African Business looks forward to 2020, with analysis of political and economic trends and predictions of what lies ahead from the region’s top economists.
2019 has been a year of cataclysmic political and economic change on the continent. Revolutions convulsed Algeria and Sudan, deposing long-time strongmen Omar al-Bashir and Abdelaziz Bouteflika in April. Public anger and discontent stretched to the southernmost reaches of the continent in September, as mobs looted foreign-owned stores in South Africa, while other citizens took to the streets to protest a spate of violent attacks against women. It was hardly ideal timing for embattled President Cyril Ramaphosa, who was forced to avert his gaze from the expensively hosted World Economic Forum.
Meanwhile, as regional policy-makers scrambled to make sense of the continental free-deal deal, which got its final ratification from Gambia in June, Nigeria raised the drawbridge, halting the free movement of goods in an anti-smuggling crackdown that sent shockwaves through west Africa. South Africa’s story
In South Africa, a year of hope has turned into a frustrating continuation of economic and institutional inertia as Ramaphosa struggles to turn promises into reform. Growth continues to stall while unemployment languishes. But the new year will see more storm clouds gathering as the country faces the real prospect of a credit downgrade if the government’s new budget, released in February, fails to deliver a viable turnaround plan that promises big results to international investors.
If South Africa’s debt falls into sub-investment grade, it could spark a sell-off by institutional investors across the the globe, including pension funds, hedge funds and banks, says Chris Vandome, a research associate at Chatham House’s Africa program.
“That could result in $15 billion leaving South Africa effectively,” says Vandome, citing figures released by Bank of New York Mellon. This enormous financial fallout would raise borrowing costs at a time when the country desperately needs loans and portfolio investment to balance its deficit.
With South Africa’s growth projections lowered from 1.2% to 0.7% by the International Monetary Fund (IMF) this year, and popular discontent brewing, there is little room for error. A man screams holding a stick in front a burning piece of furniture during a riot in the Johannesburg suburb of Turffontein on September 2, 2019 as angry protesters loot foreign-owned shops. (Photo by Michele Spatari / AFP)
One thing that could boost South Africa is the easing of trade tensions following a mooted deal agreed […]
