Power outages and prices have hobbled South Africa, leading to protests such as those in Johannesburg earlier in May.MUJAHID SAFODIEN/AFP / Getty Images
After a decade of impressive growth, Africa is now facing the burden of stagnation in its two biggest economies, dragged down by everything from electricity blackouts and fuel shortages to labour unrest and declining tourism.
South Africa reported a sharp drop in economic growth and a rise in unemployment on Tuesday, while Nigeria struggled to recover from a severe fuel shortage that grounded its airlines and forced businesses to close early.
Africa is still expected to post a 4.5 per cent growth rate this year, according to several leading forecasters, but the woes of its two biggest economies are dampening the boom. To make matters worse, those economic woes are largely self-inflicted, resulting from poor planning and perverse policies.
South Africa's growth rate fell to an annualized 1.3 per cent in the first quarter of this year, compared with 4.1 per cent in the previous quarter, while its jobless rate climbed to 26.4 per cent, the worst level in 12 years. Unemployment stood at more than 50 per cent among the youngest job-seekers, 15 to 24 years old, and was much higher when discouraged workers were included.
Rolling blackouts in recent months have hobbled South Africa's manufacturing sector, which fell by 2.4 per cent in the latest quarter. The power outages had been predicted for years, but the government neglected the state-dominated electricity sector, failing to boost its capacity even as the warnings grew more urgent.
Now it faces two more serious threats: a potential strike in the gold and coal mining sectors, where unions are demanding huge pay increases, and a severe threat to the tourism sector, where new regulations are causing a sharp drop in tourist arrivals.
Wage negotiations are scheduled to begin early next month in the gold sector. One of the two major unions has issued the same demand that triggered a five-month strike in the platinum industry last year, causing a slump in South Africa's growth rate.
Tourism, which employs 1.5 million people and contributes 9 per cent of South Africa's GDP, has suffered a plunge in visitors from China and India because of new South African visa rules, forcing tourists to apply in person at centralized offices in their home countries.
Further tourism declines are expected after June 1, when new regulations force visiting families to provide an unabridged birth certificate for every child – a requirement that few other countries have imposed. More than 500,000 tourists could be deterred from visiting South Africa, some analysts say.
Tourism has also been damaged by violent attacks on foreign migrants this year, which led to travel warnings from several countries, including Canada.
South Africa's total formal employment rose by just 17,000 over the past year, according to the latest labour survey, while the number of unemployed and discouraged workers soared by 500,000 to reach nearly eight million – just three million less than the number of formally employed.
"The indictment is simple: a 2-per-cent economic growth rate and only 0.2-per- cent increase annually in formal employment won't cut it," said South African economist Cees Bruggemans in a commentary on Tuesday.
"The South African contrasts remain as stark as ever, with economic stagnation holding back overall formal employment levels while demographics still steadily add to our labour force potential, nearly all of it doomed to unemployment and a life of discouragement."
In Nigeria, hard hit by the drop in global oil prices, economic growth fell to 4 per cent in the first quarter, down from 5.5 per cent a year earlier. But the crisis has been worsened by electricity and fuel shortages. Motorists have suffered massive queues at gas stations, scores of airline flights have been cancelled, banks and other businesses have shut their offices temporarily and cellphone companies have warned of "degraded" service.
Most businesses rely on diesel generators because of the electricity shortage. But even though Nigeria is the biggest oil producer in Africa, it has a severe shortage of domestic refining capacity, and it also struggles to maintain fuel subsidies for consumers. The shortages grew worse when the government failed to pay diesel and gasoline importers and marketers on time, leading to the shutdown of fuel depots.
The two sides reached an agreement to end the dispute on Monday, but the root causes of the shortages are unresolved.
Geoffrey York