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South Africa and Nigeria: A Similar Narrative

Global Market	1208 VIEWS
Global Market
1208 VIEWS

Friday, August 02, 2019 / 03:00PM / United Capital Research / Header Image Credit: Busineestech

Fears concerning the direction of South Africa’s economy resurfaced as the Q219 unemployment rate published during the week edged higher by 1.4%, to 29.0%, the worst performance recorded since the global financial crisis in 2008. Further analysis showed a distinct disparity in the number of persons who secured jobs compared to individuals who lost employment. Specifically, while those who secured jobs increased 21,000 q/q, those who lost their jobs grew 455,000 q/q, more than doubling jobs created during the period.

Youth unemployment continued to remain the bone of contention, as more than 56.4% of the young workforce were unemployed. In what seemed to be a contradiction to the norm, a lower unemployment rate was seen amongst individuals with little education, as the Agric sector remained the largest employer, requiring mainly labour-intensive production. On a sectoral level, the Mining, Transport, Construction and Banking sectors recorded massive lay-offs, as they struggled to remain profitable, amid a challenging business environment.

This mounts further pressure on President Cyril Rampahosa’s government, an administration already saddled with avoiding another recession. In Q1-19, GDP contracted -3.2% due to weaker consumer demand as well as lower activities in the Agric, Mining and Manufacturing sectors. Also, the government continues to battle crisis in the power sector, as the ailing state owned Power utility company, Eskom, reported a monumental loss (R20.7bn or $1.5bn) in its 2018/2019 integrated annual report, despite recent efforts of the government. The above is almost similar to that of Nigeria, Africa’s largest economy, also struggling with high unemployment rate, faltering GDP growth and power sector crisis. Accordingly, to change this narrative, both economies have to find a way to rejig their ailing power sector, boost job creation and create an enabling environment for businesses to thrive. This is critical for faster growth across the region.

Top African Stories

•Renationalisation unlikely to fly Kenya Airways back to profit: By taking back full control of Kenya Airways, lawmakers are banking on Kenya’s ability to replicate the profitable example of Ethiopia’s state-owned flag carrier Ethiopian Airlines. Reuters

• South Africa's Absa PMI expands for first time in 7 months: South Africa’s seasonally adjusted Absa Purchasing Managers’ Index (PMI) moved into expansion for the first time in seven months in July, as improved demand saw sales and business activity improve, the survey showed on Thursday. Reuters

•Ghanaian Govt suspends power concession agreement with PDS: Government has suspended the concession agreement with Power Distribution Services (PDS), bringing back the Electricity Company of Ghana (ECG) to be in full control of power distribution. Energy Mix Report

•SA’s Eskom records major losses: Power utility Eskom on Tuesday recorded a net loss after tax of R20.7 billion in the year ended March, up from a previous loss of R2.3 billion. Energy Mix Report

•Zimbabwe to defer release of inflation figures, economy to contract in 2019 – finance minister: Zimbabwe’s economy is expected to contract this year due to a drought and severe power cuts, Finance Minister Mthuli Ncube said on Thursday, without providing a figure. CNBC

•Libya’s Waha Oil Company contracts local firms for field redevelopment: Libya’s Waha Oil Company yesterday announced that it has contracted locally to redevelop its Dahra and Bahi oilfields. Energy Mix Report

Looking Forward

Angola

Jul-19 (CPI) Inflation - August 12th

Egypt

Jul-19 (CPI) Inflation - August 8th

Ghana

Jul-19 (CPI) Inflation - August 14th

Kenya

Jul-19 Purchasing Managers Index - August 5th

Jul-19 (CPI) Inflation - August 22th

Morocco

Q2-19 Unemployment Report - August 10th