A political ferment and corruption backlashes hit Nigeria and South Africa, bank collapse and plummeting oil are haemorrhaging emerging markets which were once lively in Africa.
For 2016, the IMF has projected growth rates of 6.8 percent for Kenya, 3.5 percent for Angola, 2.3 percent for Nigeria, and 0.6 percent for South Africa.
According to CNN Money, the prospects for the Rainbow Nation, Africa’s most advanced economy are not looking good. It’s expected growth is one of the slowest growing countries in one of the world’s fastest growing territories.
South Africa’s currency dipped 30% last year—because of political upheaval, in addition to its weak economy. South African President Jacob Zuma has been going in out of court over corruption charges. Prominent South Africans are asking him to resign now.
Zuma’s government hasn’t been doing fine on the other hand. He has replaced his finance minister twice now, bringing his cronies to manage the free-falling rand. Investors aren’t taking this lightly.
“The rand has steadied this year, rallying by about 7%. It’s been helped by a broader rally in markets driven by rising commodity prices,” CNN Money reported. It added that as a platinum, gold and coal producer, South Africa is sensitive to shifts in the commodity cycle.
But in spite of that South Africa ‘is on the brink of a ratings downgrade that would plunge its sovereign debt into junk status.
However, investors are showing some renewed confidence. They have bought up $1.86 billion worth of bonds so far in 2016. Which was the biggest improvement in the last five years.
For Nigeria, Africa’s biggest economy which relies on oil for 70 percent of government revenue and accounts for 90 percent of export revenue, the story has been that of a slow growth: 2,3 percent. In IMF’s estimate, that would be the lowest in the last 15 years.
For 2016, Nigeria is facing a shortfall of $11 billion in its 2016 budget. That’s in addition to its dwindling forex reserves. This has led to tighter control of the nation’s monetary policy. The foreign exchange crisis has been stifling businesses in the import-driven economy. According the CNN Money, two South African companies are out of the country.
Repatriating money is also difficult for foreign investors.
Nigeria and the World Bank have been discussing credit facility for some time now. But the administration of President Muhammadu Buhari doesn’t feel like taking IMF’s loan.
Besides this is the lingering fuel crisis that has confounded Petrol Minister Ibe Kachikwu who has promised an end to the shortage by May. The problem, in some ways, has been tied to the dollar crunch Nigeria is experiencing.
According to CNN, the war against terror group Boko Haram, which the government has vowed to eradicate, is placing further strain on the country’s finances.
Angola, Africa’s former fastest growing economy, is paralysed now. And the IMF is coming in to revive it. Angola, second to Nigeria in oil production, also relies on oil for 95% of government revenue.
International debt and budget finance have weighed down the county’s economy, the reason it’s now seeking an IMF loan.
Angola, whose growth is expected not to exceed 3,5 percent in 2016, is also bound to money-for-oil deals with China. It has used oil as collateral for loans from China, and that is further squeezing state finances.
Kenya is said to be showing some resilience, and its economy is believed to have been. The IMF said the country will experience 6 percent growth—from the 6.8 percent the financial institution first pegged it.
Its banking industry is, however, in confusion over exaggerated profits and unsecured loans, Three of its 43 banks are in deep crisis. Two actually folded up last year while the country’s central bank will be taking over the third one. Another one is under investigation, and analysts believe it’s now time for Kenya’s banking consolidation. Twelve more may be taken over.