Deglobalisation expected to impact world growth, commodity prices, and African economies
The slowly unfolding deglobalisation sentiment holds long-term consequences for Africa which can not be ignored, according to a leading in-house economist of a large South African bank.
Speaking at a recent investment summit hosted by Nedbank Namibia and Simonis Storm Securities, Nedbank Group Chief Economist, Dennis Dykes said deglobalisation is negative for world growth, impacting commodity prices which in turn has a significant effect on African economies dependent on the extractive sector.
Dykes, who also served on the Nedlac Public Finance and Monetary Policy Chamber, believes that deglobalisation is a threat because the benefits of globalisation have been unevenly distributed.
“Deglobalisation could also see a decline of trade and demand, diminishing interdependence and integration between nations and multinational organisations,’ he said.
Furthermore, rising public debt in African countries has an adverse effect on growth. “An additional complication is Africa’s increased debt burden,” he said. “Policy missteps and rising debt have not helped the continent. External and government debt will be back at concerning levels if it is not backed up by improved growth potential.”
According to the Brookings Institution, African debt is on the rise, with the median debt ratio as a percentage of gross domestic product increasing from 31% in 2012 to 53% in 2017.
In her summit presentation, Simonis Storm Economist, Indileni Nanghonga said that the Namibian economy will suffer severely if a global recession sets in. Other perils she listed are currency volatility, reduced investment, reduced skill and technology transfer, and higher trading costs. All these can result from deglobalisation.
She recommended that Namibia should manage its debt better, and in addition, advance and create certainty in the policy space, improve the efficiency and productivity of the Central Procurement Board, reform unproductive state-owned enterprises, promote effective work ethic in the government and eradicate corruption. She further warned that rising youth unemployment is a serious problem.
Local political and economic analyst, Dr Hoze Riruako added that the emergence of populism in the world’s political system has an enormous impact on such systems that are still following the traditional political route. This results in “erosion of democratic practices, unusual politics, mob politics and strongman politics.”