen­tral Bank of Egypt (CBE) has tightly man­aged the pound‚ re­sult­ing in a milder de­pre­ci­a­tion com­pared with the free-float­ing rand.

This con­trib­uted to Egyp­tian GDP eclips­ing its South African coun­ter­part dur­ing 2015.

“Were it not for the rand’s slump‚ SA would not have sur­ren­dered its sec­ond place dur­ing 2015‚” the KMPG re­port said.

Look­ing ahead‚ the IMF WEO has not ven­tured any guesses as to the tra­jec­tory of Egypt’s GDP in dol­lar terms from 2016 on- wards.

While the coun­try’s lo­cal cur­rency GDP is fore­cast by the mul­ti­lat­eral or­gan­i­sa­tion‚ there is sig­nif­i­cant un­cer­tainty as to the short — and medium-term tra­jec­tory for the Egyp­tian pound. As a re­sult‚ con­vert­ing lo­cal cur­rency GDP pro­jec­tions for Egypt to dol­lar equiv­a­lents is rather chal­leng­ing.

Busi­ness Mon­i­tor In­ter­na­tional (BMI) has‚ how­ever‚ made some ex­change rate as­sump­tions and its data point to SA be­ing un­able to re­take the con­ti­nent’s sec­ond-place po­si­tion any­time soon.

“Ad­mit­tedly‚ SA re­mains the con­ti­nent’s most de­vel­oped econ­omy‚ and has a more di­ver­si­fied eco­nomic base than the Egyp­tian econ­omy.

“How­ever‚ its fall from first and now sec­ond place among the con­ti­nent’s gi­ants is of great con­cern‚ es­pe­cially as this de­vel­op­ment is largely at­trib­uted to weak­ness in the rand that‚ in turn‚ has largely been as a re­sult of do­mes­tic is­sues.”

Yes­ter­day morn­ing, the rand was at R15.16 to the dol­lar‚ R17.26 against the euro and at R21.91 against the pound. — Bdlive.

SA recorded a de­cline in the dol­lar value of its econ­omy dur­ing 2012-15 be­cause of slow­ing real growth (in lo­cal cur­rency terms) as well as a de­pre­ci­a­tion in the value of the rand.

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