Daily Insight: African Giants, Why are the mighty falling?

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Earlier, data from S/Africa’s statistical agency, Statistics South Africa, showed that in addition to a steeper 2.6%q/q Gross Domestic Product (GDP) contraction recorded in Q1-18, the country’s GDP fell further by 0.7%q/q in Q2-18 – technically pushing one of Africa’s largest economy into its first recession since 2009. Notably, this came in a period where Nigeria, another African giant, recorded a further slowdown in its Q2-18 GDP growth to 1.5% after crawling out of recession in Q2-17. This trend underscores the fragility of its economic recovery. Thus, in an attempt to nip the problem in the bud, we ask “why are the mighty falling?”

While the Nigerian economic slump of 2016 and the recent Q2-18 slowdown are resulting effects of downturns in the Oil sector, the recent South African economic collapse is traced to massive output declines in the Agriculture, Trade and Manufacturing sectors. Also, strengthening the dollar, escalating trade tensions and routs across emerging markets, added to the worries of African giants during the period – especially South Africa.

However, both countries face serious structural obstacles which include high unemployment rates and policy stagnation. Thus, we believe that for these African giants to return to a sustainable long-medium term growth, there is a desperate need for policy and structural reforms.

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