Prinesha Naidoo
2 minute read
18 May 2016
9:00 am

Weak rand has dropped SA to third

Prinesha Naidoo

South Africa’s total productive output fell from $350 billion to $313 billion over the same period.

FILE PICTURE: Activists demonstrate in front of Parliament in Cape Town on Tuesday, 25 February 2014 ahead of the budget address to be delivered by Finance Minister Pravin Gordhan tomorrow. Picture: Nardus Engelbrecht/SAPA

That Egypt has leapfrogged South Africa to become the second-largest economy on the continent, after Nigeria, is sobering but hardly surprising, say economists.

Citing data from the International Monetary Fund (IMF), a recent KPMG report showed Egypt’s nominal gross domestic product (GDP) rose from $301 billion (R4.7 trillion) in 2014 to $331 billion in 2015.

South Africa’s total productive output fell from $350 billion to $313 billion over the same period.

“Were it not for the rand’s slump, South Africa would not have surrendered its second place during 2015,” said KPMG.

Now, further analysis shows that the north African country has also trumped South Africa in terms of GDP adjusted for purchasing power parity (PPP), a comparative value of money that takes inflation into account.

“PPP numbers can be used to say which economy is bigger or smaller than the other based on purchasing power. In this case, it is Nigeria at the top followed by Egypt and South Africa during 2015,” KPMG economist Christie Viljoen said.

“It’s not so much about the rise of Egypt but rather the decline of South Africa,” said Investment Solutions chief economist Lesiba Mothata.

He said the shrinking mining and agriculture sectors, as well as the beleaguered manufacturing sector, had contributed to South Africa’s economic decline.

Viljoen added that South Africa’s challenges were largely political in nature. “Changes in Cabinet, the fallout from insufficient investment in electricity-generating capacity, problems with profitability at factories and mines due to labour costs and low business confidence all have a notable political factor to them.”

Political turmoil has also weighed on Egypt’s economy, with real GDP growth still below the levels reached before the Arab Spring protests in January 2011.

“War-like periods force countries to implement economic reforms, which Egypt has embraced. They’ve opened the country up for investment and increased infrastructure spend,” Mothata said.

– Moneyweb