Misery loves company. Africa’s two biggest economic rivals — South Africa and Nigeria — are turning to each other as they fall on tough times.
South Africa’s economy is threatened with recession as demand from China, its main trading partner, weakens and commodity prices plunge, while Nigeria has been hit by a collapse in oil revenue.
To weather the global storm, the two nations are seeking closer trade and investment ties, with South African President Jacob Zuma yesterday scheduled to lead a delegation of ministers and business executives to Nigeria. In the process, he might rebuild a relationship that has come under strain in the past.
Nigeria might be Africa’s largest economy — having overtaken South Africa in 2014 after the data were overhauled — but South Africa still dominates because of better power and transport infrastructure, a sophisticated financial services industry and a more diversified economy.
Both economies are now under pressure, with growth slowing to 1.3 percent in South Africa last year and reaching a 16-year low of 3.3 percent in Nigeria, according to the World Bank.
South Africa is the biggest buyer of Nigerian oil in Africa, shipments of which have more than doubled between 2008 and 2014, according to data from the IMF.
However, Nigeria does not even feature in the top 20 of South Africa’s export markets.
“There is scope for the two countries to expand trade ties, particularly in non-commodity products,” Capital Economics Ltd London-based emerging markets economist William Jackson said.
There could “be greater benefits over the medium term, as rising trade in non-commodity goods tends to come alongside faster productivity growth and more rapid rises in incomes,” he said.
The one thing standing in the way of stronger trade ties is the Nigerian currency. The central bank has effectively pegged the naira at 197 to 199 per US dollar for a year by banning imports of everything from glass to wheelbarrows and restricting foreign-currency supply.
The currency controls are deterring investors, such as Johannesburg-based Truworths International Ltd, which shut its two remaining stores in Nigeria in January.
In his first state visit to the nation since Nigerian President Muhammadu Buhari was elected last year, Zuma might also seek to resolve a dispute that threatens the Nigerian operations of one of South Africa’s biggest companies, MTN Group Ltd.
Nigeria’s telecommunication regulator imposed a record US$3.9 billion fine on MTN last year for failing to meet a deadline to disconnect unregistered mobile-phone subscribers.
Diplomatic relations between the two countries were strained by xenophobic violence in South Africa in April last year, in which Nigerian businesses were attacked.
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