JOHANNESBURG Jan 23 South Africa could soon
lose its status as Africa's biggest economy to Nigeria, but in
the race to be the continental powerhouse being biggest may not
Nigeria, Africa's No. 1 oil producer, will complete a
rebasing of its gross domestic product (GDP) by next month, its
statistics office says, which economists estimate could expand
the size of its economy by between 20 and 60 percent.
This exercise, which has missed a string of previous
deadlines, looks set to transform Nigeria into the continent's
most important economy measured in terms of GDP size.
With a current economic output of around $290 billion, the
West African country - whose population is more than three times
the size of South Africa's 51 million - already boasts faster
While it has expanded by an average of 7 percent annually
over the past decade, South Africa has averaged 3 percent
growth, held back by rigid employment laws and recurring labour
But even if it slips from the top spot, South Africa can
still claim the crown of being the more diversified and
sophisticated economy. Its financial markets are among the
world's most advanced and while its $350 billion economy is
smaller than Mexico and Indonesia, its stock market is larger.
For Nigeria, the aim of the rebasing exercise is to change
the base year for calculating output to 2008 from 1990 to
reflect sectors of the economy that have since grown in
importance, such as telecoms and IT.
However, it is still heavily reliant on oil exports,
accounting for some 80 percent of government revenue, and an
enlarged GDP will do little to immediately improve life for
nearly 100 million of its citizens who live on less than $1 a
While agriculture and power sector reforms would improve
Nigeria's fortunes, turbulent politics and a resilient and
bloody Boko Haram insurgency in its north take some of the shine
off its positive growth story.
Whenever it happens, Nigeria overtaking South Africa as
Africa's economic top dog is "kind of everything and nothing,"
said David Cowan, Citigroup's Africa economist.
"It is everything because you are then the largest economy
in Africa so there's a lot of kudos attached to that. But the
reality remains that, on the ground, for every Nigerian there's
no difference ... South Africa can still call itself the most
sophisticated economy in Africa."
South Africa's expected retreat in the GDP ranking will
nevertheless be a big psychological adjustment for a country
that has often taken its lead position for granted.
It may also have geopolitical implications, raising
questions about whether South Africa should be the sole African
representative in the G20 and the BRICS group of the most
powerful emerging economies, which includes Brazil, Russia,
India and China.
Nigeria has been included in the freshly coined MINT group
of emerging economic giants, along with Mexico, Indonesia and
Michael Power, investment strategist at Investec Asset
Management, likens South Africa's situation to that of the
United States, whose economic power is expected to be superseded
by faster-growing and more populous China eventually.
"Just as the United States is contemplating the prospect of
what it's going to be like to be No. 2 in the world, South
Africa (will) have to contemplate what it's going to be like to
be No. 2 in Africa," he said.
The rise of Nigeria has taken many South Africans by
surprise, said Kevin Lings, chief economist at Stanlib, as the
country, burdened with an image of corruption and violence, is
often portrayed negatively in the media.
"Every time I've raised this discussion in the last year,
that it looks inevitable that Nigeria will become Africa's
biggest (economy), most audiences are shocked," he said.
"People have had a certain mindset about the role of South
Africa. They haven't updated that in terms of more recent
The GDP rebasing is likely to enhance Nigeria's appeal to
investors looking for high growth and alternative markets, while
South Africa, with its anaemic economy and faltering currency
may appear less compelling, analysts say.
"South Africa's good infrastructure and sophisticated
services industries provide a much easier business environment
for investors than Nigeria, but relatively low growth rates,
market size and saturation are areas of concern that may turn
investment to Nigeria," said Dianna Games, chief executive of
business advisory Africa @ Work.
Still, Simon Freemantle, a senior analyst at Standard Bank,
believes multinationals looking for a base from which to expand
into the continent will continue to choose South Africa given
its effective financial and legal systems.
For investors who may need to seek redress when things go
wrong, its enduring, more independent and transparent
institutions are a plus.
Decades from now, the gap in size between the two economies
will be even wider. By 2050, Nigeria's GDP will be just under $6
trillion in today's money as its population heads towards 400
million, predicts Charles Robertson of Renaissance Capital.
South Africa, by contrast, would have 57 million people and
a $1.5 trillion economy.
Yet that would give Nigeria a per capita GDP of about
$15,000, to South Africa's $27,000, underscoring the huge
development challenges faced by the former.
"Even with the very good trajectory that we see for Nigeria
it's going to take a long time for 170 million people to benefit
from this," said Robertson. "It's the same in China. You've
still got hundreds of millions earning virtually nothing and
that's after an extraordinary 30 years."