McKinsey puts SA in slow, steady class
ALTHOUGH SA is one of Africa’s most stable economies, its growth — together with that of “Arab Spring” countries — has dragged down the continent’s growth rate since 2010, a new report by global consultancy McKinsey shows.
The consultancy’s new Lions of Africa report categorises SA as one of the “slow growers”, which account for 46% of Africa’s GDP but together grew at just 1.3% a year on average in 2010-2015. This was less than the 2.9% global average over the period.
The “slow growers” include Libya, Egypt and Tunisia as well as SA.
The report describes SA as “experiencing slow growth and high unemployment in spite of promising opportunities that could spur development”.
By contrast the group of “stable growers”, mostly smaller, nonresource-based economies such as Mauritius, Rwanda and Morocco, recorded average growth of 5.8% a year in 2010-2015. The “vulnerable growers”, which accounted for 35% of Africa’s GDP achieved an average 5.1% a year.
They include such countries as Nigeria, Angola and Zambia that are heavily dependent on resources — the first two being hard-hit by the oil price slump. The McKinsey report, its second on Africa, points to the slowdown in the continent’s economic growth rate to 3.3% in 2010-2015 from 5.4% in the previous decade.
It highlights the divergence in growth patterns across Africa, and the huge opportunities presented by “robust long-term economic fundamentals”, and the continent’s young and growing population and high rate of urbanisation.
With the shine having worn off the Africa Rising narrative in recent years, Africa analysts generally are revising their predictions to emphasise the long-term rather than the immediate nature of the continent’s huge potential growth opportunities. And though SA is still dominant, its weak growth rate has seen it slide down the rankings on most analyses.
Rand Merchant Bank warns in its own report that SA could lose its place at the top of the list of Africa’s top 10 investment destinations.
“SA continues to stand firm at number one but risks losing its coveted spot in the next few years as a faltering growth outlook and uncertain business environment slowly eats away at its investment score,” RMB’s Africa economists say.
On RMB’s global investment attractiveness index of 188 countries, SA has dropped from being in the top 40 in 2006 to 45th now, with most African countries ranked between 120 and 188.
SA ranks high, however, on McKinsey’s Africa Stability index. And it rates a special box in the report on why it is such an outlier in terms of corporate size. “Home to almost half of Africa’s large companies, SA is an outlier not just in its own continent but in the world.”
The McKinsey report says that while Africa has 400 companies with revenue of $1bn or more, and these companies are growing faster and are generally more profitable than their global peers, the continent does not have a single company in the Fortune 500 list.
The report specifically mentions Bidvest and Naspers for their success in diversifying internationally.
The report identifies $5.6-trillion in African business opportunities by 2025. Of this, $2.1-trillion is from rising household consumption and a further $3.5-trillion is from businessto-business spending.
It finds that Africa could double manufacturing output by 2025 with the right leadership and governance.