African GDP growth has bottomed out

This could be the year of reform and renewed growth in African economies.

Dr. Martyn Davies, Deloitte Africa’s managing director for emerging markets and Africa, said that structural reform of economies could be one of the mega trends of the year.

“Usually this is impossible without a crisis. The shock in Africa that could force structural reform, is the low oil price,” said Davies. He was optimistic that the cycle of weak or no growth in GDP had “bottomed out”. But the real question was whether countries “would do the right thing”, he said.

It remained to be seen if the China-type fiscal policy to promote economic growth through investment would be used in Africa.

Ethiopia had provided the best model of this policy, while South Africa had consistently been an underspender, a primary reason for slow growth, said Davies.

Davies expected another trend to be the fire-sale of state assets.

“With IMF intervention, comes the sale of moribund state assets.”

Dr. Martyn Davies, Deloitte Africa’s managing director for emerging markets and Africa.

African state-owned companies had been a major ‘handbrake’ on economic growth. Privatisation of these companies was to be expected he said. He also expected a “repricing” of African economies.

“The hype (about African opportunities) has come to an end [during] the last two years.” Because of this, it may become cheaper to invest in these countries.

Regarding external factors in the developed world, Davies said his view on Brexit’s impact is contrary to those of many others.

“A far more commercially [orientated] Britain in Africa could be a good thing.”

However, he is deeply concerned about the future of America’s African growth and Opportunity Act (Agoa). South Africa has, until now, been the primary beneficiary of preferential trade access.

Davies’ concerns stem from Donald Trump’s cancellation of America’s participation in the Trans-Pacific Partnership.

“There is risk coming from the developed world. We need to understand that, exactly the same as we had to in 2008.”

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