The jury is still out on the effect the collapsing oil price will have on Africa’s 2015 growth prospects, with the answer depending materially on whether a country is an oil importer or exporter. However, the World Bank’s latest ‘Global Economic Prospects’ (GEP) report is less equivocal when it comes to metals and agricultural commodities. It warns that any further decline in the already depressed price of metals – particularly iron-ore, gold and copper – will severely affect a large number of countries in sub-Saharan Africa.

The authors still expect the global economy to grow by 3% in 2015, up from 2.6% last year, and for the region to expand by 4.6%, with South Africa expected to growth far more slowly at 2.2%.

However, they warn that lower growth in emerging economies, to which sub-Saharan African countries export, is a major external risk. “A worse-than-expected slowdown in China, especially, would reduce demand for commodities, putting further downward pressure on prices, especially where supply is abundant.”

China consumes almost a quarter of global energy output and half of global metal supply, but, as its economy has slowed, prices of metals such as copper, iron-ore and nickel have fallen to more than 30% below their 2011 highs. The report expects these prices to stay low during 2015 and 2016 as expanding supply is only gradually absorbed by rising demand.

Any protracted decline in metal prices, however, would lead to a significant drop in export revenues, as well as a scaling down of operations and new investments, which would reduce the growth momentum in a number of African countries for an extended period.

The trade balance in most African countries, including South Africa, would deteriorate under a scenario where the price of metals (aluminum, copper, gold, iron-ore, and silver) was 10% lower than the current baseline and where the price of agricultural commodities (cocoa, coffee, tea, cotton and tobacco) and crude oil were 5% and 30% weaker respectively.

“Countries where metals, agricultural products or oil represents a large share of total exports see their terms of trade deteriorate sharply. A sharper-than-expected and sustained decline in the price of oil from the baseline would, on the whole, adversely affect the sub- Saharan Africa region, even though non-oil importers would gain.”

The steep decline in oil prices since the second half of 2014 could, for instance, significantly reduce inflationary pressures and improve current account and fiscal balances in oil-importing developing countries such as South Africa.

But, in light of the uncertainties, the GEP argues that governments in sub-Saharan Africa should pursue policies that preserve economic and financial stability. “The basic need is to strengthen fiscal positions and restore fiscal buffers to increase resilience against exogenous shocks.”

That is going to be easier said that done in South Africa, which is running large fiscal and current account deficits. The country is also especially vulnerable to potential capital outflows, owing to its continued reliance on portfolio investment.