Nigeria and South Africa consider themselves as the prominent forces in Africa, given their status as the two largest economies south of the Sahara and their combined population of nearly 300 million people. However, both countries have experienced a decade of stagnation. The question now arises as to which of the two is more likely to recover first.
The recent challenges faced by both countries are well-documented. South Africa, which initially had a relatively successful transition from apartheid in 1994, derailed under the leadership of Jacob Zuma. From 2009 to 2018, Zuma’s tenure led the country into a state of moral and economic decline.
The collapse of state competence affected various aspects, including tax collection and energy production. Economic growth, which had once been transformative for millions in the black majority, slowed down significantly. This left millions trapped in poverty with no clear path out.
Nigeria’s decade of difficulties occurred under President Muhammadu Buhari, whose two terms thankfully came to an end in May. One advantage of both democracies is that their leaders, no matter how ineffective, are limited to two terms.
Under Buhari, per capita economic growth also declined to zero. An outdated protectionist economic agenda failed to deliver the desired results. Despite Buhari’s promises to address terrorism and corruption, violence and corruption persisted.
Previously, most investors would have predicted that South Africa would recover first. In 2018, Cyril Ramaphosa, a leader known for his intellect and political finesse, became president. People believed he could reverse the damage caused by Zuma’s tenure. Nigeria, on the other hand, seemed to be on the brink of failure, with elections marred by corruption unlikely to produce a leader of Ramaphosa’s caliber.
However, that prediction now appears to be inaccurate. Despite its significant challenges, Nigeria has more potential for quick fixes. Regardless of the deep ethnic and religious divides inherited from colonialism, they are easier to overcome than the racial fault lines entrenched by apartheid.
For years, Nigeria’s incentives have been distorted by oil. The country has seen its brightest minds and opportunists thrive more from rent-seeking than productive endeavors. As oil reserves decline and global demand decreases, this resource curse will gradually lift. In the meantime, simple policy changes can unleash Nigeria’s impressive entrepreneurial talents.
Surprisingly, Bola Tinubu, the newly elected president, seems to grasp this concept, despite having a questionable reputation. With the elimination of the costly petrol subsidy and adjustments to the foreign exchange regime, he has made significant strides. These policies are not miraculous solutions, but they can help restore investor confidence. Nigeria now needs a competent cabinet, a coherent security policy, improved tax collection, and increased investment in healthcare and education.
Despite its status as an “African giant,” Nigeria remains tragically impoverished, with a per capita income of $2,200 and a life expectancy of 53. Nevertheless, there are opportunities for improvement. With reasonably sound policies, Nigeria can turn the corner.
The situation appears more challenging for South Africa, as Ramaphosa has discovered. After nearly three decades in power, the ruling African National Congress (ANC) has lost its vision and moral authority. South Africa possesses a more advanced economy, superior universities, and deeper pension funds. Despite Zuma’s efforts, it also maintains stronger institutions, some of which resisted during the era of state capture. With an average income of $6,800, South Africa’s economy produces slightly less output than Nigeria’s, despite having a quarter of its population.
However, averages can be misleading. South Africa has the most unequal income distribution in the world, with a Gini coefficient of 0.63 (0 represents a perfect wealth distribution, while 1 indicates that one person owns everything). In contrast, Nigeria, hardly a socialist paradise, has a Gini coefficient of 0.35.
Apartheid was designed to keep black people poor and enrich white people. The persistence of inequality at 1994 levels is a consequence of both historical burdens and the ANC’s failed policies. As Dele Olojede, a Nigerian author residing in South Africa, states, “South Africa’s wealth is in white hands, and political power is in black hands. It is inherently unstable because of that.”
The ANC no longer enjoys a monopoly on power, and it is likely to be unable to govern alone after the upcoming general elections. The country may enter a turbulent period of coalition politics, and a challenging journey lies ahead.
For South Africa, things may worsen before they improve. In Nigeria, there is a glimmer of hope that positive change may occur sooner.
