- Burkina Faso
- Cape Verde
- Central African Republic
- D.R. Congo
- Equatorial Guinea
- Guinea Bissau
- Ivory Coast
- São Tomé and Príncipe
- Sierra Leone
- South Africa
- South Sudan
Tuesday, January 26, 2016
China sneezes - Africa catches a cold
As China’s economy slows and its once seemingly insatiable hunger for Africa’s commodities wanes, many African economies are tumbling, quickly.
Nigeria’s and South Africa’s currencies fell to record lows this month as China, Africa’s biggest trading partner, announced that imports from Africa plummeted nearly 40 percent in 2015. The International Monetary Fund has in recent months sharply cut its projections for the continent. Credit rating agencies have downgraded or lowered their outlook on commodity exporters like Angola, Ghana, Mozambique and Zambia, which were the darlings of international investors until just over a year ago. Many economists expect South Africa, the continent’s most advanced and diversified economy, to slide into a recession this year. 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 like manufacturing and agriculture.
“We can see what drove the growth in Africa when demand goes away,” said Greg Mills, the director of the Brenthurst Foundation, a Johannesburg-based economic research group. “Well, demand has gone away, and it’s not pretty.”
South Africa’s rand has declined sharply in recent months because of the worldwide fall in prices of raw materials and because of poor government policies. The weak rand will 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.
Nigeria, Africa’s biggest economy and oil producer, is reeling from the crash in crude prices. Nigeria’s currency, the naira, collapsed to record lows this month after Nigeria’s central bank placed restrictions on the sale of American dollars to protect its shrinking foreign reserves. The currency fell to about 300 naira to the dollar in Nigeria’s black market, down from about 240 early last month. Weakening currencies will 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 dollar had 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, Mr. Awonegbe said.
“We are feeling so much this spillover effect,” said Mr. Awonegbe, who employs 50 people. “What happens in China affects Nigeria.”
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 the 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 around 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, Ms. Nawakwi said, could have asked the Chinese to build infrastructure that would have furthered regional integration, business and trade.
The impact on Africa of China’s downturn and a growing trade imbalance — China exported $102 billion to Africa last year but imported only $67 billion from the continent — raised skeptical voices.
“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’s purely economic.”