Storming ahead, lagging behind: Nigeria and South Africa in the future?

27th February 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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Earlier this month, global assurance, tax and advisory services group PwC published ‘The World in 2050: Will the Shift in Global Economic Power Continue?’ From an African point of view, the most striking thing was the prediction that, by 2050, Nigeria would be one of the ten biggest economies in the world. To be precise, it would hold ninth place, with a forecast purchasing power parity (PPP) gross domestic product (GDP) of $7 345-billion (in 2014 dollar terms).

In contrast, South Africa would rank 27th, with a PPP GDP of $3 026-billion (again in 2014 dollar terms). PwC ranked Nigeria 20th last year, with a PPP GDP of $1 058-billion, and expects the country to rise to 16th place by 2030, by which time its GDP should be $2 566-billion. South Africa filled 29th spot last year (PPP GDP: $683- billion) and is predicted to fall to 31st place in 2030 ($1 249-billion). Thereafter, the country’s position will improve (as already noted) to 27th place.

It is striking that, despite the huge problems currently facing Nigeria, including still-widespread corruption and the Boko Haram war (for that is what it effectively is) in the country’s north-east, PwC believes that the West African country has the dynamism to overcome these problems and crises and could race all the way to the top ten within 35 years – not a long time, in historical terms. After all, 35 years ago was 1980. Where was Nigeria in 1980?

Of course, the key word is “could”. PwC chief economist and report coauthor John Hawksworth cautioned in the press release covering the publishing of the report: “Recent experience has underlined that relatively rapid growth is not guaranteed for emerging economies, as indicated by recent problems in Russia and Brazil, for example. It requires sustained and effective investment in infrastructure and improving political, economic, legal and social institutions. It also requires remaining open to the free flow of technology, ideas and talented people that are the key drivers of economic catch-up growth. Overdependence on natural resources could also impede long-term growth in countries such as Russia, Nigeria and Saudi Arabia unless they can diversify their economies over time.”

From a South African point of view, what is depressing is that PwC expects the country’s relative performance to remain mediocre over the next 35 years. Some may take emotional solace from the company’s expectation that, in 2030, the South African economy would be bigger than that of the Netherlands (which would rank 32nd, at $1 066-billion; it would keep that place in 2050, at $1 581-billion; last year, it ranked 26th, at $798-billion). More may take greater solace from the prediction that, by 2050, the South African economy will be bigger than Australia’s (which should occupy 28th place, at $2 903-billion, down from 23rd place in 2030 and 19th last year). But other countries are going to shoot past South Africa.

The PwC list covers the 32 biggest economies in the world. For 2014, there are only three countries ranked below South Africa. They are Colombia (30th), Bangladesh (31st) and Vietnam (32nd). By 2030, they will all be ahead of South Africa, with Vietnam at 28th place, Bangladesh at 29th and Colombia at 30th. By 2050, Vietnam and Bangladesh should have significantly increased their lead, to 22nd and 23rd respectively, although, interestingly, Colombia is predicted to fall back to 29th place, below South Africa.

Last year, the two countries ranked immediately above South Africa were Malaysia (27th) and the Philippines (28th). (Remember, we are dealing with GDP in PPP terms.) By 2030, Malaysia is expected to rank 24th and the Philippines 26th. By 2050, Malaysia is expected to remain 24th, but the Philippines is forecast to climb to 20th. (To digress a little, Thailand, strikingly, ranked 21st last year and is expected to keep this position in 2030 and in 2050: talk about consistent performance. Its PPP GDP is expected to go from $990-billion to $1 847-billion to $3 510-billion.)

It should be noted that PwC already ranked Egypt higher than South Africa for 2014, making this country the number three, and not the number two, African economy. Last year, Egypt was 22nd, at $945-billion. By 2030, the North African country is expected to be 20th ($1 854-billion), reaching 16th place (and $4 239-billion) by 2050.

Of course, not all the emerging economies will do well. Iran, for example, is predicted to fall from 18th to 19th to 25th place. Argentina is forecast to decline from 24th to 27th to 30th place (putting it below South Africa by 2050).

Who are likely to be the top ten in 2050? PwC suggests China, India, the US, Indonesia, Brazil, Mexico, Japan, Russia, Nigeria and Germany. (The UK would be 11th, France 13th, Italy 18th and Canada 19th.)

It seems that PwC has little confidence that the South African government will rapidly address the country’s problems and release the country’s still considerable economic potential. And this report was published before the 2015 State of the Nation address. That, of course, included the announcement that it was now government policy to ban land ownership by foreigners. This marks the crossing of an important line of principle. Foreigners will be discriminated against. Countries that compete with South Africa for foreign investment, like Peru, proudly highlight that they do not discriminate against foreigners. By adopting this policy – by signalling its willingness to discriminate against foreigners – Pretoria is actively discouraging foreign investment. That will hurt economic growth.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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