Egypt Beats South Africa To Become Africa's Second Largest Economy
Egypt has leap-frogged South Africa and become Africa second best economy with Nigeria still leading the pack. Analysts however argue that it is not much about Egypt's rise, rather it is more about South Africa's decline.
The North African country recorded nominal Gross Domestic Product (GDP) rise from $301 billion in 2014 to $331 billion in 2015 while within the same period South dropped from a GDP of $350 billion to $313 billion. This fall has been attributed to the fall of the South African currency, the Rand.
Even though South Africa remains the “continent’s most developed economy, and has a more diversified economic base than the Egyptian economy… its fall from first and now second place amongst the continent’s giants is of great concern,” KPMG Financial Risk Manager Christie Viljoen said, adding “especially as this development is largely attributed to weakness in the rand that, in turn, has largely been as a result of domestic issues”.
Statistics also show that Egypt has beaten South Africa in terms of GDP adjusted for purchasing power power parity (PPP) a comparative value of money which takes inflation into account. PPP figures can also be used to determine how big or small a country's economy is.
“It’s not so much about the rise of Egypt but rather the decline of South Africa,” said South Africa's Investment Solutions Chief Economist Lesiba Mothata. South African President Zuma at one time made three changes to the finance ministry inside a week, firing, hiring and recalling ministers willy nilly. Such activities and many other policy inconsistencies of the South African government have been largely attributed to the fall of the country's economy.
Political unrest is said to have weighed heavily on the Egyptian economy, with real GDP growth still below the levels reached prior to 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, which lead to a return in foreign direct investment (FDI),” Mothata said. According to data from the United Nations Conference on Trade and Development (UNCTAD), FDI into Egypt rose 56% to $6.7 billion in 2015, whereas flows into South Africa fell 74% to $1.5 billion.
However, although Nigeria and Egypt’s GDPs have surpassed that of South Africa, South Africa is still a more developed and stable economy, as is clear from its vastly superior sovereign credit rating.