Political reform has created new prospects for policy change in southern Africa – but there are headwinds, according to recent analysis conducted by UK-based BMI Research. Commenting on the changing political landscape in South Africa, Angola, Zimbabwe and Nigeria, BMI warns that political infighting – particularly before elections – and rising commodity prices could stymie economic reforms.
The researchers are however optimistic about the outlook for reform in Angola and Zimbabwe. Newly elected Angolan president Jõao Lourenço has impressed potential investors with his proreform rhetoric and personnel changes in state oil company Sonangol, the central bank, and the head of the sovereign wealth fund, according to BMI.
But they predict long-term challenges for the country as a result of short-term political pushback and rising global oil prices. They also expect that Angola’s weak business environment and lack of diversification will result in slow growth in non-oil sectors. Commenting on the prospects for South Africa following the appointment of Cyril Ramaphosa as the country’s new president, BMI believes the scope for meaningful reform will remain limited in the face of a strong populist presence in the party’s leadership.
“Without early investor optimism being met with structural reform, Cyril Ramaphosa will continue to face weak investor sentiment,” according to the report. They also identify a large wage bill and inefficiently operated State-Owned Enterprises as further challenges. And in terms of Zimbabwe, BMI cautions that the country’s challenges should not be overestimated. They point out that public sector salaries (accounting for 90% of the public wage bill) and the country’s $1.8bn foreign debt prevent meaningful reform. They add that postelection cuts to expenditure and revenue growth will encourage international re-engagement, but only if proven effective in the long term.
“The biggest concern remains how the country will address the process of de-dollarisation,” a BMI spokesperson says. “This will require the support of the international community in the day-today reality of increasingly expensive transactions.” They warn that overreliance on the US dollar will not be mitigated by increased investment as the country’s import dependence will sustain outflows of hard currency. In Nigeria the higher oil prices and an increase in production in the crude oil sector have generated real GDP growth – but BMI suggests that further progress is required before the sector sees the boon in investment it requires. They warn, however, that the upcoming election could distract from a reform agenda in the country.
Quote: The scope for meaningful reform in South Africa will remain limited in the face of a strong populist presence in the party’s leadership. – BMI “
