You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

Why Egypt beat South Africa

‘It’s not so much about the rise of Egypt but rather the decline of SA: economist Lesiba Mothata.

That Egypt has leapfrogged South Africa to become the second largest economy on the continent, after Nigeria, is sobering but hardly surprising, say economists.

Citing data from the International Monetary Fund (IMF), a KPMG report showed Egypt’s nominal gross domestic product (GDP) rose from $301 billion in 2014 to $331 billion in 2015. South Africa’s total productive output fell from $350 billion to $313 billion over the same period. “Were it not for the rand’s slump, South Africa would not have surrendered its second place during 2015,” said KPMG.

saegypt1

Source: IMF World Economic Outlook 2016

 

Now, further analysis shows that the North African country has also trumped South Africa in terms of GDP adjusted for purchasing power parity (PPP), a comparative value of money which takes inflation into account. “PPP numbers can mostly be used to say which economy is bigger or smaller than the other based on purchasing power. In this case, it is again Nigeria at the top followed by Egypt and South Africa during 2015,” KPMG economist Christie Viljoen said.

“It’s not so much about the rise of Egypt but rather the decline of South Africa,” said Investment Solutions chief economist Lesiba Mothata. He said the shrinking mining and agriculture sectors as well as the beleaguered manufacturing sector have contributed to the South Africa’s economic decline.

Viljoen added that South Africa’s challenges are largely political in nature. “Changes in Cabinet, the fallout from insufficient investment in electricity-generating capacity, problems with profitability at factories and mines due to labour costs, and low business confidence all have a notable political factor to them,” he said.

saegypt2

Source: IMF World Economic Outlook 2016

 

Political turmoil has also weighed on Egypt’s 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.

While the rout in commodity prices has weighed on South Africa, Egypt’s lessening dependence on oil exports acted as somewhat of a buffer against the collapse in oil prices. “Egypt is now a net importer of oil so low global oil prices have had a slight positive effect, especially on its fiscal accounts,” said Jacques Verreynne of NKC African Economics.

Egypt’s GDP growth was also boosted by its larger population of 88.4 million, compared with South Africa’s population of 55 million. “As the economies of countries with larger populations grow, it is inevitable that their GDPs will catch up with South Africa,” Verreynne said, suggesting that South Africa risks falling further down the list of the Africa’s largest economies. However, South Africa’s relatively small population does skew nominal GDP per capita in its favour, placing it ahead of both Egypt and Nigeria.  

“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,” said Verreynne.

COMMENTS   9

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

So, in truth, the headline of this story should read

“SOUTH AFRICA DECLINES IN SIZE TO FALL BEHIND EGYPT.
FURTHER DECLINES EXPECTED AND IMMINENT”.

That orange line for SA should in fact be below the Zero line.
We are already in recession.

Egypt beat South Africa because they have:
1. 38 million more people
2. Closer to Europe, so easier to trade and do business with.
3. Located on one of the busiest trade routes in the world (Suez canal)
4. They have awesome pyramids.

taking a step back what has blown me away is the fact that Egypt actually has an economy. so much for our standard (western) news sources eh …. I thought the place was a wreck post arab spring. the only time the country makes our news is when bombs are planted on planes leaving for Europe or people are being tried for something in relation to Tahir square.

media with an agenda ….. bah

none of that is new though …. what’s changed ?

“Were it not for the rand’s slump, South Africa would not have surrendered its second place during 2015,” said KPMG.

These politically-connected auditors (whose Know-Your-Customer processes failed in the case of the Guptas until the ANC heaved some heavy breaths) WOULD say that, wouldn’t they?
It’s a bit like saying were it not for Apartheid, the rand would not have slumped from R1 = £2 in 1961 to R1 = £4.1 in 1990 (when FW abandoned apartheid) or from R:£ = 5.38 in 1994 to 20+ now.

Well, we DID have Apartheid and we DO have Corruptheid. Only getting rid of them will save the currency and save the country.

you may or may not know. During apartheid the rand was not freely traded, there was a lot of exchange controls. At the end of apartheid SA was broke and heavily indebted after years of propping up apartheid. Part of the failure of the ANC lies in the fact that they had to start by paying off debts that were accumulated by the apartheid regime. I bet the NATS never told you this in the 90s.

The biggest factor again is that GDP is calculated using the $ and over the last year, the Egyptian Pound depreciated 16% and the rand 29%. We need a bit of responsible reporting instead of pointing to population numbers etc. here, I didn’t even study economics. :/

Just shows you most commentators simply fit the story to fit their preconceptions

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / PODCASTS SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: