South Africa Loses Spot as Africa's Second Largest Economy as Nigeria Gains

7 years ago

South Africa Loses Spot as Africa's Second Largest Economy as Nigeria Gains

Nigeria has overtaken South Africa on the African economic scale following a sharp fall according to a report by Forbes.

Once the largest economy on the continent, South Africa’s domestic and political issues have seen it fall to third place behind Nigeria and Egypt, KPMG has warned, using data from the International Monetary Fund (IMF ).

Even though South Africa remains the “continent’s most developed economy, and has a more diversified economic base than the Egyptian economy… its fall from first and now second place amongst the continent’s giants is of great concern,” KPMG Financial Risk Manager Christie Viljoen said, adding “especially as this development is largely attributed to weakness in the rand that, in turn, has largely been as a result of domestic issues.

“South Africa has been known as the continent’s second-largest economy since Nigeria rebased its gross domestic product (GDP) data in early 2014. However, the IMF World Economic Outlook (WEO) released in mid-April provided more sobering GDP statistics for South Africa. Not only did the multilateral organisation suggest that the South African economy would grow by a mere 0.6% this year, but also that the country is now only the third-largest economy on the continent behind Nigeria and new silver medalist Egypt,” Viljoen said.

“Nigeria’s rebasing exercise some two years ago revealed that the oil-dependent economy was almost twice as big as previously thought. The country’s National Bureau of Statistics (NBS) ensured greater measurement of the informal sector, the inclusion of 46 industries from a previous 33, as well as methodological changes to measuring service sector activity with the rebasing.

“Backward adjustments to GDP indicated that Nigerian GDP in US dollar terms surpassed its South African equivalent in 2011. By the end of 2015, Nigeria’s GDP was measured at $490 billion compared to South Africa’s estimate of $313 billion,” Viljoen added.

In February is was announced that South Africa attracted the largest amount of start-up funding ($54.5-million) and was the most favoured destination (36%), according to the African Tech Startups Funding Report 2015. This placed it ahead of Nigeria, the continent’s populace country with 170-million people, with $49.4-million, or 24% in investments, and Kenya with $47.3-million (14.4%).

South Africa breathed a sigh of relief on Monday when credit ratings agency Moody's MCO -0.17% left the country’s rating unchanged at Baa2 – but with a negative outlook – after months of fears it would be downgraded to junk status.

This followed the unexpected firing of Finance Ministe,r Nhlanhla Nene on 9 December 2015, which saw more than $6,6 billion (R100 billion) wiped off government pensions. This was revealed this week by Daniel Matjila, the CEO of state’s pension investment arm, the Public Investment Corporation (PIC), in response to questions in Parliament.