South Africa: Getting to grips with being in second place

Nigeria has recently emerged as the economic giant of the continent, a title quite suitable given its demographic size and vast population. The numbers seem to predict a major shift for Africa, with a new era led by Nigeria. Some may even suggest that the #BRIC nations should welcome a new member and say goodbye to South Africa; which has always seemed out of place in the grouping given its small population and economy. The news that came out on Sunday should not lead to any chest thumping or condemnation of South African economic policy. The revelation that Nigeria had an even larger economy than what was thought should be viewed as a reflection on Africa’s bad state of keeping track of numbers rather than a show of pride amongst nations still struggling with huge economic problems. Maybe African governments need to put a lot more effort into ensuring the most accurate data about their countries is presented?

What does this really mean for South Africa?

One the ground very little has changed for either nation; they both still have a maze of socio-political and economic challenges to navigate, there are a large number of people living in poverty, and the unemployment figures are stubbornly high.  It would be misguided in thinking that Nigeria’s new economic standing reflects anything about the South African economy and the policies of its government. South Africa has record of fundamental economic problems, many of which have a historical basis, long before the Nigerian GDP rebase. It will take South Africa some time to resolve these issues.

The impetus to improve the economy of the country is not going to come from external forces but rather emerge from internal pressures on government. In the past five years the stagnant economic growth and unwavering unemployment rate have been the main burdens of the #ANC led government, not to mention the continued tensions in the mining sector which will drive down growth prospects as well in the near future. South Africa needs to deal with these issues before it can look at its positioning on the African or global totem pole. However, this does not mean that South Africa should ignore being competitive regionally or globally, if it wants to grow its economy.

One area that Nigeria’s new position could significantly impact South Africa would be international relations; particularly on Africa’s role in the global economy. For a number of years South Africa has made it its responsibility to give Africa a voice in platforms for global economic discussions. This was quite an easy role for South Africa to take as an economy far ahead of its peers on the continent.

South Africa also had an advantage of being the poster boy for democracy after the 1994 elections; which made it a welcome guest in international forums dominated by Western Governments. In the changing dynamics of the 21st Century, South Africa has seen its favourable position dwindle as its economy remained stagnant and players outside the West, including #China and India, took an interest in the rest Africa. South Africa’s privileged position as Africa’s voice at the #G20 may also change, as the country starts to find it harder to advocate its case as the best suited country to speak on behalf of Africa. Perhaps both Nigeria and Africa could represent the continent. It would be best for South Africa and Nigeria to strengthen their diplomatic and economic ties even further, for the benefit of all of Africa – perhaps then both nations could represent the continent.

Nigerian growth is a South Africa opportunity

South Africa remains the most advanced economy on the continent, and will continue to be one of the main economic players in Africa. It has a superior banking and financial system, a regulatory regime which is one of the most stable on the continent, and it’s multinationals are already seen as key drivers of #FDI into the continent. South Africa’s mineral reserves are seen as one of the most valuable in the world. These reserves are estimated at US$2.5 trillion dollars, with the country being home to the largest reserves of #platinum group metals (#PGMs). What is needed is for the country to unlock this mineral potential to boost the economy for the 21st century - this is why the South African government is bent on seeing more beneficiation of its resources in the country.

South Africa must not aim to compete with Nigeria on size of economy. What the country needs to focus on is remaining competitive in the dynamic global economy. It will also have to ensure that it maintains its key competitive advantages to remain a gateway to the rest of Africa. So far South Africa remains ahead of Nigeria in a number of indices.

South Africa is in the economic doldrums at the moment, and is likely to remain there for the next five years or decade if the present regime doesn’t take drastic actions.  What fellow countries, like Nigeria, present to South Africa is not a challenge to its hegemony, but rather an opportunity for economic growth as markets for South African products. South Africa should set itself up to ride the wave of African growth - while some of its multinationals have led the way, there is still a large part of the economy that needs to follow. Some state-owned companies, such as #Transnet, #Telkom and #Eskom, have fallen behind and should follow the example of South African retail, telecommunications and financial companies who have taken advantage of the growth opportunities Africa presents. South Africa is at the doorstep of Africa; all sectors should be looking at exploiting the boundless opportunities. 

Originally published on the africapractice website here: http://www.africapractice.com/blogposts/page/25/?id=5767

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