In a significant development, the International Monetary Fund (IMF) has projected that South Africa may soon surpass Nigeria as the largest economy in Africa, according to its latest World Economic Outlook.
This revelation comes as South Africa, the most industrialised nation on the continent, sets ambitious goals to achieve a gross domestic product (GDP) of $401 billion by 2024.
Presently, Nigeria and Egypt hold the top spots with GDPs of $395 billion and $358 billion, respectively, at current prices.
However, the IMF suggests that South Africa will temporarily claim the throne in 2024, only to be overtaken by Nigeria once again.
While this projection indicates a potential shift in economic power, experts caution that South Africa’s reign at the top may be short-lived. By 2026, the country could potentially fall to third place, trailing behind Egypt.
This prediction highlights the dynamic nature of Africa’s economic landscape and the fierce competition among its key players.South Africa’s rise to the top is attributed to its well-established industrial sector, which has been a driving force behind its economic growth.
The country boasts a diverse range of industries, including mining, manufacturing, and services, which have contributed significantly to its GDP.
Additionally, South Africa’s strategic location, robust infrastructure, and skilled workforce have attracted foreign investment, further bolstering its economic prospects.
Nigeria, on the other hand, has long held the title of Africa’s largest economy, largely due to its vast oil reserves. However, the country’s heavy reliance on oil exports has made it vulnerable to fluctuations in global oil prices, leading to economic volatility.
In recent years, Nigeria has made efforts to diversify its economy and reduce its dependence on oil, but progress has been slow. Egypt, with its large population and strategic geographical location, has emerged as a formidable contender in Africa’s economic race.
The country has implemented economic reforms and attracted foreign investment, particularly in sectors such as tourism, manufacturing, and infrastructure.
As a result, Egypt has experienced steady economic growth, positioning itself as a strong contender for the top spot.
The potential shift in economic power between South Africa, Nigeria, and Egypt reflects the broader narrative of Africa’s economic transformation.
As countries across the continent strive to achieve sustainable growth and reduce poverty, competition for economic supremacy intensifies.
While South Africa’s temporary rise to the top may be celebrated, it also serves as a reminder of the challenges and uncertainties that lie ahead.
As the African continent continues to evolve, it is crucial for policymakers and leaders to prioritise economic diversification, investment in human capital, and the development of robust institutions.
Only through these measures can Africa unlock its true potential and establish itself as a global economic powerhouse.
This forecast coincides with significant policy changes initiated by Nigerian President Bola Tinubu’s administration, aiming to revitalise the economy.
The measures include removing fuel subsidies and reforming the foreign exchange system to address dollar shortages and enhance tax revenue.
Division chief in the IMF’s research department, Daniel Leigh, emphasised that these reforms should lead to “stronger and more inclusive growth.”
According to Bloomberg, Nigeria and Egypt have also adopted vital economic policies that could propel them back to the top in the near future.
“We believe the IMF’s projections reflect where it believes meaningful reforms will take place,” Bloomberg stated.
South Africa’s potential emergence as Africa’s largest economy in 2024 is largely attributed to the shrinking of Nigeria and Egypt’s GDP in dollar terms following sharp currency devaluations.
However, the long-term trajectory shows Nigeria and Egypt regaining their top spots, with Nigeria taking a strong lead.
“For Nigeria to realise the GDP expansion projected by the IMF, we think oil output must be restored to its potential; insecurity needs to be tackled; and the bottlenecks in the power sector addressed,” Bloomberg added.