Africa’s top 4 economies are in trouble

Growth in Africa has outpaced most emerging markets in recent years, but that’s changing fast as a slew of problems beset its leading economies. Here’s what you need to know about sub-Saharan Africa’s big four:

SOUTH AFRICA

The prospects for Africa’s most advanced economy are not looking good. The country is set to grow by just 0.6% this year, according to the International Monetary Fund. It’s one of the slowest growing countries in one of the world’s fastest growing territories.

The rand plummeted 30% last year, and not just because of an emerging market sell-off. Political turmoil has also had a big impact.

Just this month, South African President Jacob Zuma survived impeachment despite the highest court in the land finding him guilty of breaching the constitution over how public money was spent renovating his home. Well known figures from the anti-apartheid struggle are now calling for Zuma to step down.

Chaos in government isn’t helping either. Zuma stunned investors by replacing Finance Minister Nhlanhla Nene with a little known politician. The president then backtracked and asked Nene’s predecessor Pravin Gordhan to take the position in order to stop the rand’s freefall.

The rand has steadied this year, rallying by about 7%. It’s been helped by a broader rally in markets driven by rising commodity prices. As a platinum, gold and coal producer, South Africa is sensitive to shifts in the commodity cycle.

But the country is not out of the woods yet. It’s on the brink of a ratings downgrade that would plunge its sovereign debt into junk status.

Still, investors are showing some renewed confidence, buying up $1.86 billion worth of bonds so far in 2016 — the best start to a year since 2010.

NIGERIA

Africa’s largest economy is buckling under the low oil price. Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country’s budget. For an emerging market that can only mean one thing — slower growth. The West African nation is expected to clock in growth of 2.3%, the lowest rate in 15 years, according to the IMF. Its facing a shortfall of $11 billion in its 2016 budget.

Discussions between Nigeria and the World Bank are continuing on a possible loan or credit facility that would be tied to policy reforms. It has drawn down its currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for companies and two South African businesses have already pulled out.

Index compiler MSCI is considering removing Nigeria from its frontier market index because the restrictions have made it harder for investors to repatriate money. To make matters worse, the country is facing a fuel crisis. Despite being Africa’s largest oil producer, it has never had enough refining capacity, and the scarcity of dollars is making it harder for importers to bring gas into the country. The war against Al-Qaeda linked terror group Boko Haram, which the government has vowed to eradicate, is placing further strain on the country’s finances.

ANGOLA

What was once one of Africa’s fastest growing economies is now on its knees and asking for help from the IMF. Angola is Africa’s second largest oil producer and relies on oil for 95% of government revenue.

After debuting on the international debt market last year, the country appears unable to meet its budget and debt obligations. It has requested assistance from the IMF in the form of monetary support. Angola is also bound to money-for-oil deals with China. It has used oil as collateral for loans from China, and that is further squeezing state finances. The country is set to grow by 3.5% this year, down from 6.8% in 2013, according to the IMF.

KENYA

Kenya’s economy is more resilient and diversified but there’s trouble brewing in its banking sector. Three banks are being wound down by the central bank. Two of the banks failed last year, and a third was forced into the arms of the lender of last resort this month. A fourth bank is being investigated, and analysts believe consolidation in the industry is inevitable.

The East African nation has 43 banks, most of which have overstated profits and are buckling under the weight of non-performing loans and a big fall in deposits. A dozen banks may end up under central bank control as it tries to clean up the sector. All this is weighing on Kenya’s growth prospects: The IMF has just cut its forecast to 6% for 2016, down from 6.8% previously.

South Africa: ANC backs Zuma ahead of impeachment vote

African National Congress (ANC) secretary Gwede Mantashe addresses the media in Johannesburg, April 1. The ANC offered its backing to President Jacob Zuma ahead of a parliamentary debate on whether the president should be impeached.

BY CONOR GAFFEY | Newsweek/

South Africa’s governing party have backed President Jacob Zuma, ahead of an upcoming vote to impeach him.

The motion to remove Zuma from office—which is being spearheaded by the main opposition party Democratic Alliance (DA)—came after South Africa’s top court ruled that Zuma had failed to uphold the constitution in a scandal relating to state-funded improvements on his homestead in Nkandla, in the coastal province of KwaZulu-Natal.

The Constitutional Court ruling concerned Zuma’s failure to heed a 2014 report by Public Protector Thuli Madonsela, which found that the president had “benefited unduly” from upgrades to his home—including a swimming pool and cattle ranch—that cost an estimated 246 million rand ($23 million at the time) and that the president should pay back some of the funds. Zuma apologized live on television on Friday for the “frustration and confusion” the Nkandla scandal had caused and said he would comply with the court’s ruling.

