Politics wreck Southern African growth

The so-called wind of change that started blowing across southern Africa two years ago, has morphed into a gale force headwind instead, writes Leon Louw.

Recent political change in Angola, South Africa, Botswana and Zimbabwe were hailed as historical events that would change the economic trajectory of the region. However, economic realities have stemmed the tide of optimism that many felt was the beginning of the resurrection of the “Africa Rise” narrative.

In hindsight, the damage done by incompetent and corrupt governments, in especially South Africa and Zimbabwe, has eventually taken its toll, and the brooms that intended sweeping clean afterwards, have to take full responsibility for the sins of their predecessors. Of all the new leaders in the southern African region, the president of Angola, João Lourenço, has been the boldest in restructuring the economy and flushing out corruption and nepotism. Lourenço is driving privatisation relentlessly, and the mining industry, especially, has benefited from his reform programme. The opposite is true in South Africa and Zimbabwe.

The biggest disappointment of all would surely be Zimbabwe, where President Emmerson Mnangagwa’s government is stumbling from one blunder to the next without even knowing. But then, could we have expected anything better from a leader that came to power through a military coup, and is advised by army generals? From being regarded as a fresh breeze after Robert Mugabe’s misrule, Mnangagwa has become an even bigger disaster. Zimbabwe is a failed state and doing business in the country is almost impossible. It is not open for business (as its president so boastfully proclaims) unless you line pockets, and the sad reality is that nobody really knows if the situation will ever change.

In South Africa, President Cyril Ramaphosa, for all his good intentions, is hamstrung by a faction within the African National Congress (ANC) that seems intent on destroying the economy at all costs. The group is closely aligned to ex-president Jacob Zuma, and until Ramaphosa’s hands are free, he is a lame duck president without direction. From being the shining light, South Africa is fumbling in the dark, literally. Its national energy provider, Eskom, is in a debt-ridden downward spiral from where it can never emerge, unless it is privatised. Without enough electricity, and business friendly policies, the South African economy is heading towards the same black hole as Eskom, regardless of the new president’s charisma. Zuma’s tenure has cost South Africa dearly, and Ramaphosa is paying the price.

Mokgweetsi Masisi of Botswana is another president that has to deal with the backlash that accompanies the change of guard in African countries. Ex-president Ian Khama’s shadow looms large over Masisi’s decision making. Factional battles within the Botswana Democratic Party (BDP) have ravaged the ruling party since Khama stepped down as president last year, and questions are being asked of a country with the reputation of being a beacon of hope for democracy in Africa. Despite its challenges though, Botswana, and its neighbor Namibia, remains low risk, business friendly environments.

Meanwhile, Mozambique’s economy is gaining stream and with the gas fields of the Rovuma Basin bound to start producing soon, all is set for the country to ride the tide of new prosperity. The security situation, however, especially in the Cabo Delgado Province in the north of the country, has deteriorated significantly. American petroleum company Anadarko recently reported that one employee was killed and several injured after an attack close to the construction site of its liquefied natural gas (LNG) plant in Cabo Delgado. Islamist groups are claiming responsibility for numerous incidents in the region over the last year, and it has become risky for foreign companies to do business in the far northern parts of the country. There is a real concern that the situation will get worse before it gets better.

According to the recently released 2019 Southern Africa Economic Outlook Report by the African Development Bank, the southern African economy as whole is projected to grow slower than others in the continent – at 2.2% in 2019 and 2.8% in 2020. “At the heart of this slow growth are major headwinds of high inflation, increasing government debt, and slow growth in South Africa, which contributes about two-thirds of the region’s GDP,” according to the report. It further states: “The second largest economy in southern Africa, Angola, is expected to grow by 1.2% 2019 and 3.2% in 2020, while Mozambique will grow at 4.5% percent in 2019 and 5.0% in 2020.

“In 2018, the five fastest growing economies were Madagascar (5.0%), followed by Botswana (4.2%), Mauritius (4.1%), São Tomé and Príncipe (4.1%), and Zambia (4.0%). The five slowest growing economies were Angola (–0.7%), eSwatini (–0.5%), Namibia (–0.1%), South Africa (0.7%), and Lesotho (0.9%) – a mix of large (Angola and South Africa) and smaller economies (Lesotho, Namibia, and eSwatini). In 2019, Madagascar is projected to grow faster than all the other countries in the region, followed by Malawi, São Tomé and Príncipe and Mozambique”.  

Leon Louw is a specialist in African affairs and mining. For more about doing business in Africa, mining and mining operations in Africa, and the political risk of operating in Africa,contact Leon or follow him on Twitter, Linkedin and Facebook.