Africa

In Summary

• The IMF released their iconic World Economic Outlook last week and said the following about Sub Saharan Africa.

• Higher, albeit volatile, oil prices have supported the outlook for Angola, Nigeria, and other oil-exporting countries in the region.

International Monetary Fund IMF
International Monetary Fund IMF

The IMF released their iconic World Economic Outlook last week and said the following about Sub Saharan Africa.

In sub-Saharan Africa, growth is expected at 3.4 percent in 2019 and 3.6 percent in 2020, 0.1 percentage point lower for both years than in the April WEO, as strong growth in many non-resource-intensive countries partially offsets the lackluster performance of the region’s largest economies.

Higher, albeit volatile, oil prices have supported the outlook for Angola, Nigeria, and other oil-exporting countries in the region.

 

But growth in South Africa is expected at a more subdued pace in 2019 than projected in the April WEO following a very weak first quarter, reflecting a larger-than-anticipated impact of strike activity and energy supply issues in mining and weak agricultural production.

So after downshifting SSA growth 0.1% for 2019 and 2020 they have pegged Nigeria at 2.3% and 2.6% and South Africa at + 0.71% and +1.1%. Nigeria and South Africa constitute 50% of SSA GDP.

I think Nigeria will post lower numbers than projected by the IMF and worthy of note is that Both Economies are in fact in reverse because of Population growth which is exceeding GDP.

This single Paragraph does not tell the Story because this year in 2019 so much has gone on. Let start with the Geopolitical and Political dimension.

There has been a significant advance and intrusion by Middle Powers [KSA, UAE, Egypt was always there] into the Horn of Africa. The ‘’Oudh’’ Spring in Khartoum met a ‘’red in tooth and claw’’ Counter-Revolution and Sudan feels like an African Fault-line.

Its somewhat counterintuitive but it is the Al-Sisi Model which is delivering economic growth of 6% but I for one think its impossible to replicate because the cry for Political Freedom is relentless and at fever pitch.

Sudan is surely a collision which is set to repeated elsewhere in what could morph into a Gladwell level move not unlike Ebola which is exponential at its heart.

 

America feels detached, China certainly more cautious around its BRI Loan Book.

Russia has reasserted itself with its unique bag of Tricks [Elections,, Weapons and Cash particularly where there are resources available for swapping].

The United Kingdom will surely seek a bigger engagement post Brexit and France and the Future of the French speaking World is also in Africa. Quite a sophistical Policy Tool-Kit is required.India is a Player too.

At a more granular level, Zimbabwe is a Laboratory Experiment with Inflation last clocking 176%.

There is a straw and camels back moment but predicting that moment is always a Fools Errand. Centrifugal forces are working against the mercurial Prime Minister Abiy’s agenda in Ethiopia.

The French speaking countries like Cote D’Ivoire and Senegal are in a sweet spot in large part precisely because of the stability of the Euro Anchor and at which very moment they are considering dumping the connection and launching their own ECO.

President Tshishikedi in the DR Congo continues to build momentum from a low base. East Africa’s Infrastructure model [predominantly rail] is finding that the Main Creditor is not being persuaded to pony up more cash.

The actual Signal was emitted at FOCAC 2018 but Policy Makers’ Antennae were scrambled then and the message did not get through.

The Message got through at the third time of asking, in fact.

The Proof of Magafulinomics will be in the eating and surely we will know whether the cake it is baking is a growing one or a shrinking one.

The overarching and interestingly at a time when the Rest of the World seems to be embarked on a process of Fragmentation and Globalisation coming apart at the seams, Africa is proudly moving counter-trend with the African Continental Free Trade Area (AfCTA).

Of course, the Devil is in the Details of the execution and such things can simply fall apart in a deluge of Non-Tariff Barriers but it is a Silver Bullet particularly if we allow the free circulation of our People who are natural Entrepreneurs. Just look outside, there are markets just about everywhere.

From an economic Perspective, balance sheets are fully loaded and the exposure to Foreign markets quite high [The SSA Eurobond market is in excess of $104b, for example]. Just on Friday Fitch Ratings revised its Outlook on South Africa to Negative; Affirms at ‘BB+’.

This is surely a Precursor for what has to be a deteriorating Ratings trend line.

For now, with the Developed World embarked on their own version of ‘’Voodoo economics’’ with interest rates deep in negative territory, this has created a benign backdrop for SSA Sovereign Paper because of the Optics of handsomely positive interest rates in a world of negative interest rates.

However, the Ratings Trendline versus Yield compression means at some point the elastic band will snap. Zambia of course snapped earlier in the year.

The best performing stock market has been South Africa where the Gold Price move higher popped Gold and Miners shares.

Aly-Khan is a financial analyst