South Africa's influence over its neighbours is waning

September 17, 2006

By Quentin Wray

Singapore - South Africa's economic dominance of sub-Saharan Africa has waned since the early 1980s, when it accounted for more than 40 percent of regional output, but the country still accounts for over one-third of regional purchasing power, the International Monetary Fund (IMF) has said.

In its latest regional economic outlook, published a week ago, the fund said South Africa's economy was three times larger than second-placed Nigeria's and almost 40 times that of the region's median economy, Mali. South Africa had accounted for more than one-third of all economic growth in sub-Saharan Africa since 1980.

Since 2000, its direct investment in the rest of the continent had doubled, hitting about $3.7 billion (R27.3 billion), or 11 percent of all South African foreign investments.

South Africa was the third-largest investor measured by the number of companies in a UN survey of foreign investment in manufacturing and services in 15 African countries. Investment was "heavily concentrated" in neighbouring countries and accounted for only about 2 percent of the continent's stock of total inward direct investment. This was less than 1 percent of the size of the African economy, the bank said.

It noted that investment by South African companies was becoming more diversified geographically and was relatively diversified by sector. South Africa's presence in the traditional resources sector was strong, but companies had also been investing in nontraditional sectors such as retailing, telecommunications, and food and beverages. Despite this, trade linkages with the rest of the continent, apart from its immediate neighbours, remained small at 2.8 percent of total trade.


Trade was, however, three times higher in the period 1994 to 2005 than during the isolation that characterised the preceding decades. The IMF said South Africa imported more than it exported to the region. Imports from sub-Saharan Africa were about 4 percent of total imports, of which almost half - mainly oil - were from Nigeria.

Looking at regional prospects, the bank said average growth for sub-Saharan Africa was projected to accelerate to 5.9 percent in 2007, primarily because of rising petroleum output in a few oil-producing countries. This compares with growth of 5.2 percent for the continent and 5.1 percent globally.

Growth in South Africa is expected to converge towards the "potential growth rate of 4 percent", the bank said. This ties in with projections by South African economists.