Recent figures have only strengthened our belief that the challenges facing Africa’s three largest economies are growing. Nigeria’s botched response to low oil prices has caused the currency to plunge on the parallel market, which will spur inflation. The country’s fiscal position is deteriorating rapidly, but the government remains committed to counter-cyclical policy. We believe that growth in South Africa slowed further at the end of 2015, and what meagre expansion there was remained dependent on the consumer sector. With inflation and interest rates picking up, this is unlikely to be sustainable. Angola’s economy is notoriously opaque, but consumer spending is probably suffering as the currency has been devalued and interest rates raised. Economic indicators in Africa’s smaller economies are more mixed, but nothing in the latest data presents a compelling reason to question our view that Africa’s economy will remain weak in 2016.
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