While economic activity in sub-Saharan Africa is likely to gather momentum in 2023, countries such as South Africa, Nigeria and Ghana will continue to pose a significant risk to the region’s overall performance, according to Fitch Solutions.
This unit of global analytical company, Fitch Group, projects that sub-Saharan Africa’s overall growth will accelerate to 3.6% in 2023 from 3.3% in 2022 – driven mainly by East and Central Africa. The region’s overall growth rate is forecast to increase marginally in 2023, though inflation is set to remain well above the 10-year average.
According to Fitch Ratings, South Africa – which has a BB- ‘Stable Outlook’ rating from Fitch (BB and below is considered a junk rating) – will see its GDP growth slow from 1.6% in 2022 to 1.1%
This is on the back of weakening global growth and monetary tightening and fading support from post-pandemic reopening, with only a mild recovery to 1.7% in 2024.
“Our forecasts assume that power shortages, which according to the South African Reserve Bank estimates held back growth in 2022, will not significantly improve this year and will ease only gradually in 2024.
“While substantial investments in increasing generation capacity are under way, there is a risk that the power supply imbalances deteriorate further with escalating effects on growth,” highlighted a Fitch Ratings spokesperson.
What can be done?
An economist at the NWU Business School, Professor Raymond Parsons, wrote in an op-ed piece for Business Report that there were remedies that could strengthen SA’s economic resilience.
He noted that energy insecurity must be urgently addressed and that boosting investor confidence remained essential.
“If President Cyril Ramaphosa can soon convert his stronger political mandate into rapid pro-growth policies and projects, South Africa’s prospects for job-rich growth will improve this year,” said Parsons.
“The ball, therefore, lies mainly in SA’s court in 2023 to mobilise the policies and projects demonstrating real progress in key economic reforms that can make a positive difference to its economic performance.”
