South Africa’s President Jacob Zuma is visiting Nigeria for a two-day state visit seen partly as an attempt to mend fences between the two countries that have a history of diplomatic tensions.
The trip has also been seen as a move to seek out new opportunities for each to help the other weather the economic storms that are buffeting both from all sides.
Zuma is scheduled to address the National Assembly in the capital Abuja, and meet with the South Africa-Nigeria Business Forum, having been accompanied by his ministers of trade and industry, international relations, defence, home affairs, and mineral resources, as well as a contingent of captains of industry.
The relationship between South Africa and Nigeria is complicated. Nigeria sees itself as the continent’s natural leader, as Africa’s most populous country and biggest economy. Nigeria knocked off South Africa as the continent’s largest economy in 2014, with the rebasing of its economy which took it to $521 billion.
But both countries have fallen on hard economic times – for different reasons. South Africa barely escaped recession last year, posting a 1.3% growth in 2015; Nigeria was slightly more vibrant due to its younger and larger internal market, but still posted a 16-year growth low at 3.3%.
South Africa is exposed by its reliance on mineral exports, particularly to China, which have dried up as the Asian economy reorients its economic policy away from raw materials consumption.
And Nigeria is in a fix as oil prices have plummeted 70% in less than two years, leading to a fiscal squeeze which President Muhammadu Burhari has tried to counter by fixing the local naira’s exchange rate and curbing imports.
South Africa is the biggest buyer of Nigerian oil in Africa, shipments of which have more than doubled between 2008 and 2014, according to data from the International Monetary Fund. However, Nigeria doesn’t even feature in the top 20 of South Africa’s export markets – an imbalance that the trade visit may address.
In his first state visit since Muhammadu Buhari was elected Nigeria’s president last year, Zuma may also seek to resolve a dispute that threatens the Nigerian operations of one of South Africa’s biggest companies, MTN Group Ltd. Nigeria’s telecommunication regulator imposed a record $3.9 billion fine on MTN last year for failing to meet a deadline to disconnect unregistered mobile-phone subscribers.
At a joint press conference with Zuma on Tuesday, Buhari in his first public comment on the issue said the telco had abetted terrorism by not cutting off unlisted clients, but that talks would seek to break the stalemate.
Even before that, diplomatic relations between the two countries were strained by xenophobic violence in South Africa last April, in which Nigerian businesses were attacked. Nigeria temporarily withdrew its two most senior diplomats from South Africa at the time.
“These two countries need this competitive kind of relationship, where they cooperate even though they are competing,” Azwimpheleli Langalanga, a visiting research fellow in the economic diplomacy department at the Johannesburg-based South African Institute of International Affairs told Bloomberg.
Nigeria wants “to be taken seriously because they are a serious player on the African continent,” he said.
Still, even as the two jostle for supremacy, and try to assert their “natural” leadership on the African stage, the ground may be shifting beneath their feet.
Last December, in an interview with Mail & Guardian Africa, executive secretary of the UN’s Economic Commission for Africa (UNECA) Carlos Lopes reckoned that South Africa’s time as Africa’s undisputed economic powerhouse was gone – forever – and Nigeria’s current dominance was also shaky.
“South Africa will not get back on top,” said Lopes. In turn, “Nigeria will [soon] have strong competition and by 2050 may have an economy smaller than DR Congo and Ethiopia.”
The reasons for this are two-fold: demographic and structural.
In South Africa’s case, the working age population (15-59) will grow by just 0.3 percentage points, from 63% to 63.3% between now and 2050; while Nigeria will see a 7 percentage point growth over the same period, from 51.5% of the total population in 2015 to 58.4% in 2050.
South Africa also suffers from overfinancialisation of its economy, with an enormous amount of capital concentrated in its financial markets. This means that there is less incentive to invest in the real economy, or create real jobs, because investors can live comfortably off the interest accrued by their financial assets.
But even with a large domestic market, and more robust growth in its working age population, Nigeria’s long term challenge is in its lack of reliable power – by some measures, the country has the highest density of generators per square kilometre, which means huge running costs for businesses, constricting the formal sector.
And at the moment, the immediate headache is the Nigerian currency. The central bank has effectively pegged the naira at 197 to 199 per dollar for a year, banning imports of goods from glass to wheelbarrows and restricting foreign-currency supply.
The currency controls are making it difficult for local businesses to operate, and deterring investors, like Johannesburg-based Truworths International Ltd., which shut its two remaining stores in Nigeria in January. Other South African companies are also reassessing the options.
With the two big economies fighting their short and long-term battles, which African country is likely to benefit from their crises?
Last December, Mail & Guardian Africa assessed the dark horse possibility of Ethiopia or DR Congo taking up positions as the continent’s leading economies. Ethiopia came out tops, being seen as having a much better chance than DR Congo.
But there may also be room for regional economic blocs to aggressively take up a bigger, combined footprint on Africa’s economic stage.
The East African Community (EAC) admitted its sixth member South Sudan last week, a move that was seen as taking the pragmatic, long-term view on the country’s potential, despite its current political and economic mire.
And last June, the Tripartite Free Trade Agreement (TFTA), bringing together 26 African countries and a combined economy of $1.2 trillon was signed. It is expected to come into force in 2017.
The EAC is seen as Africa’s most successful free-trade zone, and the TFTA will be hoping to emulate some of its shine. Africa’s internal trade is just 11%, but just removing current trade barriers as the EAC has done could double the local share of total trade to 22%, according to African Union trade commissioner Fatima Haram Acyl.
The TFTA does not include Nigeria, but the inclusion of heavyweights South Africa, Egypt, Angola and Kenya mean it accounts for 60% of continental output.
It is all a rapidly shifting ground that will serve to remind South Africa and Nigeria that time has not stood still for them as they squabble, and that the only constant thing around these African parts is change.
(Source: MAIL & GUARDIAN AFRICA)