The World Bank has lowered its 2016 growth forecast for Africa to 3.3%, from 4.2% previously, after the continent expanded by only 3% in 2015; the slowest pace of growth since the 2009 global financial crisis and well below the 6.8% levels experienced by the continent between 2003 and 2008.

The bank’s latest Africa’s Pulse publication, released on Monday, indicated that the weak 2015 performance, as well as the 2016 downward revision, could be attributed largely to the plunge in commodity prices, which had dramatically lowered the terms of trade for the continent’s oil and minerals exporters.

“The fall in commodity prices represented a significant shock for the region, because of the large share of commodities in exports: fuels, ores and metals account for more than 60% of the region’s exports compared with 16% for manufactured goods and 10% for agricultural products,” the bank outlined.

Commodity price drops would also lower Africa's terms of trade in 2016 by an estimated 16% and the “impact of this shock is expected to lower economic activity by 0.5% from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively”.

Growth expectations for 2017 had also been reined in to 4.5%, from 4.7% previously, and the bank argued that commodity exporters across the region would need to adjust to a “new, lower level of commodity prices”.

“Furthermore, with commodity markets, and external conditions more generally, likely to be less supportive than in the past, the region will also need to focus on developing new sources of growth.”

GROWTH: SA’s BIG UNKOWN

For South Africa, the slump in commodities had helped motivate the bank’s recent downward revision of the country’s 2016 growth outlook to 0.8%.

Senior economist for South Africa Marek Hanusch said that, while there could be some improvement in commodity prices in 2016, mining was still unlikely to be a source of economic expansion during the year.

South Africa’s weak growth performance was also likely to be a key factor in determining the outcome of the current review of South Africa’s foreign currency sovereign rating by the ratings agencies, which would make pronouncements in June.

The country's rating was at risk of being junked and, besides South Africa’s debt and fiscal balances, the growth outlook (together with the influence that the politics of the day could have on the implementation of growth-supportive policies) would be critical factors in shaping the final determination.

Hanusch said government seemed to be taking serious steps to deal with debt levels and to moderate spending, but indicated that growth remained the “big unknown”. However, he also stressed that South Africa’s domestic currency rating remained two notches above junk, while foreign currency denominated debt comprised only 10% of total debt.

Nevertheless, South Africa, along with the rest of the continent, would need to focus on developing new sources of growth, especially in light of an expectation that commodity prices would remain low and volatile for some time.

For South Africa, the deterioration in the business environment would depress investment growth in 2016, the bank said, adding that high unemployment and interest rate hikes would also limit private consumption.

However, Hanusch felt there was still potential for government to take actions to stimulate the services sector and for the country’s manufacturing sector to begin taking greater export advantage of the 16% decline in the value of the rand against the dollar since January 2015.

Newly appointed chief economist for Africa Albert Zeufack argued that Africa was at a “critical moment”, with more and more countries facing fiscal, monetary and balance-of-payments stresses.

“So Africa is going through tough times, we need to take the time to assess, without complacency, the difficulties the continent is going through. But we also need to take it as a moment of opportunity,” Zeufack said, highlighting in particular the opportunities arising from Africa’s rapid urbanisation.