The Global Pandemic Is A Time Bomb African Economies Aren’t Equipped To Defuse
The pandemic outbreak is already starting to sound like a broken record. However, the world is yet to heal from it, as does its economies. Meanwhile, Africa’s coronavirus cases—now above 9,000—are but a tiny fraction compared to the impacts on the continent’s rather fragile economies.
By now, it is no longer news that COVID-19 had made its way into many African countries, exempting less than a handful. Some of the continent’s economies were once among the world’s fastest-growing. But no thanks to the virus, things are taking a drastic turn.
What’s worse, African economies are also some of the most vulnerable in the world. With a number of its biggest economies almost choked with debt, the adverse effects of what is one of the world’s most radical pandemics make matters worse.
To contain the coronavirus and stop its spread, some governments have ordered for lockdowns in the most affected parts of their respective countries. Nevertheless, they are disrupting ways of working for many individuals, businesses, and even government agencies themselves.
The lockdowns are necessary given how fast coronavirus spreads. But what is also being inadvertently locked down—or slowed down—is supply chains and demand in global markets for an extensive range of African exports.
Describing the situation as “an unfolding health and economic crisis,” McKinsey— an American management consulting firm—says the pandemic will delay or reduce foreign direct investment (FDI) to Africa.
In its Tackling COVID-19 in Africa report published April, McKinsey said Africa’s investment partners from other continents are redirecting capital locally.
The fall in crude oil prices early March is testament to how African economies are taken by surprise by a negative tick in business. For net oil-exporting countries, the 50 percent decline will leave lost tax revenues, currency pressure and increased liquidity in its wake.
Bear in mind, nonetheless, that oil importing economies and consumers are at an advantage. In Africa, these countries include Nigeria, South Africa, Morocco, Ghana, Ivory Coast, Ethiopia and Ghana, among others.
Africa’s nominal GDP as of 2020 is at USD 2.58 Tn and before the pandemic, it was expected to grow at 3.7 percent. The combined states of the African Union (AU) constitute the world’s 11th largest economy with a nominal GDP of USD 2263 Bn.
But post-COVID-19, the numbers are no longer attractive. McKinsey projects that the continent’s GDP growth would be shaved to just 0.4 percent in 2020, a scenario which it says looks less likely by the day.
“In all other scenarios, we project that Africa will experience an economic contraction in 2020, with its GDP growth rate falling by between five and eight percentage points,” the report said.
Already, the Nations Economic Commission for Africa (ECA) has analyzed that the pandemic will trim off USD 29 Bn from African economies. According to its own report, the outbreak will eat 1.4 percent off the continent’s cumulative GDP.
According to McKinsey, depending on the scenario, Africa’s coronavirus saga could make its economy experience a loss of between USD 90 Bn and USD 200 Bn in 2020. “The pandemic’s spread within Africa could account for just over half of this loss, driven by reduced household and business spending and travel bans,” it said.
South Africa—the worst-hit nation on the continent in terms of COVID-19—has proven itself to be epicenter of development in Africa. Despite just entering another recession, the nation is ruthlessly responding to the virus, establishing drive-through testing centers and mobile medical units.
South Africa now boasts of one of the highest coronavirus test rates in the world, which is an impressive stride towards containing the outbreak and reducing the effects on the local economy. But the same cannot be said for elsewhere in Africa’s coronavirus battle.
“We’ve been through a lot on the continent,” Ms Eziakonwa, the UN’s development programme regional director for Africa, told the AP. “Ebola, yes, African governments took a hit, but we have not seen anything like this before.
The African labour market is driven by imports and exports and with the lockdown everywhere in the world, it means basically that the economy is frozen in place. And with that, of course, all the jobs are gone.”
Factually, Sub-Saharan Africa plays host to high-risk economies. For one, it is because most of them are choked with debt. Secondly, some of them are literally walking on a razors trying to implement their budgets.
Consider that oil-exporting nations like Nigeria and Angola are losing up to USD 52 Bn in revenue due to the oil price tumble. Meanwhile, the UN Economic Commission for Africa (UNECA) has said the pandemic could seriously hinder already stagnant growth.
Africa’s coronavirus battering could not have come at a worse time for the continent’s economies. The gravity is as such that 20 African countries ran to seek emergency financial help from the International Monetary Fund as of March 25th. The IMF said requests from another 10 are likely to follow.
While the IMF in conjunction with the World Bank are hurrying fast to support young, fragile economies, many other challenges prove that Africa is at risk of being dragged into an economic muddle—if strategy does not meet promptness.
Across the continent, corruption remains a huge concern. Most countries in Africa have poor or no public services, an absence which goes a long way to stir street protests that lead to violence. Inequality is also significantly present.
“What we may currently be experiencing is the calm before a heavy and devastating storm. “Unless we move fast we will soon be swarmed. There will therefore be no further warning before the pounding descends upon us,” South Africa’s health minister Zweli Mkhize said on Wednesday, warning against complacency.
The world’s aviation sector is in the middle of its worst crisis since the 9/11 attacks in 2001. And, Africa’s biggest airline is no exception is the fallout. Even before the sector grond to a halt due to travel bans, demand had already manifested more than 20 percent sluggishness due to exposure to Chinese markets.