Size matters; at least when it comes to diplomatic clout and economic growth.

South Africans might be tempted simply to shrug and accept the new reality that Nigeria's economy is actually sixty per cent larger than ours following last week's rebasing of their gross domestic product (GDP) - but that would be a mistake.

Yes, we must agree that countries with larger populations will, given long run economic convergence, become larger economies. And we should admit that the largest countries have more diplomatic influence, regardless of the individual wealth of their citizens.  We can also acknowledge the anecdotal evidence that that shows that bigger countries have tended to grow faster in recent years.

Given these realities it was a matter of time before Nigeria became the biggest economy in Africa. In recent years they have developed quickly on the back of oil revenue, the emergence of a consumer class, and the growth in telecommunications and the film industry. The rebasing exercise shows, for the first time, just how big those sectors have become in Nigeria.

The mistake would be to think that it is acceptable that we lost the label of "largest economy in Africa" so soon, and the prominence that position bestows in the minds of investors.

Because if our government had managed our economy better over the past two decades it would have been years, even decades, before we were knocked into second place.

Twenty years ago, around the last time the Nigerians rebased their GDP, our economy was more than seven times the size of Nigeria's. But over the past 20 years they have averaged economic growth of 6,4%, almost double South Africa's average rate of 3,3%.

And things have got worse under President Jacob Zuma's ANC which has presided over a decline in average economic growth to 1,9% over the past five years, even as Nigeria's growth accelerated to 7%.

This is the real reason we have been overtaken as Africa's largest economy so soon. It makes our government's response to the development particularly ironic.  

Instead of accepting the Nigerian challenge as an incentive for reform Finance Minister Pravin Gordhan and Trade and Industry Minister Rob Davies welcomed the development and suggested it would allow Nigeria to play a more prominent role in international institutions.

This response, somewhere between spin and denial, is simply not good enough. Economic mismanagement by this government has seen us squander our advantage as the only African economy with a manufacturing base to speak of, in the second fastest growing region globally.

I recall a conversation I had a few years ago with an employee of a French multinational who was posted to Abidjan in 1994. He said when his company saw the television coverage of our first democratic election they decided to prepare themselves for competition from new South African competitors moving north. Twenty years later, he said, they are still waiting.

This is not to say that several South African companies - primarily in the telecommunications, banking and retail sectors - have not successfully expanded into the rest of our continent. This growth has been to the benefit of the companies themselves and the countries they invested in. The point is that those few have done it almost entirely without the support of the ANC government.

Over government has spent twenty years paying lip service to the potential of our continent in speeches about the "African Renaissance" but has neglected to do the hard work of opening up trade with our neighbours, overhauling the diplomatic corps, and building the infrastructure our companies need to access the African market.

As a result we are now seriously outplayed on our own continent. Data from 2011 ranks South Africa as the tenth biggest exporter to the rest of Africa. Spain, South Korea and the Netherlands all exported more to Africa than we did in that year.

In no other region of the world would you expect the largest economy to be anything other than the biggest exporter to the region. Think Germany in Europe, Brazil in South America, or China in Asia.

Of course, as of last week we are no longer the largest economy on our continent so perhaps the point has, unfortunately, become moot.

South African underperformance has been met with an emerging dynamism across our continent. Nigeria, despite its problems with corruption, poor infrastructure and chronic instability, has a significant size advantage.

Because of returns to scale in economic performance Nigeria's population of around 170 million - more than three times larger than ours - gives them an economic advantage too.

Over the past ten years those countries with larger populations, and therefore larger internal markets, have registered higher economic growth than smaller countries. Between 2000 and 2012 the 10 countries with the largest populations grew at an average annual GDP growth rate of 5%. The next 10 largest countries grew at an average of 4,5%, and the next 10 at 3,3%.

An investor looking for a market approximately as big as Nigeria's would have to target the whole of southern Africa - including South Africa, Mozambique, Zimbabwe, Botswana, Zambia, Namibia, Angola and Tanzania. If they invest in Nigeria, they can access the same number of consumers but need to deal with one set of regulators, one tax authority and one national government.

Nigeria's new economic status also brings political clout. It may even raise questions about our place as the African country in the G20 or the BRICS.

This is the real effect of last week's rebasing. It hasn't magically made Nigerians wealthier, but it has given their nation a prominence they can use to grow their diplomatic influence and attract the investment they need.

Thankfully, while we have relinquished our claim to continental leadership under the ANC, it's not too late to win it back.

One of the quickest ways to kick-start economic growth in South Africa is for government work to open up more trade with Africa:

Our diplomats should be held to account for the amount of trade they promote. When he was ambassador to Argentina, former DA leader Tony Leon increased South African exports by 78 per cent in three years. We should expect all diplomats to do the same

Exchange controls need to be abolished as a signal to investors that we are open for business. This will also help to turnaround the situation where African companies  - like the Nigerian oil firm Seplat and cement giant Dangote - are looking to list in London rather than on the JSE

We should make it easier to trade across borders by simplifying import-export and customs procedures

The seemingly-stalled plan for a grand free trade area on the continent should be prioritised to help us approximate some of the economic benefits that size brings

A SADC-wide tourist visa should be introduced, on the condition that border security and fraud prevention is enhance, to promote regional development

We must dust off the work Trevor Manual was asked to do in 2010 to promote infrastructure development on the continent, and particularly the "North-South corridor" to Tanzania, and redouble our efforts to get this done, and

A "South African Peace Corps" should be established, similar to the US programme introduced by John F Kennedy, to build closer ties with the rest of the continent and open the eyes of young South Africans to the potential of Africa.

All of these proposals will help South African companies to better access, and contribute to, African growth. They acknowledge the importance of healthy competition, but also the fact that Africa's economy is stronger when our countries are more open and connected. Finally, they are all front-and-centre in the DA's Plan for Growth and Jobs - our offer to the voters in this year's election.

Tim Harris MP - DA Shadow Minister of Finance.

A version of this article first appeared in Business Day.

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