THE BLOG

Forget About Being Africa's Biggest Economy, We Are Better Together

Despite jostling for the prize of Africa's biggest economy, ordinary South Africans know that a prospering Nigeria is good for South Africa and vice versa.

02/03/2017 05:04 SAST | Updated 02/03/2017 06:13 SAST
George Osodi/ Bloomberg/ Getty Images

If we've learned anything from the last 12 months, it's that the value of statistics and headlines are often misleading. In August 2016, for example, hundreds of papers around the world proclaimed the news that South Africa had overtaken Nigeria as Africa's biggest economy. But in reality, and set in their proper context, any celebrations resulting from the news have been shown to be premature.

In truth, the numbers behind the economic rankings in Africa can vary, depending largely on International Monetary Fund calculations. And with South Africa and Nigeria's economies being so similar in size ($301bn and $296bn respectively at the time), the Rainbow Nation essentially took first place on a technicality. But regardless of the rankings and away from the headlines, the economies of each had so severely contracted in early 2016, both had been left teetering on the brink of recession. Hardly cause for celebration.

But the story doesn't end there. Last September, South Africa bounced back. Growing 3.3 percent in the preceding quarter, the economy was bolstered by a resurgent mining sector, progress in manufacturing, and positive growth across primary, secondary and tertiary sectors. Certainly agriculture and electricity still posed challenges, but the South African economy was sufficiently diversified that these hiccups were more than offset by solid quarterly growth in motor manufacturing, finance and transport.

Nigeria, however, saw no such growth and officially entered recession. The reason? Do not be fooled into thinking that Nigeria is a country that is predetermined to live and die by the price of oil. This view absolves my county of any responsibility to take steps to improve this very situation, by diversifying away from dependency on a single commodity.

Efforts have been made to improve the diversification picture in Nigeria, but in reality very little has been done to move away from its dependence on oil. The approach has been slow, but it is becoming clear that Nigeria cannot simply ride out the recession until the oil price improves.

So, as the continent's leading economies, what can South Africa and Nigeria do to help each other? Diplomatically, relations have been tense in the last two years, in part due to the $5.2 billion MTN fine imposed which Nigeria imposed in 2015. But despite our jostling for the dubious prize of Africa's biggest economy, ordinary South Africans know that a prospering Nigeria is good for South Africa and vice versa.

The first problem to fix is the crisis of currency in Nigeria. Our foreign exchange policy is a challenge: problems persisting despite our currency supposedly being floated last year. And this is something that should alarm all Africans. With a drought of dollars, importers in Nigeria cannot pay for exports.

What is clear to me is that South Africa's economy is as diverse as its population. With our shortage of dollars, the difficulties of importing to Nigeria have come at a time where we should be looking to neighbouring economies within Africa – particularly South Africa – for greater trade.

South Africa currently exports over $1billion dollars worth of goods and services a year. This is a fraction of what it could and should be. However, political inaction on both sides will limit this and my hope is that South Africans will share Nigerian's concerns for what is happening in our economy. Both countries stand to benefit from growing neighbours and will share those benefits across the continent.