00:00Now, the war in Iran is reshaping the outlook for African economies, with rising oil prices
00:05creating a mix of winners and losers across the continent. While we see major exporters like
00:10Nigeria who may benefit, many countries, including South Africa, are facing higher energy costs,
00:16inflation pressures, and growing concerns over fuel and fertilizer supply. IMF Africa director
00:22Abibi Selassie also warned that oil importers will continue to face rising costs and severe
00:28consequences. Oil importers, particularly non-resource rich and fragile states, face
00:35deteriorating trade balances, rising living costs, and limited buffers. The human consequences are
00:42almost certain to be severe. This latest shock comes on the heels of the dislocation caused
00:48by the sharp and unprecedented decline in official development assistance.
00:55Now, joining us to discuss this all is David Cowan, Citi's senior economist for Africa
01:00here in studio with me. David, thank you so much for being with us. We've heard quite a
01:04bit from the IMF spring meetings this week. If we take a look at where sub-Saharan Africa's
01:09economic recovery, though, was, would you say at this point it has retreated or potentially
01:15stalling based on your own research? I would say it's stalling. I think we're saying that whereas
01:20we'd had a projected pick-up in growth from, say, 4.5% towards 5%, we're really stuck in
01:25this 4.5% level, which actually by global standards is quite good, right? But I wouldn't
01:29say at this point we're retreating. If you think about it on balance in Africa, what you're
01:34really asking is, am I, for example, downgrading South African and Egyptian growth a little bit
01:39as oil importers, but then would I offset that by upgrading Nigerian and Algerian growth,
01:44for example, right, as oil exporters? So I think by the time you put all that balance
01:48together, we end up pretty neutral in the scale of it. Although clearly, as you highlighted,
01:52there's winners and losers in this whole process. And before we get to the winners and losers,
01:57I wonder if you think the pass-through to this potential stalling of growth is because of
02:02some of the fuel pressures? Is it fertilizer? Where have you seen it?
02:06Okay, so I think the two things you'd separate out. What's curious on Eastern and Southern Africa
02:10is that, yes, fertilizer is imported from the GCC, but in some ways Africa has got lucky in this
02:16crisis. The crops in Southern Africa are already in the ground. The fertilizer has been used. East
02:20African crops are already planted, right? So they will come up in the future. That means the pressure
02:25actually jumps back. There's a little bit of pressure, for example, in South Africa, Zambia,
02:30Zimbabwe on winter wheat crops, but really the worry is when we come back to planting in October.
02:36The other thing that's quite curious about it all is we've seen African governments respond in a huge
02:41number of ways in how they pass through the petrol price. And at the moment, I would say the majority
02:46are sort of hoping that they're not passing through the full impact of the global price.
02:51They're going to take a fiscal hit. And if the oil price comes down in the second half of the
02:55year,
02:56then they've got away with some of this, right? But at this point, that variety, somewhere like
03:01South Africa is passing it through. Zimbabwe passed it through quite aggressively. Nigeria.
03:05Kenya hasn't raised its petrol price. Cote d'Ivoire hasn't raised its petrol price yet, right?
03:09So this variety is one of the things that we have to work through in this situation.
03:14Let's talk about Nigeria, because you call it an unambiguous winner, but potentially that comes
03:20at a cost. And we heard that this week with some of the leaders at the IMF. What does that
03:25mean in
03:26your view? So essentially, again, sometimes I don't know whether we've hit a lucky crisis,
03:31given Africa's been through a lot of crisis. But essentially, if you're going to open a huge
03:35new refinery, Mr. Dangote's refinery, which is a 650,000 barrel capacity at a time when there's not
03:42only a global oil shortage, but merely more fundamentally this petroleum product shortage
03:46that people are waiting for, that really puts you in a strong position. Moreover, you know,
03:52Nigerian domestic demand may be 300,000 to 400,000 barrels. So we're seeing that export. And in fact,
03:59if you put all the West African refinery together, the Cote d'Ivoire, the SIR in Cote d'Ivoire or
04:03Ghana's
04:04Temer, actually Africa has some slight surplus in petroleum products. And we've already seen
04:11Dangote ship some of that to other African countries, right? Togo, Ghana, Benin, Ethiopia.
04:16So in a way, we are slightly protected from that. But Nigeria is particularly insulated.
04:21And they just opened a big new fertilizer factory, too.
04:24What is the cost that it comes at for Nigeria? Because we did hear Cardoso also speaking about
04:29it. So the cost is a little bit that, yes, they, for the first time, Nigeria has changed its whole
04:34approach to life. Historically, Nigeria had a heavily subsidized petrol price and shortages.
04:40Now it's the only country not facing shortages. But the cost is a rise in the petrol price. And then
04:45that will impact on consumption. And remember, over the years, Nigeria's oil sector has become much
04:51smaller as a part of the economy. So although you see growth in the oil sector, it doesn't influence
04:57it as much as, say, the service sector, where incomes consumption is impacted by higher petrol
05:03prices. So what then would change your outlook? I mean, we're talking about potential talks to
05:09extend the ceasefire. There's still a lot of unknowns, right?
05:13I think what changes our outlook most is if the oil price is still at $90 plus in September,
05:19October. We're still based on the assumption that we have a $100 oil price in March, April,
05:26maybe May. Then we're assuming June, July, August, it starts to ease off. And if it eases off to
05:31levels of 70, 75, that's broadly acceptable for some African countries. I actually argue 60 is a fair
05:39price in Africa for oil importers and exporters, right? It sort of balances it off. So it'd be
05:44slightly in favor of exporters. So Key will be looking over the next few weeks at how this
05:48progresses. How this progresses. All right, we'll leave it there with you. David Cowan,
05:51Citi's Senior Economist for Africa, joining me here in studio. David, thank you so much.
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