Africa Business Communities

Stallone-Obaraemi Samuel: Nigeria VS South Africa – Africa Economic Leadership Beyond GDP

A lot has happened and is still happening in Africa. The pace and speed of development on one hand, and the seemingly daunting challenges of the African continent on the other hand, as against its enormous natural and human resources are all exciting in their rights. Nigeria with it vast population size has continued to maintain its status the giant of Africa and the most populous black nation on earth.

On the far southern end of the continent lies the economically bustling South Africa. With a population of about sixty million, it was adjudged the number one economy of the African continent.  This change in economic status came with the recent rebasing of the GDP of Nigeria. Although this should have been done every few years, Nigeria last rebased its GDP in 1990, which implies that most of its businesses and sectors have for long been under-rated. With the most recent rebasing of the GDP, Nigeria now towers as both Giant of Africa as par population, and the number economy with a GDP of $ 510 billion, overtaking South Africa with a GDP of $384 billion, with a whopping 32.8% gap.

A perusal at the history of both Nigeria and South Africa would reveal that both countries have a lot of commonalities and possible contrasts in both political and economic spheres. For purposes of this study, we shall focus on how both countries stand in relation to each other, economically. 

Diversification

As Cairns (2014) posits, although the economies of South Africa and Nigeria both rely heavily on commodity exports there are variances in the magnitude of reliance.  While crude oil makes up about 95% of foreign revenue for Nigeria, a diversified set of commodities make up 65% of South Africa’s export. Furthermore, the diversification of South Africa is much deeper as they also generate revenue from manufacturing, services and consumer products. Quoting Fatima Vawda and  Nema Ramkhelawan-Bhana,  Cairns (2014) further adduced that the above does not necessarily yank Nigeria from the hinges of diversification.  Although Nigeria heavily relies on Oil, it is only but its seemingly visibly acknowledged  source of heavy income. A closer look has revealed that there is a mountain of economic activities that go on in Nigerian cities. A lot of service-related activities driven by demand, like the massive growth of ICT. Another back fall of the Nigerian economy is the heavy reliance and usage of raw cash as against electronic banking. Interestingly, the banking sector is also making great positive changes.

Demographics

In line with Cairns’ (2014) position,  another major difference between South Africa and Nigeria is the size and mix of their populations. The population on Nigeria is more than 3 times the population of South Africa. The implication of this is that the GDP per capita of  Nigeria is still lower than that of South Africa. In terms of mix, Nigeria has more youths in its population, proportionately speaking, relative to South Africa. According to Fatima Vawda as mentioned by Cairns (2014), while the population of Nigeria is expected to grow by 159% by 2050, South Africa is expected to grow by 25%. This statistics off- course has some positive business potential implications, although the daunting challenges of immense poverty and the concentration of purchasing power cannot be ignored when making business decisions.

Preference as to Business Destination

Until now, South Africa has always been viewed as the-top-of-mind destination for setting up businesses in Africa. But that may not be the case for so long, as many other African countries like Kenya, Ghana etc are asserting their economic voices in the continent. This is further stretched by the emergence of Nigeria a economic continental power, with the rebasing of its GDP. That having been said, while comparing these two countries, one will be making a mistake by trying to simply yank off South Africa.  The business terrain in Johannesburg is by far more advanced and regulated than what we have in Lagos. One cannot take for granted the huge gap in diversification that exists in the South African economy, as against over-dependence on oil that envelops the Nigerian economy.  Another factor to consider is the sophistication of human capital and resources that South Africa has as against the lack of such vital resources in high and very technical and strategic areas of business and economic expertise. Furthermore, the picture exhibited by the rebasing of the Nigerian economy may not necessarily reflect the true economic condition of the country. So in as much as Nigeria is a formidable economic entity in Africa, there is much left to be done to frame the form upon which our economic sword is to be forged.

Economic Industrial Waste and Pollution

It is interesting to read what Fioramonti (2013) said about South Africa and Nigeria. “South Africa is Africa's most polluting country and the 13th worst emitter of carbon dioxide in the world.” Coincidentally, South is not alone. She is with her sister Nigeria. Both are blessed with large quantities of fossil fuel, but have relied extensively economic growths that dependent on energy. Consequently they have depleted their natural resources while also imposing undue risks on human and environmental health. According to Fioramonti, it is worthy of note that although Nigeria’s GDP has been rebased, the gains brought about in terms of the GDP is almost infinitesimal compared head-to-head, to the loss of human capital and natural resources. In fact Nigeria not been increasing it overall wealth. It has continued to record economic losses for decades, and is ahead of South Africa in terms of costs associated to environmental destruction, as Nigeria currently ranks 20 places below South Africa with regard to oil revenue accountability and management. One of the worst countries in the world, in this regard. This is evidenced by the gruesome activities allowed by the government to be perpetrated by multinational companies.

Role model for the continent

But GDP regards these phenomena as "positive" for the economy, with paradoxical consequences for the way in which most African economies are designed and run. No surprise, therefore, that one of the world's least ­sustainable societies is now touted as a role model for the continent.

As the UN recognises, GDP focuses exclusively on the "cash" being generated by market activities (that is, present income and production flow) whereas alternative measures of inclusive wealth highlight the importance of stocks of assets and their changes over time.

The politics of GDP makes countries blind by rewarding short-term consumption and wholesale exploitation of natural assets at the expense of social justice and sustainability.

There is no economic success without sustainable progress, and African economies would be better off if their leaders realised that GDP-based frameworks are very misleading. If South Africa is serious about leading the continent towards a brighter future, it should develop a more comprehensive wealth-based accounting system and help the rest of Africa, including Nigeria, to do the same.

Stallone-Obaraemi Samuel is Senior Human Resources Manager with TNS Global. Follow him @twitter.com/Stupendousstal

 

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