Business Day

McKin­sey puts SA in slow, steady class

- HI­LARY JOFFE Ed­i­tor at Large jof­ Business · South Africa News · Finance · Economics · Social Sciences · Africa · Libya · Egypt · Tunisia · Mauritius · Rwanda · Morocco · Nigeria · Angola · Zambia · Naspers · International Crisis Group

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.

 ?? Pic­ture: SUN­DAY TIMES ?? UPWARDS: The McKin­sey re­port high­lights the huge op­por­tu­ni­ties pre­sented by Africa’s ro­bust long-term eco­nomic fun­da­men­tals.
Pic­ture: SUN­DAY TIMES UPWARDS: The McKin­sey re­port high­lights the huge op­por­tu­ni­ties pre­sented by Africa’s ro­bust long-term eco­nomic fun­da­men­tals.

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