South Africa is lagging behind Africa

South Africa has been the second slowest-growing economy in Africa over the last decade, consistently underperforming the continent’s average economic growth rate. 

This is according to a report from McKinsey’s Global Institute titled Reimagining Economic Growth in Africa, released in June. 

Over the last decade, only the Central African Republic has grown slower than South Africa, with Africa’s most developed economy growing at less than 2% per annum on average. 

McKinsey now classes South Africa as a “slow grower” when ranking the continent’s economies. It ranked alongside Africa’s ten worst economies and had the slowest growth among all major economies. 

This is partly due to the long-term decline in commodity prices over the last decade. However, McKinsey points out this trend may increase with demand due to the global renewable energy transition. 

More concerning is that Foreign Direct Investment (FDI) in South Africa fell at the fastest rate of all African countries, apart from Nigeria. 

According to the global consulting firm, South Africa “has consistently underperformed Africa’s average growth rate over the last 20 years,” with corresponding below-average investment, exports, and development rates. 

In 2004, South Africa’s contribution to the total African GDP was 25%. At that stage, it had the largest economy in Africa. Since then, its contribution has plummeted to only 14%.

The reason is simple – South Africa’s economy grew at a lower rate than the rest of Africa.

The country’s sluggish economic growth has even seen it lose its crown as Africa’s largest economy to Nigeria.

South Africa’s economic struggles have very real consequences, including high unemployment and a rise in absolute poverty.

The biggest factor behind the country’s economic woes this year is an unstable power supply and subsequent load-shedding.

However, South Africa still dominates the continent economically, making up 32% of all exports to African countries at $35 billion – five times higher than second-placed Nigeria. 

South African corporates dominate the continent, with 40% of all companies with revenue above $1 billion headquartered in the country. 

These corporates are also growing faster than their counterparts from other African countries.