Egypt sees opening to become largest African economy

South Africa, Nigeria, and Egypt continue their competition for the status as the largest economy in Africa, with South Africa recently moving back to first place among the three, according to recalculated International Monetary Fund (IMF) data. South Africa had previously fallen to rank third after Egypt moved up to second according to the IMF’s World Economic Outlook report for April.

The US dollar value of South Africa’s GDP stands at $301bn, while Nigeria’s GDP stands at $296bn and Egypt’s at $270bn. The relative ranking between the three changes depending on exchange rate movements, and all three economies have seen their national currency depreciate against the dollar—by 50% for the South African rand, 61% for the Nigerian naira, and 25% for the Egyptian pound.

While the differences in exchange rate prove a pedantic exercise in comparison, the real difference came when Nigeria moved to include a large portion of its informal sector into the formal economy, including 13 new factories, which resulted in its rapid rise as the largest economy in Africa.

According to the Egyptian Centre for Economic Studies (ECES) the informal sector in Egypt is estimated to be 65-70% of the formal economy—accounting for EGP 1.2-1.7tn across 18m establishments and 40,000 factories, as well as an estimated EGP 300bn in lost tax revenues for the government.

Investment decisions, or policy, are not dictated by the top economy in Africa ranking—what matters to investors are the future economic prospects of each country, the potential for growth, and the GDP per capita increase indicating an increase in the standard of living.