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Blog : 13 September 2016 (Battle of the Top 3)
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We take a look at the three biggest economies on the African continent. They are Nigeria, Egypt and South Africa. Who is the biggest, and which country's citizens are the best off? Read all about it below.
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Race for the top heats up
The graphic below shows the current size of the three biggest economies in Africa's (expressed in US dollars) from 2010 to 2015. As can be seen from the bar chart, South Africa was the biggest economy in Africa in 2010 and 2011, but was officially overtaken by Nigeria as the biggest economy on the continent in 2012 (based on data obtained from the World Bank).
While South Arica started off on the higher level, its GDP expressed in US dollars has been steadily declining in recent years (it's weak exchange rate and low/no growth in the economy contributing to this). Nigeria showed strong growth from 2010 to 2014, and large decline in its GDP expressed in US dollars in 2015, largely due to the massive hit it's economy and currency took in 2015. The Nigerian economy is heavily dependent on oil, and oil price declines from 2015 hurting their economy badly.
(Many market analysts believe this is why the Nigerian authorities targeted foreign companies such as South Africa's MTN with heavy fines, in order to assist in filling up state coffers that were left a lot emptier due to weaker oil price)
Egypt on the other hand, has seen consistent growth in it's GDP expressed in US dollars from 2010 to 2015, and Egypt officially surpassed South Africa as the 2nd biggest economy in Africa in 2015.
(Many market analysts believe this is why the Nigerian authorities targeted foreign companies such as South Africa's MTN with heavy fines, in order to assist in filling up state coffers that were left a lot emptier due to weaker oil price)
Egypt on the other hand, has seen consistent growth in it's GDP expressed in US dollars from 2010 to 2015, and Egypt officially surpassed South Africa as the 2nd biggest economy in Africa in 2015.
Leader of the pack only tells half the story
While both Nigeria and Egypt has surpassed South Africa in terms of economic size, readers must take into consideration that these two countries populations are far greater than that of South Africa.
In 2015 Nigeria had a population of around 184 000 000 people, Egypt 88 500 000 and South Africa just under 55 000 000. Thus Nigeria's population is 3.3 times the size of South Africa's and Egypt's population is about 1.6 times the size of South Africa's population. So when looking at the size of each country's economy (expressed in US dollars) per peson living in the country the story looks a little different.
The graphic below shows the GDP per capita (expressed in current US dollars) from 2010 to 2015.
In 2015 Nigeria had a population of around 184 000 000 people, Egypt 88 500 000 and South Africa just under 55 000 000. Thus Nigeria's population is 3.3 times the size of South Africa's and Egypt's population is about 1.6 times the size of South Africa's population. So when looking at the size of each country's economy (expressed in US dollars) per peson living in the country the story looks a little different.
The graphic below shows the GDP per capita (expressed in current US dollars) from 2010 to 2015.
So while Nigeria is Africa's biggest economy it falls well short of both Egypt and South Africa when it comes to the GDP per capita. And while South Africa's GDP per capita above has shown strong declines since 2011, up to 2015, Egypt and Nigeria is still very very far away from catching up with South Africa in GDP per capita terms.
South Africa's GDP per capita is 1.57 times that of Egypt's GDP per capita(in 2015) and 2.16 times the size of Nigeria economy (in 2015). This basically implies the average South African citizen is better off than the average citizen in both Egypt and Nigeria. But in recent year's the average citizen in South Africa has been worse of than he was in 2011, and South Africa will need to address this and put policies in place to "stop the rot" that is currently happening. As we showed in our Animated Map of African countries growth rates, South Africa has not exactly matched it's African peers when it comes to economic growth since 2004. It has been under performing for a very long time.
While commodity prices, droughts and a host of other reasons can be used to try and explain South Africa's poor economic growth, other African countries experienced similar issues (if not worse) yet they still delivering much better growth rates.
This immediately raises questions about economic policies that is in place. And there in might be South Africa's problem. To many restrictive policies that were developed with the best of intentions but had unforeseen negative consequences and impacts on South Africa's economy.
While commodity prices, droughts and a host of other reasons can be used to try and explain South Africa's poor economic growth, other African countries experienced similar issues (if not worse) yet they still delivering much better growth rates.
This immediately raises questions about economic policies that is in place. And there in might be South Africa's problem. To many restrictive policies that were developed with the best of intentions but had unforeseen negative consequences and impacts on South Africa's economy.
One of them being Black Economic Empowerment (BEE) (laws designed to get more people from previously disadvantage backgrounds in South Africa into formal employment). What happened is that a lot of skilled labour where offered retirement packages in order to make space for more appointments of previously disadvantaged individuals (since companies were now scored based on their labour force demographics and its ownership and were excluded from competing in government tenders if their BEE "score" was to low). Other skilled labour saw what was happening and a lot of skilled and experienced labour in South Africa emigrated to other countries, leading to the so called "brain drain" in which masses of people left South Africa and took their skills, knowledge and know how with them. And this has to an extent (and we suspect a pretty large one) hamstrung South Africa's economic growth. While we agree such policies are needed to address the past, how they are implemented should be considered more carefully and what knock on effects they might have must be considered and weighed up.
And in recent years the South African government has spent billions on paying "consultants" from other countries to come and assist and provide insights and help in various spheres of government. Money that could have been spent elsewhere to uplift previously disadvantaged peoples lives if certain policies developed by government were a bit better thought through.
And in recent years the South African government has spent billions on paying "consultants" from other countries to come and assist and provide insights and help in various spheres of government. Money that could have been spent elsewhere to uplift previously disadvantaged peoples lives if certain policies developed by government were a bit better thought through.
