BusinessDay

Protests expose frailties of Africa’s two largest economies

It was South Africa’s turn lately to expose the frail economic conditions haunting Africa’s two largest economies and its ugly consequences.

Hiding behind protests against ex-leader Jacob Zuma’s imprisonment, hoodlums looted and vandalised private properties in Zuma’s home province of KwaZulu-Natal and Guateng, the province that houses the country’s biggest city, Johannesburg.

More than 1000 stores including those of Pepkor, Spar and Mr Price, were looted last week and retailers had lost an estimated 2 billion rand, according to Busisiwe Mavuso, the CEO of Business Leadership South Africa, which represents many of the country’s biggest companies. “The disquiet about Zuma’s arrest is being used as an excuse for sheer, opportunistic looting,” Mavuso said.

At the heart of the civil unrest in South Africa, these past few days and Nigeria last year is a rotten economy that is bleeding jobs and has led to discontent among the people.

Africa’s most industrialised economy contracted the most in a century last year and lost 1.4 million jobs as restrictions to curb the spread of the coronavirus weighed on output and forced some businesses to cut wages, reduce staff or permanently shut down.

In Nigeria, the economy contracted by the most since 1984 last year. The World Bank predicts an additional 7 million will be rendered poor this year in the world’s latest poverty capital, where 87 million people already live below $1.90 a day.

Read Also: How insecurity cost Nigeria’s economy $10.3bn in 2020

Nigeria and South Africa are also on the list of the top five countries with the highest unemployment rate globally, with Nigeria in second and SA a close third. While 33 percent of Nigeria’s labour force was unemployed as at the end of 2020, 32.6 percent of South Africa’s labour force was unemployed.

Nigeria is however battling higher inflation than South Africa. At 17.75 percent as of June, Nigeria’s inflation rate is over 3 times the 5.2 percent inflation rate in SA.

The economic hardship in both countries has been exacerbated by the COVID-19 pandemic and a third wave of infections is now threatening to slow the pace of any recovery.

Live video footage revealed looters brazenly walking past TV cameras carrying armfuls of stolen goods at a popular mall in Soweto, the Jabulani Mall, last week.

Mams Mall in Mamelodi was also gutted and shops there were fully looted.

Liquor stores were among those affected following the ban on alcohol by the government as part of its health measures to curb the COVID-19 pandemic. Shops of companies like pharmacy group Clicks and food retailers Pick n Pay and Shoprite were also affected in the protests.

A tale of two countries

Only last year, protests against police brutality in Nigeria were also hijacked by looters and arsonists who took the opportunity to steal and vandalise private and public property.

People carted away various items from television sets to food items during the widespread looting of shops and malls in Nigeria. Months later, many of the affected stores are yet to recover.

The stores at Circle Mall, Lekki, in the country’s commercial capital of Lagos, among which include Shoprite; retail pharmacy chain, HealthPlus, and children clothing store, Ruff n Tumble, remain shut after being attacked by the looters.

Both Nigeria and SA are battling with similar tensions: social discontent, rising jobless population, violence, corruption amid the coronavirus pandemic, which is worsening the situation.

Unlike Nigeria whose over-reliance on oil has held back growth, SA is the most industrialised country on the continent. Yet, the number of South Africans who can get a job is increasing as the construction and trade industries shed jobs.

South Africa’s official unemployment rate has been above 20 percent for at least two decades, even though the economy expanded by 5 percent or more a year in the early 2000s.

Analysts cite an education system that does not provide adequate skills, strict labour laws that make hiring and firing onerous and apartheid-era spatial planning that make it difficult for job seekers to enter and remain in the formal workforce as part of the problem.

The pandemic has exposed long-standing structural weaknesses in the South African economy that have progressively worsened since the global financial crisis of 2008 and 2009, the World Bank said in an economic update.

Same applies to Nigeria that has been stuck in what Moody’s Investors Service calls a low-growth cycle since 2015 following the collapse in oil prices.

A slowdown in foreign direct investment has dealt a tough blow on Nigeria’s economy, ravaged the local currency and caused inflation and unemployment to rise even faster.

Economists recommend far-reaching economic reforms as a possible solution to the challenges both countries face.

The two economies would benefit from measures to preserve macroeconomic stability, revitalise the jobs market by improving the investment climate to build a better and more inclusive economy after the pandemic.

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