From the oil wells of Angola to the copper mines of Zambia, the boom is over. The global commodities slump is beginning to weigh heavily on the African economy, dragging the region to its most sluggish growth since 2009.
The World Bank, in a report on Monday, projected that Africa's growth will slump to just 3.7 per cent this year, down substantially from its 4.6-per-cent expansion last year. It's also below the 4.5-per-cent growth rate that Africa had managed to maintain from 2009 to 2014 in the aftermath of the global financial crisis.
Africa's economic health is suffering not just from weakening commodity prices, but also from the Chinese slowdown and widespread electricity shortages in many African countries, the World Bank said.
The report is confirmation of a trend that has become increasingly visible across Africa this year, with currencies collapsing, oil wealth eroding, power outages spreading, and mining companies announcing layoffs and closings. Oil-rich Nigeria, the biggest African economy, announced that its year-on-year growth had fallen to 2.35 per cent in the second quarter of this year, its slowest rate in a decade, while South Africa, the next biggest African economy, suffered a 1.3-per-cent drop in GDP in the second quarter.
The pain is hitting some countries more than others. Among the worst-hit economies are the oil-exporting countries – including Angola, Nigeria, Equatorial Guinea and Republic of the Congo – as well as the mineral and metal producers such as Botswana and Mauritania. Meanwhile, the electricity shortages are damaging the economies of Zambia, South Africa and Ghana, while political turmoil is paralyzing countries such as Burundi and South Sudan.
Some of Africa's leading commodities – including copper, iron ore, oil, natural gas and coffee – have seen their prices drop by more than 25 per cent since June, 2014, the World Bank said.
The erosion of African currencies has been even more dramatic. Over the past 15 months, the currencies of South Africa and Ghana have dropped by more than 25 per cent, while Angola's kwanza has tumbled 38 per cent, the Ugandan shilling has fallen 45 per cent and the Zambian kwacha has plunged 80 per cent, the report said.
The World Bank also warned that many African countries are facing higher inflation and growing government debts. Fiscal deficits are expanding because of rising wage bills and expanding military spending at a time when revenue is declining, it said.
Despite the slump this year, Africa's growth rate should begin to revive next year, reaching 4.8 per cent in 2017 as commodity prices make a slow recovery and electricity supplies begin to increase, the bank said.
It emphasized that the current slump is not affecting every African nation. Several countries – Tanzania, Mozambique, Ethiopia, Rwanda and Ivory Coast – are expected to grow by 7 per cent or more from 2015 to 2017 because of higher consumer spending and increased investment in energy, transport and resources, the report said.
Some analysts believe the commodity slump could actually benefit Africa in the long run. "The end of the commodity supercycle poses an opportunity for African countries to reinvigorate their reform efforts and thereby transform their economies and diversity sources of growth," said a statement by Makhtar Diop, the World Bank's vice-president for Africa.