The World Bank has lowered its 2016 growth forecast for Africa to only 1.6%, a dramatic downward revision from the 3% figure projected in April. The new forecast represents the lowest level of growth for sub-Saharan Africa in over two decades and is also below the expected regional population growth of 2.7%.

Chief economist for Africa Albert Zeufack describes the slowdown, as well as the dip below population growth, as “extremely serious”, as it means that income per person is set to decline this year. The growth forecast for 2017 has been revised to 2.9%, which is only slightly above population growth.
The slump, recorded in the biannual Africa’s Pulse publication, is attributed largely to the weak performance of the large economies of South Africa, Nigeria and Angola.

The bank has revised its 2016 growth outlook for South Africa to just 0.4%, from 0.8% in April. It has also lowered its 2017 outlook to only 1.1%, while its expectation for 2018 is only 1.8%.

The figure is in line with the South African Reserve Bank’s recently revised forecast of 0.4%, which represents an upward revision from an earlier forecast of 0%. Finance Minister Pravin Gordhan is expected to revise government’s official growth forecast of 0.9% when he delivers the Medium-Term Budget Policy Statement on October 26.

South Africa’s gross domestic product (GDP) contracted by 0.1% year-on-year in the first quarter, weighed down by a deterioration in the mining sector and the effect of drought on agricultural production. Owing to an increase in manufacturing output and sustained growth in commerce and finance, which more than offset weaker retail sales, GDP growth rebounded to 0.6% year-on-year in the second quarter. The rebound was weak by historical standards, the bank says.
World Bank Southern Africa programme leader for equitable growth, finance and institutions Sebastien Dessus says South Africa has both contributed and been affected by the slowdown in growth across the region.
“Basically, South Africa is part of this bigger slowdown story . . . It certainly contributes to the decline, but it also suffers from the decline in growth in other countries, as it is able to export less.” Similarly it has been impacted on by the weakness in commodity prices and demand.

The bank expects private consumption to remain weak in South Africa, owing to rising unemployment, high household indebtedness and elevated inflation. Investment growth is expected to remain sluggish because of policy uncertainty and long-standing structural issues.

South Africa also forms part of a category of 11 countries that the World Bank describes as ‘slipping’ in their performance.
These countries – Angola, Botswana, Cape Verde, Chad, Equatorial Guinea, The Gambia, Liberia, Madagascar, Nigeria, Sierra Leone and South Africa – experienced average yearly GDP growth rates of 5.8% between 1995 and 2008. However, the performance fell to 1.9% between 2014 and 2016.
The group of slipping performers makes up 31.7% of the region’s population, but produces 60.4% of its GDP.
Africa’s Pulse stresses, though, that growth is far from homogeneous, with some countries, such as Ethiopia, Rwanda and Tanzania, continuing to post yearly average growth rates of over 6%.

“Our analysis shows the more resilient growth performers tend to have stronger macroeconomic policy frameworks, better business regulatory environments, more diverse structure of exports and more effective institutions,” Zeufack says.