Can Africa’s Economies Survive Global Economic Turmoil

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Ghana and South Africa both delivered budgets this week against a backdrop of a struggling global economy.

The state of our economy is troubling, but we will fix it. It will require some sacrifices, truthfulness, transparency and discipline to.

Raise the revel you needed. The government proposes to increase evetererate by half a percentage point in twenty five twenty six and by another half a percent a point in the following year.

Both countries have big holes in their budgets to fill. But will the spending cuts and tax rises be enough and will the public accept them?

So the democratic Allians will not be supporting the budget in its current form and therefore the budget being table to does not have a parliamentary majority.

On today podcast, we'll look at what these big economies on two sides of the continent tell us about Africa's growth story in twenty twenty five. I'm Jennifer Zabasaja and this is the Next Africa Podcast, bringing you one story each week from the continent driving the future of global growth with the context only Bloomberg can provide. Joining us today is Bloomberg Economics Africa Economists.

That's von Mango Evon. Thanks so much for being here.

We haven't had you on the podcast, so appreciate you making the time.

Let's just start with Ghana.

This is the first budget for the new Mohamma administration. What was Finance Minister Cassio Atto Forsen faced with when putting his plans together and did he achieve that?

So the challenge of the John Muhamma administration which has just come into office is that they've inherited a fiscal miss, essentially the inherited in economy with high inflation deficits that will wider than anticipation and they're going to have to correct this. Their plan is quite ambitious. Their plan to turn the primary deficit of three point nine percent into a surplus of one point five percent of GDP this year.

How realistic is that considering the situation that Gama is in right now.

So our primary view is they may all likely miss that because as I mentioned, that's quite a significant fiscal adjustment. It requires a significant cut in spending, which they have pledged to do. As well as a significant increase on the revenue front. On the revenue side, they've increased levees to the mining sector and taking advantage of the higher

So what is the target that economics is expecting.

We expect there to be a small primary deficit or at least close to zero on the primary deficit side, would it still be a significant improvement from a deficit that was around four percent of GDP? In order to arrest that increase in public debt, you need a primary surplus and that's what this administration is trying to achieve. So the goals are commendable, but it will probably take them longer to achieve them than they're currently suggesting.

How much do you think gold could potentially be a contributor to that surplus that the government is trying to achieve. We are seeing record prices for gold you mentioned mining. How much could that really move the need of for them?

Well, it's an important contributor, considering it's one of their biggest exports, also in this time when prices are quite significantly high. However, it is not the only driver of revenue. You need revenue to be performing well in other parts of the economy. Wouldn't lean too much on the gold sector getting them out of this fiscal mess that they're in.

Everyone what's Bloomberg economics expectation for the CD because a lot of focus is being paid to currencies across the continent right now.

So the sceity is likely to continue to come under pressure. Keep in mind, though they've been successful at restructuring their debt domestically, they're still haven't got complete access to international capital marketers yet, so that restrains how much foreign capital can flow into the country, which implies the currency will likely continue to come under pressure as they go through this fiscal consolidation plan.

So the country is not necessarily out of the woods yet this new administration.

Oh not as yet. Of course, the big hurdle has been jumped, which is debt restructuring, which is a big positive. But this administration, as they've said themselves, have a big job to do in terms of correcting the fiscal challenges that they found. We do think that if they remain on this path, by the time they reached the end of their four year term, we should begin to see a turnaround on the fiscal front and that should begin to reflect in a much more stable currency and lower inflation.

Okay, so somewhat positive there for at least this new administration.

That's only a few months in. Let's turn to South Africa.

It's also the first budget for this new g and U coalition government. A lot of different views on the budget that we got on Wednesday. Talk to us about your assessment of what was presented.

Okay, So, as you saw, the budget was delayed by three weeks and the main reason is the two big parties in the ruling coalition government disagreed on the VAT increase. What we did see is a compromise. Instead of a two percentage point increase in that to seventeen percent, this new budget proposes fifty basis points hike over the course of two years, so essentially a percentage point over the

I've also been struck evon by a lot of the discussion around tax collection here in South Africa and how the ideology around that potentially needs to change in the government. Do you think it's the inefficient way to collect revenue? Is it what South Africa needs right now, this economy needs.

I think the Soufric Revenue Service has actually done a much better job of tax collection in recent years, particularly under Edward Kristwitter, who was appointed I think about four years ago, so that has improved. Of course, there's more that can be done there those that are evading taxes.

Considering that you said that there's a growth problem, are there any green shoots though you see positives for the economy moving forward?

Well, yes, so there has been an increase in the allocation made to infrastructure. I think the plan is to spend about a trillion brands on infrastructure over the medium term.

Ivan stick with us when we come back, we'll dig into how the markets have reacted and what these budgets actually tell us about the state of the African economy.

We'll be right back. Welcome back today.

We're digging into Africa's economy after two crucial budgets were revealed this week that was in Ghana and South Africa. We have our Africa economists Evon and Mango still with us. So Ivon, what do you make of the reaction that we've seen to the budgets, especially in the markets.

So in the case of South Africa, they is caution and the main way and for that is the second biggest party in the coalition. I said they're not going to pass the budget in its current form. So while a budget has been read, we essentially don't have a budget as it is and that will be decided over the coming weeks. Also keep in mind this is the first time we have a coalition government, so this is all new. The minister mentioned to himself he's a new territory,

And I wonder if we think about what is happening in the global economy, there is a lot happening for the markets and for investors globally to digest. I mean, there are developments in the Middle East, there's developments with Ukraine, and there's also, of course the the trade war that has been really started by President Trump and igniting over the past few weeks. Is that having an impact on the African economy yet, based on your research.

That's a good question. I actually dedicated a bigger section of my reaction to the budget to geopolitics than I normally do, given that, yes, it is weighing on what's happening in our part of the world. So for South African particular, even before the budget, we've seen us AID cuts that's impacted not just South Africa, but the rest of the continent. In terms of what the impact has been, it's particularly the health sector that's been affected In a

To the aid cuts. The rest of the continent.

Yes, there are countries which will be hit hardest, particularly the lower income countries such as Malawi, and in that case they're going to have to scramble for resources from other development partners in order to fill that gap. The other area of concern, of course, is that it is an important source of foreign exchange, particularly for smaller economies, so in those countries you could see pressure on currencies.

Yeah, and there's even talk in the US about a potential recession. Now, I mean that wasn't even part of a few months ago.

Von.

Let's just close out with your outlook for twenty twenty five. I recognize that this is a very difficult question, considering there is a lot of headwinds that a number of these economies on the continent are facing. Do you see some of the bigger economies South Africa, Ghana and Nigeria.

Though, starting to pick up in growth.

So in South Africa's case, yes, although growth disappointed last year, kim in weaker than we'd anticipate it at zero point six percent, would I expect to pick up? We're still optimistic. We're our growth forecasts at one point nine percent. And the reason for that upside is largely due to the return to more reliable electricity supply, so certainly in South Africa's case, which is the biggest economy on the continent,

That is Evone Mango Bloomberg Economics Africa Economists, and you can find her research on the Bloomberg terminal.

Now Here are some of the.

Other stories we've been following across the region this week. The Rwanda backed M twenty three rebel group has consolidated control over the two largest cities in the Eastern Democratic Republic of Congo, effectively setting up a proto state in the mineral rich region and forcibly recruiting soldiers and civilians.