After meeting in Cape Town on Monday, top ANC officials accepted Zuma’s apology and offered the president their full support. ANC General Secretary Gwede Mantashe said that the party wanted to see the Constitutional Court ruling “implemented to the letter” but insisted that the ruling did not mean that the president had broken his oath of office, according to South Africa’s Times Live news site.

Veteran ANC figures, including Ahmed Kathrada —who was jailed alongside Nelson Mandela in 1964 for trying to overthrow the apartheid government—have called on Zuma to resign in the wake of the scandal. Mantashe said that the ANC would engage with dissident voices in the party in the wake of the decision to back Zuma.

The motion to impeach Zuma is to be debated in South Africa’s Parliament on Tuesday, but is unlikely to pass due to the ANC’s massive majority—Zuma’s party controls 249 out of 400 seats in the National Assembly and a two-thirds majority is required by the opposition for the motion to pass. DA leader Mmusi Maimane told Newsweek that ANC assembly members must stand “in defense of the constitution” and vote to impeach Zuma.

Zuma’s potential impeachment gained traction on social media on Tuesday, with numerous South Africans calling for the president to be removed from his post:

South African Parliament to Debate Impeaching President Zuma

South Africa’s parliament will open debate Tuesday on an opposition motion to impeach President Jacob Zuma for violating the constitution.

The Constitutional Court ruled last week that Zuma “failed to uphold, defend, and respect the constitution” by failing to pay back some of the public funds he used to make improvements on his private home.

More than $20 million in remodeling included adding a swimming poll, an amphitheater and a fenced-in area for cattle.

The federal anti-corruption office ordered Zuma to repay the money spent on renovations unrelated to security.

Zuma said in a televised address to the nation last week that he “never knowingly or deliberately set out to violate the constitution, which is the supreme law of the republic.”

He made no mention of the scandal during a rally Sunday to announce aid for drought-stricken areas.

Zuma’s ruling African National Congress dominates parliament and any effort to impeach him will likely fail.

Previous efforts to impeach Zuma or force him from office were also voted down.

How South Africa’s constitutional court put Zuma in his place

BY GARETH NEWHAM | Newsweek/

Jacob Zuma's homestead Nkandla in KwaZulu-Natal, South Africa, January 21, 2014. South Africa's highest court has ruled that Zuma should pay back some of the state money spent upgrading his home. MARCO LONGARI/AFP/GETTY IMAGES — Jacob Zuma’s homestead Nkandla in KwaZulu-Natal, South Africa, January 21, 2014. South Africa’s highest court has ruled that Zuma should pay back some of the state money spent upgrading his home.
MARCO LONGARI/AFP/GETTY IMAGES

“The President failed to uphold, defend and respect the Constitution.” With those words, Chief Justice Mogoeng Thomas Reetsang Mogoeng of the South Africa Constitutional Court finally ruled on the biggest of many presidential scandals since Jacob Zuma came to power in 2009.

The court ruling related to the failure of Zuma to adhere to the findings of the public protector, Advocate Thuli Madonsela, that he breached his ethical responsibility with regards to the excessive expenditure of public money on his private homestead in Nkandla and should repay a portion of it. An amount of 246 million rand ($23 million at the time) was used to enhance security and upgrade Zuma’s residence—which including the installation of a swimming pool and ampitheater—resulted in it becoming one of the most expensive homes in a country where more than half the population lives on 779 rand ($53) per month.

The roots of the saga started in 1999, when Zuma was appointed as deputy president of South Africa. Soon after, he began developing his rural estate near Nkandla in northern KwaZulu Natal, a province on South Africa’s east coast. His financial advisor at the time, Schabir Shaik, assisted with the financing of the project. Shaik was eventually convicted of being in a corrupt relationship with Zuma and sentenced to 15 years imprisonment in 2005.

Fortunately for Zuma, the political winds were changing at the time. Then-President Thabo Mbeki, who was increasingly seen as intolerant and aloof, had become unpopular within the African National Congress (ANC) and its alliance partners South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU). Fired by Mbeki and facing corruption charges himself, Zuma had little option but to go for broke and challenge Mbeki for presidency of the ANC. He partly achieved this by presenting himself as a “people’s president” and building support from ANC structures such as the Youth League and other political leaders whom Mbeki had alienated.

