COVID-19 AND THE AFRICAN ECONOMY
It seemed that the African continent after recording a strong economic finish in the year 2019 with a GDP of $2.58 trillion - a growth of 3.7% - was on an upward trajectory towards turning the economic landscape of the continent around. With the growth in SMEs (playing a key role in the growth and causing an incremental reduction in the problem of unemployment), effective governance, and diversification of the economy, a stellar performance was expected over the next five years. Then the Corona Virus hit the globe and everything changed.
In Africa, the measures used in the process of containing the transmission of the COVID 19 since was announced as a global pandemic by WHO and the first case being recorded in the continent up to date, is likely to create major economic shocks as a result of retardation of key economic sectors such as tourism, air transportation, manufacturing industries, and trade.
The Economic Commission for Africa (ECA), in a new report on the coronavirus pandemic, says over 300,000 Africans could lose their lives due to COVID 19. This, as the pandemic continues to impact on the Continent’s struggling economies whose growth is expected to slow down from 3.2% to 1.8% in a best-case scenario, pushing close to 27 million people into extreme poverty.
The report also states that Africa’s small and medium enterprises risk complete closure if there is no immediate support. Furthermore, the price of oil, which accounts for 40% of Africa’s exports has halved in value, and major African exports, such as textiles have crashed. Tourism, which accounts for up to 38% of some African countries’ GDP, has effectively halted as has the airline industry that supports it. The COVID 19 crisis threatens to disproportionately hit developing countries - Income losses are expected to exceed $220 billion, and nearly half of all jobs in Africa could be lost.
Vera Songwe, Executive Secretary of the ECA says that “The economic costs of the Pandemic have been harsher than the direct impact of the COVID-19. Across the continent, all economies are suffering from the sudden shock to the economies. The physical distancing needed to manage the pandemic is suffocating and drowning economic activity,”
On mitigation, Ms Songwe in a report outlines several concerted efforts to keep trade flowing, especially in essential medical supplies and staple foods, with a strong policy push to fight the urge to impose export bans. It also proposes that intellectual property on medical supplies, novel testing kits and vaccines must be shared to help Africa’s private sector play its role in the response.
Ms Songwe also notes that the private sector needs liquidity, but it also needs partners. “That is why we call on the international community to support by injecting more liquidity into our economies,” she adds.
She stresses the need for never-before-seen assistance through innovative financing facilities, stating, “We must build back better, by ensuring that we are climate-conscious in rebuilding and by leveraging the digital economy.”