Years of rapid economic growth across sub-Saharan Africa fueled hopes of a prosperous new era. To many, the world’s poorest continent was finally emerging, with economies that were no longer dependent on the fickle global demand for Africa’s raw resources.
However, as China’s economy slows and its once seemingly insatiable hunger for Africa’s commodities wanes, many African economies are tumbling, quickly.
Since the start of this year, the outlook across the continent has grown grimmer, especially in its two biggest economies, Nigeria and South Africa. Their currencies fell to record lows this month as China, Africa’s biggest trading partner, announced that imports from Africa plummeted nearly 40 percent last year.
Illustration: Tania Chou
“We can see what drove the growth in Africa when demand goes away,” said Greg Mills, director of the Brenthurst Foundation, a Johannesburg-based economic research group. “Well, demand has gone away and it is not pretty.”
The IMF has, in recent months, sharply cut its projections for the continent. Credit rating agencies have downgraded or lowered their outlook on commodity exporters, such as Angola, Ghana, Mozambique and Zambia, which were the darlings of international investors until a little more than a year ago.
Many economists expect South Africa, the continent’s most advanced and diversified economy, to slide into a recession this year, a projection disputed by the government. As Africa’s biggest exporter of iron ore to China, South Africa is suffering from a slump in mining, as well as in other sectors, such as manufacturing and agriculture.
Similar to the currencies of many commodity-exporting nations, South Africa’s rand has declined sharply in recent months because of a worldwide fall in prices of raw materials and because of poor government policies. The weak rand is likely to make it more painful for South Africa, which is experiencing the worst drought in a generation and is usually an exporter of agricultural products, to import corn, the nation’s staple.
Higher food prices could pose a challenge to the government of South African President Jacob Zuma, who is confronting widening public anger over rising income inequality and whose party, the African National Congress, is expected to face serious challenges in municipal elections this year.
Nigeria, Africa’s biggest economy and oil producer, is reeling from a crash in crude prices, while Nigerian President Muhammadu Buhari tries to deal with Boko Haram, the Muslim extremist group that has long terrorized the nation. With oil accounting for 80 percent of government revenue, the government might also lack the resources to quell potential unrest in the Niger Delta, the source of the nation’s oil.
Nigeria’s currency, the naira, collapsed to record lows this month after Nigeria’s central bank placed restrictions on the sale of US dollars to protect its shrinking foreign reserves. The currency fell to about 300 naira to the US dollar in Nigeria’s black market, down from about 240 naira early last month.
Weakening currencies are likely to make it harder for Nigeria — and many other African governments — to repay China for loans used to build large infrastructure projects. The tumbling naira and China’s downturn are also reverberating across private businesses, large and small.
Happiness Awonegbe, a businessman in Lagos, Nigeria, whose companies import paper, tires and other goods from China, said the restrictions on the US dollar have made it difficult for him to place orders with Chinese suppliers.
When he can place an order, his Chinese suppliers now take 50 days to fill it instead of 30, apparently because of reductions in their work force, Awonegbe said.
“We are feeling so much this spillover effect,” said Awonegbe, who employs 50 people. “What happens in China affects Nigeria.”
As the slumping economies have underscored the continent’s growing vulnerability to changes in China, they have quieted much of the heady talk of “Africa rising,” a catchphrase that symbolized the continent’s fortunes. Growing consumer demand and an emerging middle class, while real in many African nations, are insufficient to offset a fall in the continent’s main driver of growth, which remains commodities.
However, experts also see bright spots on the map. While previously high-flying commodity exporters, such as Angola and Zambia, have been hit hardest by China’s slowdown, other nations are showing greater resilience.
“The ‘Africa rising’ narrative was not true, but neither is the diametrically opposed argument that Africa is no longer rising,” said Simon Freemantle, a senior political economist at Standard Bank, a South African bank. “The truth is obviously in between.”
“What we are going to see, going forward, is far more fragmentation and divergence across the continent, and what is going to determine that divergence is how prudent countries have been during the good times. Have they embedded macro reforms? Have they saved?” Freemantle added.
He said East African nations, including Kenya and Ethiopia, which have been forced to diversify their economies, in part, because of their dearth of commodities, would probably continue to enjoy robust growth.
Even Nigeria, which remains dependent on oil, has experienced growth in other sectors in the past decade. A rising middle class has led to the emergence of Western-style shopping malls. A booming entertainment industry helped Nigeria overtake South Africa as the continent’s biggest economy in 2014.
Still, experts say, most nations failed to take advantage of the boom years to carry out long-term changes to their economies. They failed to deal with some of the biggest obstacles to sustained growth — like a severe lack of electricity across the continent — and spur industries that would create jobs. In South Africa, where a chronic shortage of power has constrained the economy, the unemployment rate hovers at about 25 percent.
Zambia, whose economy depends on copper exports, has suffered from waning demand from China and a drop in copper prices. Mines have closed and thousands of jobs have been lost in recent months.
Critics say Zambia could have taken advantage of the boom by negotiating better terms with Chinese companies, including securing technology transfers or employment for infrastructure projects. Zambia used revenue from copper to increase the salaries of civil servants, but did not invest in potential growth industries, like tourism and agriculture.
Edith Nawakwi, a former finance minister in Zambia and now leader of an opposition party, said large infrastructure projects were often wasted opportunities that failed to lead to economic development. African leaders could have asked the Chinese to build infrastructure that would have furthered regional integration, business and trade, Nawakwi said.
“What we need is a change in the way we approach China,” Nawakwi said. “You get from China what you ask for.”
Last month, in a summit meeting in Zambia with most of Africa’s leaders, Chinese President Xi Jinping (習近平) pledged US$60 billion in development assistance to the continent and promised to support “Africa in achieving development and prosperity.”
Zimbabwean President Robert Mugabe, who is chairman of the African Union, heaped praised on China as a counterpoint to Western powers. Many delegates to the summit meeting said China, unlike the West, treated Africans as equals.
However, with the impact on Africa of China’s downturn and a growing trade imbalance — China exported US$102 billion to Africa last year, but imported only US$67 billion from the continent — skeptical voices are increasing.
“The Chinese are not romantic anymore about their relations with Africa — far from it,” said Ibbo Mandaza, a political analyst and businessman in Zimbabwe. “For them, it is purely economic.”
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