This strategy succeeded, and he was elected as the ANC president at the party’s five-yearly National Conference in 2007. Shortly before the 2009 national elections, the then-acting head of the National Prosecuting Authority Mokotedi Mpshe withdrew the 783 criminal charges of corruption, fraud, money laundering and racketeering facing Zuma. Following the ANC’s election win in 2009, Zuma became the president of South Africa.

Zuma quickly used his presidential authority to consolidate his power across the party and the state. He appointed people he believed would owe him allegiance to powerful positions in security and other key state agencies. In this way he was able to dispense patronage to loyalists and target people he perceived as enemies.

Recently, however, Zuma has come under increasing pressure. Various senior ANC party members have publicly alleged that the Guptas—a wealthy business family that are Zuma’s personal friends and benefactors to a number of his immediate family members—have been able to influence presidential decisions, including the appointment of cabinet ministers. This resulted in senior ANC stalwarts calling for Zuma to step down.

Zuma’s term of office as president is due to end in 2019. However, this Constitutional Court ruling has provided fresh impetus to growing calls for Zuma to either step down or be removed by the ANC much earlier. The problem facing the country is that Zuma is still very powerful within the ANC. Despite the court’s ruling, key structures such as the ANC Youth league and Women’s Leaguequickly released public statements after the Constitutional Court ruling expressing their full support for him.

If Zuma threatens to fight against any internal attempts to remove him, it is likely to result in deepening the already severe divisions within the ANC and its alliance partners. Given that highly-contested local government elections will take place later this year, there is unlikely to be the stomach for this type of fight. Moreover, Zuma is in a tight spot. A court ruling on rationality of the withdrawal of the criminal charges against him in 2009 will be out later in 2016, and if he loses they could be reinstated. There is far too much at stake for Zuma, a man who has consistently put his personal interests ahead of his party and the ANC, to leave power prematurely.

It is likely that the ANC will try and manage this internally to prevent additional damage to the party. It will most likely be the outcome of the 2016 local government elections that will determine Zuma’s fate. If the ANC loses substantial support, Zuma’s exit is likely to happen in the relatively near future. If the ANC manages to retain their substantial majority, Zuma is likely to stay until the end of his term of office. Whatever the outcome, South Africa’s Constitutional Court has reaffirmed its supremacy over a rapacious political elite.

Gareth Newham is the head of the Governance, Crime and Justice Division at the Institute for Security Studies (ISS), an African security thinktank based in Pretoria. The ISS tweets @issafrica.

South Africa’s Guptas hit back in Zuma finance minister row

The wealthy South African family accused of wielding undue influence through its links to President Jacob Zuma says it has been the victim of “xenophobic and hate speech”.

The family took out two pages in a newspaper it owns to deny the allegations and respond to criticism.

President Zuma's son (right) works for a company owned by the Gupta family — President Zuma’s son (right) works for a company owned by the Gupta family

Deputy Finance Minister Mcebesi Jonas has said that he was offered the top job by a member of the Gupta family.

This has led to increasing pressure on President Zuma.

“As the global economic slowdown began to bite, the family became the scapegoat for every calamity and misfortune that South Africa has faced,” the Guptas said in a statement, carried in the local New Age newspaper.

The office of the country’s anti-corruption watchdog, known as the Public Protector, has said it is considering whether to investigate the involvement of the Gupta family in state affairs.

Questioned by the opposition in parliament on Thursday about Mr Jonas’ allegation, Mr Zuma said: “I’m in charge of the government. There is no minister who was ever appointed by the Guptas.”

The Zumas and the Guptas – the ‘Zuptas’

Bongi Ngema-Zuma, one of the president’s wives, used to work for the Gupta-controlled JIC Mining Services as a communications officer.

Duduzile Zuma, his daughter, was a director at Sahara Computers.

Duduzane Zuma, a son, is a director in some Gupta-owned companies.

Mr Zuma’s presidency has been marred by allegations of corruption, cronyism and incompetence, amid a worsening economic situation.

Last year, South Africa was hit by a wave of xenophobic violence against African migrants.

A senior governing party official warned on Thursday that the country risked turning into a “mafia state”.

Gwede Mantashe is the third most powerful person in the governing African National Congress (ANC), and his remarks suggest Mr Zuma may be losing the confidence of influential members of the party as well, correspondents say.

Senior ANC officials are meeting this weekend and they may examine Mr Zuma’s relationship with the Guptas.

The Guptas, who arrived in South Africa from India in 1993, have huge interests in computers, air travel, energy, and technology.

In 2013, there was an outcry after a private jet carrying guests to the wedding of a Gupta family member was allowed to land at a South African military air force base in Pretoria.

The Zumas and the Guptas – the ‘Zuptas’

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