Recession in South Africa means risks but also opportunities for Mozambique

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Recession in the South African economy will have negative effects on Mozambique, but it also offers opportunities, especially in the agricultural sector, Eduardo Sengo, the executive director of the Confederation of Economic Associations of Mozambique (CTA), has told Lusa.

Source: Recession in South Africa means risks but also opportunities for Mozambique – analysts | Club of Mozambique

“The stagnation of the South African economy “is a great risk [for the Mozambican economy], but there are opportunities,” he said.

Seng pointed out that the depreciation of the rand and the closure of companies will result in remittances being worth less and jobs losses for Mozambicans working in South Africa.

“If the South African economy continues to slow down, it affects us: from the point of view of remittances, South Africa is a very important country for Mozambique,” he told Lusa.

Furthermore, a rand devaluation may reduce the value of Mozambican exports to South Africa.

Despite the negative effects, Sengo thinks that Mozambique can take advantage of the current state of the South African economy, mainly as regards the demand for agricultural products caused by the drought there.”[Agricultural products] are in great demand, because they are a consumer giant, and this demand is no longer being satisfied as it should be,” the CTA executive director said.

Sengo notes that agricultural production in South Africa fell 30% in the second quarter of this year, and Mozambicans in the agricultural sector have moved to seize the opportunity.

Also on the positive side, the fall in the value of the rand may accentuate the downward trend of inflation in Mozambique, since the country is very dependent on South African food products

But not all analysts think like him.

Yasfir Ibraimo, an economist at the Institute for Social and Economic Studies of Mozambique (IESE), thinks that recession in South Africa could result in higher food prices in Mozambique.

“The fall in production and reduced demand in South Africa will generate inflationary trends, especially for basic products, as agricultural production is falling,” he told the Mozambican daily A Verdade.

In addition to the figures, there is a social side linked to the economic recession.

Hélio Filimone, a Mozambican journalist who in July published a book called “Xenophobia in South Africa: Mozambicans as emblematic victims of the phenomenon”, said that recession in the South African economy places Mozambicans there increasingly at risk of being the target of attacks on foreigners.

“The hostility of South Africans to foreigners in times of crisis is intensifying and the situation is boiling in times of economic recession,” Filimone told Lusa.

South Africa is in recession for the first time since 2009 after two quarters of economic contraction, the country’s statistics agency said.

According to official data, the South African economy fell by 0.7% in the second quarter of 2018, following a 2.6% contraction in the first quarter. A country is considered to have fallen into recession after two or more consecutive quarters of economic contraction.

Source: Lusa