Association for Free Research and International Cooperation

Coronavirus Pandemic a looming threat to Africa’s economy

19.04.2020
Article from AFRIC Editorial
The coronavirus pandemic is one of the leading human calamities ever recorded in history. It is clear that nations all over the world are scrambling and to contain the outbreak and its impacts. Slowly taking its toll on the globe, it has far-reaching economic ramifications. From the start of Coronavirus, the Africa continent was one of the continents least affected, but in recent times the storyline has changed tremendously. Currently, in Africa, the outbreak has already disrupted millions of people’s livelihoods, including poor households, private and public sectors, and small and informal businesses. The pace of this disruption is possible to accelerate in the weeks ahead. The look of the pandemic has made everyone aware that no country or continent is exempt. Until all countries are safe no country is safe.

The rate and global spread of the virus and its associated sense of panic have heightened across the financial, health, political and social circle. Plunging massive holes in the global economies to its core after the Second World War and the recovery from the 2008 economic crisis. With 16,573 Confirmed cases, 2,823 recovered cases and 790 confirmed death tolls in Africa, just in the space of two months. Although social distancing, quarantine, stay-at-home, closed national and regional borders, travel bans restriction are all in place the case curve has refused to flatten. But the most affected part in this equation is the African economy which is at this point sinking. Economists have predicted that the Sub-Saharan Africa region will see economic growth reverse and nose-dive to between -2.1% to as low as -5.1% this year due to the global pandemic crisis.

Shaky Economic takes a worse shape

The economic fiasco will cost the region between $37 billion to $79 billion due to a sharp decline in output growth with its region’s key partners including Europe, China, and the USA as they are equally in abrupt fall in commodity prices especially in crude oil. The full or partial lockdown of major cities including Accra, Nairobi, Abidjan, Lagos, Johannesburg among others in the region has revealed the reality of how these major cities feed and live off the flourishing existence of informal sector which is one of the major backbones of the continent’s economies

Africa’s three largest economies, South Africa, Angola, and Nigeria are already struggling to stand on their economic feet with a sharp decline of oil, natural resources and metal price and weak investment growth. According to Brooking institution, crude oil prices have dropped 54% in the last three months with current prices at $30 per barrel, with natural gas and metal prices dropping by 30% and 4% respectively, natural resources including cocoa have devalued to 21% in the last few days. It is clear that COVID-19 will push Sub-Saharan Africa towards its first recession. Hafez Ghanem, World Bank Vice President for Africa highlighted the pandemic is testing the pulse of the societies and economies across the world and African countries are likely to experience the worse, the region is likely to hit hard. However, one of the noted sectors, highly affected is the Informal sector.

According to The International Labour Organization, Sub-Saharan Africa 66% of total employment comes from the Informal sector: In Kenyan, there are 11.8 million people in the informal sector compared to 2.4 million in the formal sector. This sector doesn’t understand the language of VAT, taxation, bank transactions, etc yet they hold the realities of Africa’s economies for the longest time creating more than 80% jobs in the region. 

The informal sector business will end up losing its customers as the lockdown measures are in place. There is a low demand for their goods and a decline in their stocked products which may go to waste. Woodworkers who make suitcases and boxes for school children may be affected because schools are closed.  Dressmakers, event planners, transport operators, workers in agriculture will equally face their share of loss which can lead to food security. The World Food Programme’s analysis for West-Central Africa reveals that 2019/2020 has proved a positive agricultural season with high productivity with cereals, however with the restriction on internal and external borders, limit market access, and market closure, in the long run, can lead to food shortage.

Most African Governments considering this have provided policies and responses to help buffer the informal sector financially. There has been the establishment of funds to support informal workers without losing their live hood as their job requires them to be on-site. Also, Governments have provided lenient restrictions in the lockdown period for the sector example market women can still open and run their business but for a specific period. Some of the workers in the informal sector have also found creative ways to survive especially those in the fashion and dressmaking industry, as they producing masks using local fabrics to support communities and public to fight against the virus, beverages companies have changed the production of beers and drinks into the production of hand sanitizers diversifying their production and maintaining workers. Entrepreneurs have launched into producing creative items to fight the virus, an example in Ghana, a young entrepreneur produced solar-paneled mobile sinks that can be placed outdoors that can reinforce the washing of hands measure in public.

It is agreed that the pandemic is not only a Government battle, as wealthy citizens have joined forces to support the needy of the society, with food, water, essential home items, donating medical supplies to hospitals and funds to support the informal sector. Also, The World Bank has given a beacon of hope, as they have also deployed up to $160 billion to financially support developing countries over the next 15 months especially for businesses

A crisis, an Opportunity

Despite the health and economic fright generated by the coronavirus, a glimmer of hope is beginning to appear for the African continent. Countries and political leaders are riding the sleds asking for a solidarity abolition of the continent’s international debt. China says it is ready to collaborate with the international community to alleviate the debt of African countries. This decision will help indebted countries to meet their challenges in this context of the covid-19 crisis. Chinese Foreign Minister Wang Yi said a temporary freeze on African countries’ debt payments as part of an agreement between the main G20 countries is expected this week. With an investment of 145 billion dollars, of which 8 billion should be repaid this year, China is the first lender in Africa.

No vaccine has been found yet for COVID-19, however, a trial vaccine has been tested to know its impact against the virus. In recent times, two French doctors suggested on air that the developed vaccines should be tested first in Africa, this sparked a lot of controversies and rage in the region with the agenda that Africa would not be used as a guinea pig for test vaccine trials. This led the doctors to retract their statements. 

COVID-19 outbreak is a wake-up call for Africa to reflect on our region’s policies, ideologies, and structures and find ways to make it a success. In our health sector especially, the over-reliance on foreign health care services and products, solicit for international support for medical equipment and supplies. This is the only reason why two French doctors can make such a statement about the continent. There could be a silver lining in this chaos, an opportunity. If African governments could see beyond the pandemic.  This crisis can give Governments, policymakers the opportunity to start thinking about how they could use the crisis to shape a more, sustainable, and prosperous vision of the future.

Policies and structures are needed to invest in our own. Our own health sector, herbal medicines, and knowledge that can be developed into global standards invest in our health professionals as they are playing a critical role in this period, develop plans on how our economy can diversify so it will be able to withstand intense shock, especially the informal sector. It is time for the Government to rethink the system of the informal sector, to accord them benefits like retirement packages, and provide structures that can help them flourish. At the end of the day, the informal sector has been the longest sector that has shaped the African economies; the sector that has always remain the unsung hero of Africa.

Article from AFRIC Editorial

Photo Credit : google image/illustration

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