The countries of central and southern Africa represent a population of 1,2 billion people and according to projections of
United Nations, one in four people will live on the subcontinent by 2050. As reported by
SACE focus,
during 2015 the GDP of Sub-Saharan Africa grew by 3,4%, the lowest rate recorded in the last fifteen years. And the latest forecasts for the current year point towards
a further slowdown in economic activity, around 3%, pending recovery starting from 2017-18.
What is worrying is not only the slower economic speed, but a generalized worsening of the macroeconomic picture, especially in those markets that most depend on the exploitation of raw materials. All accompanied by the persistent unsustainability of the external debt. In recent years, many countries have accumulated a further deficit, even at less favorable conditions than in the past since they contracted on the international capital market, through Eurobond issues, or on a bilateral basis, in particular through agreements with Asian counterparts. Here then is that difficulties have increased in honoring foreign debt maturities, thanks to the depreciation of national currencies.
In this picture they stand out three negative effects on the activity of Italian exporters and investors in the region:
– in the case of commercial agreements or financial partnerships that have not yet been signed, one may come across slowdowns or postponements of negotiations, both with the public sector and with private counterparties, especially as regards sectors that are not considered strategic;
– if the contracts are already in place, attention should be paid to the greater difficulties in honoring payments by African customers, taking into account the lesser availability of hard currency;
- the currency shortage also affects the activity of the Italian investors themselves, who may experience delays and impossibilities in the processes of convertibility and transfer of their profits abroad.
The difficulties of Sub-Saharan Africa can be traced back to three strongly correlated elements:
commodities, China and foreign capital.
Approximately two-thirds of the region's total exports are attributable to energy and mineral resources and metals, compared to 16% for manufactured goods and 10% for agricultural products.
Oversupply, uncertainty about demand in key emerging markets and stronger dollar continue to push commodity prices lower. And the African oil & gas exporting countries, particularly Nigeria and Angola, are paying the price for the repercussions, also due to the negative effects of currency restrictions on private sector activity. At the same time, other countries in Southern Africa (e.g. Botswana, South Africa and Zambia) and West Africa (Guinea, Liberia, Sierra Leone) have also had to deal with deteriorating prices of exported non-energy mineral resources, such as iron , copper, diamonds and platinum.
The second factor is
China, which since 2011 has become the region's first trading partner, for an amount of trade flows today equal to about 200 billion dollars, a level comparable to trade between Sub-Saharan Africa and the EU and about four times that with the US. The potential repercussions of the Chinese slowdown on African growth clearly emerge from these numbers. Beijing's push towards
internal growth more oriented towards consumption and services it translated into a drop in imports from the African subcontinent, in particular of energy and mineral resources. Particularly suffering are those markets which, by choice or necessity, depend for most of their exports (over 40%) on the Chinese counterpart, such as Angola, Sierra Leone, Mauritania, Zambia or the Democratic Republic of the Congo.
In past years, the wealth of commodities and positive financial returns had attracted large multinationals and international investors to Sub-Saharan Africa.
Today, in the context of low commodity prices and a gradual strengthening of the dollar, foreign capital flows to Sub-Saharan Africa are progressively decreasing. Among the reasons, a lower propensity of European banks for local lending, but also a drop in Eurobond issues by African countries, which fell to 9,2 billion compared to 12,9 billion in 2014.
The number of issues has decreased following conditions that have become more expensive, in some cases almost prohibitive, where the risk that African counterparties will not honor their obligations has soared.
The economic slowdown in the region has also impacted the commercial activity of our companies in the region.
In 2015, Italian exports to the area stopped at 5,7 billion euros, a decrease of 7,9% compared to the previous year. Analysts expect a further decline in Italian exports to the area for 2016, albeit more attenuated. It must be kept under observation
the decline between 25 and 40% of exports, in particular of capital goods, towards African economies more linked to oil, such as Nigeria,
Angola and Republic of the Congo.
However, during 2015, Italian sales to those economies less dependent on the three factors mentioned above grew by double digits, such as the Ivory Coast (which with a +59% becomes the third destination market in all of Sub-Saharan Africa), Kenya and Senegal. This second group of countries today represents a new driving force for African growth, which is less dependent on factors external to the continent. And it is precisely these new markets that represent the greatest opportunities that Italian companies must aim for, also for offset declining sales in larger economies, as South Africa, Nigeria and Angola, which however alone will continue to represent over 50% of total Italian exports to the region.
