Sub-Saharan African (SSA) economies, including South Africa’s, have been subjected to a reality check in recent weeks, coming not only from the IMF and the OECD, but also from several African watchdogs.
The prognosis for Finance Minister Enoch Godongwana and his SSA counterparts is neither encouraging nor flattering.
The narrative is largely the same, exacerbated by the impacts of the pandemic, the Ukraine conflict, and global economic shocks, especially rising inflation, interest rates, the cost of living and public debt.
Any post-Covid-19 recovery, let alone normalisation, has been put on the back burner, at least for the near-to-medium term.
Antoinette M Sayeh, deputy IMF manager, while agreeing that many developing countries needed debt relief, could not help but inject realpolitik.
“For debt relief to be impactful countries also need to address better governance, more transparency, and structural fiscal issues,” she warned.
So one can forgive Godongwana going to the World Bank Group (WBG) annual meetings in Washington DC last week cap in hand, speaking on behalf of low-and-middle income countries.
His extensive wish list centred on climate finance, energy and food security, especially given that SSA countries have the smallest carbon footprint yet are suffering disproportionately from its devastating effects.
His wish list:
- Much greater concessional and grant funding for climate action, mitigation and adaptation.
- Appropriate incentives to woo a reluctant private sector to participate through Green Finance and Sustainable Finance.
- The WBG to facilitate and fund energy generation using their natural resources, at the least to provide base load capacity.
- The WBG to make explicit its willingness to fund gas generation.
- The WBG and the developed countries to prioritise investments in agricultural research, and manufacturing of inputs especially fertilisers.
- Investment in transport infrastructure and storage facilities to enable flow of food from surplus areas to those in need.
- The WBG may also want to investigate the challenges to food security brought about by the communal land tenure system, which often hinder development initiatives.
The challenge for SSA finance ministers is how to balance Godongwana’s call that “transition must be just, inclusive and sustainable” with Sayeh’s implied contention that it should also be transparent and corruption free.
The Fitch Solutions Country Risk Index shows an overwhelming number of African states are politically and economically unstable over the short to-long term.
South Africa ranks with Namibia, Botswana, Russia, Iraq, Egypt and Brazil, with a score of 50-59 with 100 the most stable. The rest of the African countries have much lower scores.
South Africa’s growth trajectory is very worrying, down from the 4.9% rebound in 2021 to the third lowest forecast for Africa at 2.1% in 2022 to the lowest at 1.1% in 2023, which leaves scant fiscal space for the Treasury.
This means it is almost inevitable that Godongwana will continue to borrow from the IMF and the international markets, even if tax receipts increase.
The mitigating factor is that South African national debt in 2022 at 70.2% of the GDP is manageable, straddling the two extremes of its rival African economies – 94% in Egypt, and 37.4% in Nigeria and rising. Cairo will spend 8.2%, Pretoria 4.7% and Abuja 2.3% of GDP in 2022 just to service the debt.
The macro-economic metric that poses the biggest immediate danger to the livelihoods of ordinary South Africans is inflation, which in September had risen to 6.2%, a 2.5% hike since December 2021. Consumers are suffering from its real impact on the cost of living with the petrol price rising 10% only recently, but spare a thought for inflation in Ghana (22%), Angola (19.5%) and Mozambique (17.25%).
Lesetja Kganyago, the Reserve Bank governor, recently pleaded at the Africa Centre for Education in Economics in Joburg for greater understanding of the historical context of African macroeconomic policies. He has a point.
Often past successes are clouded by recent aberrations, including the state capture era that wrongly gives the impression that macroeconomic mismanagement is entrenched.
Parker is an economist and writer based in London
Cape Times