Hold on to your hats –
Next year will be a rocky ride for Africa
By Dianna Games
C
HINA’S recent promise to deepen
partnerships with African countries and
provide $60bn over three years to address
constraints to development, was good news for
a continent facing many headwinds as it rushes
headlong into 2016.
Ironically, China’s slowdown is one of those
headwinds. But there are many other issues
that will make next year a difficult one for subSaharan Africa.
The continent’s petro-states have slashed
budgets and put infrastructure projects on hold
as budgets dry up, but they continue to reel
from the effect of low oil prices.
Any hopes that this was just a brief cyclical blip
have been dashed by the fact that 18 months
since the oil price plunged, there is no sign of
an upturn.
Oil industry executives speaking at the Africa Oil
Week conference earlier this year confirmed the
view that the "world of $50 oil" isn’t going to
change anytime soon.
At the same event last year, oil majors flagged
ambitious exploration projects and mentioned
the billions of dollars lined up for Africa’s oil
and gas assets. This year, the broad narrative
focused on project pullbacks and how to
negotiate this long, rocky road.
Oil is just part of the problem. Lower commodity
prices in general signal that next year is going to
be difficult for Africa.
Buffeted by global developments and internal
weakness, currencies in Africa have lost
significant value. Angola’s kwanza, Zambia’s
kwacha and Nigeria’s naira are among the
main casualties. South Africa has not fared
well either. Fitch Ratings has predicted that
emerging markets will face another wave of
ratings downgrades next year.
The benefits of lower oil prices for non-oil
producers have not been realised in many cases.
Zambia, for example, is looking at growth rates
of less than 4% and a widening trade deficit.
Despite this, there is little political leadership
in addressing the looming macroeconomic and
social crises.
South Africa, like many other African states, is
facing the challenge of rising debt. The resort
by a number of African economies to issue
Eurobonds to fill fiscal voids is coming back to
bite them.
Ghana and Zambia have already turned to
the International Monetary Fund (IMF) for
FARMERS GAZETTE
November 2015
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