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Powerhouses Nigeria and SA shape the economy of continent

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They make up almost 28% of Africa’s GDP, which makes them the most influential countries in sub-Saharan Africa.

Photo: GCIS – Nigerian President Bola Ahmed Tinubu waves to the crowd during inauguration at the Eagle Square venue in the capital, Abuja.

By Dr Sizo Nkala

President Cyril Ramaphosa attended the inauguration of the new Nigerian President Bola Ahmed Tinubu. Tinubu was elected president in the February 25 presidential elections after garnering more than eight million votes. Ramaphosa’s attendance at Tinubu’s inauguration underscores the warm, cordial relations between the two countries and the willingness to improve the relationship even further.

Picture: GCIS President Cyril Ramaphosa in Abuja, the Federal Republic of Nigeria at the Inauguration of His Excellency President-Elect Bola Ahmed Tinubu.

Nigeria and South Africa are the continent’s two biggest economies with gross domestic products (GDP) of $441 billion and $418bn respectively. They make up almost 28% of Africa’s GDP, which makes them the most influential countries in sub-Saharan Africa. In 2021, trade between the two countries reached $2.8bn with Nigeria’s exports to South Africa making up almost 80% of the total trade. However, the exports are dominated by crude petroleum, which makes 97% of Nigeria’s export value to South Africa.

There is more room for growth in bilateral trade considering that it is only 4% of intra-continental trade. In terms of investments, Nigeria and South Africa are increasingly finding each other. About 120 companies from South Africa have invested in Nigeria with a total capital expenditure of just over $223 million. In 1999 there were just four South African companies in Nigeria. This could be attributed to the return of democracy in Nigeria in 1997 following a long history of military rule.

Some of the South African companies operating in Nigeria include well-known brands such as MTN Group, Mr Price, Shoprite, South African Breweries, SAA and Stanbic Merchant Bank among others. Nigerian companies have also ventured into South Africa, investing in various sectors including in cement, banking, aviation and fintech led by companies such as the Dangote Group, Access Bank Group, Paystack, and Air Peace. Moreover, there are numerous small businesses that have been established by Nigerian entrepreneurs living in South Africa, especially in cities like Johannesburg, Durban, and Cape Town.

The most popular businesses operated by Nigerians in South Africa include restaurants, spaza shops, car dealerships and clothing shops. However, the relationship has not always been smooth sailing.

Statistics SA estimated that about 30 000 Nigerians live in South Africa making up about 2% of foreign nationals living in the country. Nigerian nationals have been stereotyped as drug dealers, human traffickers, and online fraud perpetrators. These accusations have at times led to xenophobic attacks against members of the Nigerian community. The 2019 xenophobic attacks against Nigerians sparked a diplomatic row which saw then Nigerian president Muhammadu Buhari sending a special envoy to relay his concerns about the violence to his South African counterpart, Ramaphosa. Nigeria even pulled out of that year’s World Economic Forum event that was taking place in Cape Town.

Some of the biggest Nigerian artists including Burna Boy and Tiwa Savage withdrew from their scheduled performances in South Africa in protest while a number of South African businesses operating in Nigeria were ransacked by angry Nigerian citizens in revenge attacks. Just last year, the Nigerian embassy in South Africa issued a warning to Nigerian citizens living in the country of a planned attack against foreign nationals, urging them to be vigilant.

It is important that the two countries work together through bilateral structures such as the South Africa-Nigeria Bi-National Commission to stop the xenophobic violence that could ruin an otherwise thriving relationship.

As the regional powerhouses in Africa, Nigeria and South Africa’s voices and actions will play important roles in moving Africa forward both politically and economically. The implementation of the African Continental Free Trade Area (AfCFTA) which was launched in 2021 to increase intra-African trade has been very slow.

As the economic giants of Africa, South Africa and Nigeria will have to lead the way to ensure that the new free trade area becomes a reality rather than a paper tiger. Moreover, the two countries must also use their influence to stem the tide of violent conflicts around the continent in countries like Libya, Sudan, and Mozambique, among others.

Africa’s development prospects will be greatly undermined without peace and stability. Hence, as Africa’s so-called hegemons, Nigeria and South Africa must use their influence to restore peace and stability in the affected countries. Further, Africa must have a co-ordinated and coherent approach to international issues such as the Russia-Ukraine war, geopolitical competition among major powers, and the global economic recession. These external factors have affected Africa’s economic growth and development trajectory through the disruption of critical supply chains.

South Africa and Nigeria are part of the few African countries with sufficient diplomatic weight to shape the continent’s response to these emerging issues. One hopes that since the election season in Nigeria is over and the new administration has taken the reins of power, Nigeria can direct its attention to these pressing issues.

*Dr Sizo Nkala is a Research Fellow at the University of Johannesburg’s Centre for Africa-China Studies.