economic and social effects of the Coronavirus on Africa
Covid-19: which strategies to adopt for coping?
COVID-19 as a global pandemic is a threat that this virus poses to every country in the world. The virus has now been detected in 152 countries, with more than 180,000 infected and more than 7,000 killed. Though Africa remains one of the regions with the fewest cases, the number of countries affected has increased over past week. Nearly 450 cases have been reported in 30 countries, concentrated in northern Africa and South Africa, with deaths. The Economic Commission for Africa (ECA), member of the Infrastructure Consortium for Africa (ICA), through it report dated 18 March 18, highlights several analyses that could help to cushion the economic and social effects of the pandemic.
While the relatively low number of cases on the continent if we compare to the rest of the world, was so far a good news, ECA notes an exponential health impact. Number of cases increased from about 50 confirmed cases on 13 March to over 400 confirmed cases on 17 March, while number of countries increased from 12 to 28 respectively.
« $100bn will needed to bridge funding gap »
Added to this, the crisis may overwhelm weak health care systems on the continent. ECA projects that about 80K people on a 1,3 Bn global population could be affected by COVID-19 and about 3000 deaths at minimum, considering that in half of the affected countries 55.9%, excluding North Africa, live in slums, that mean (2014). In some affected African countries, less than 50% of the population have access to safely managed drinking water services (2017). You don’t have to be « Einstein » to understand that achieving the SDGs and Agenda 2063 severely compromised ! $100bn will needed to bridge funding gap and propel the Decade of Action recommend ECA.
The channels of impacts in Africa
Africa is increasingly interconnected with the rest of the world and the continent started 2020 with a positive economic outlook, as outlined in The ICA report. However the COVID-19 pandemic will have effects on trade, fiscal, banking sector, remittances, tourism, investments and financial markets, social, price, and consumer and business sentiment are all disrupted.
Moreover, the wind of poverty and decline employment that is blowing on the continent will soon turning into a maelstom. ECA indicates that Coronavirus is a new blow to economy Growth expected to drop from 3.2% to 1.8%.
Commodity prices and trade in goods
51% of Africa’s exports go to countries highly impacted by COVID-19. As we know, Africa is a large net exporter of fuels. Exports of fuels tend to fluctuate and closely following evolution of crude oil prices. Over US*65bn losses in revenue are expected, analyse ECA.
The top 10 African exporters of fuels will be hit (based on 2016-18 averages). Average 2016-18 yearly exports revenues from fuels for Africa were US* 166 billion, with WTI average yearly price for the period at US$ 57.6. Commodity prices expected to continue declining. The current decline in oil prices has been far more rapid, with some experts projecting, even more severe price declines than in 2014. Already, crude il prices have fallen by 54 percent in the three months since the start of 2020, with current prices falling below $30 per barrel. The same for non-oil commodity prices. Furthermore, the shock comes at a particularly bad times for three of the largest economies : South-Africa, Nigeria and Angola which already had weak growth outlooks, with South Africa already in recession. COVID-19 could reduce Nigeria’s total exports of crude oil in 2020 by between US 14 billion and US 19 billion (compared to predicted exports without COVID-19). Unfortunately, ECA and ICA analysts expect similar stresses in some other countries.
Decline on remitances and financial sector
Remittances, an important sector of economic activity for many africans countries, will be heavily affected by COVID-19 as countries begin to encourage social distancing. Remittances as a share of GDP exceed 5 percent in 13 African countries, and range as high as 23 percent in Lesotho and more than 12 percent in Comoros, The Gambia, and Liberia. The decline in remittances will impact African SIDS, LDCs and conflict affected countries.
Disruption in access to trade credit will impact pre-financing options of goods exporters and importers. For trade credits, countries will need liquidity help, especially those which are net food exporters to avoid increase in Non Performing Loans (NPLs). Fragilities in the sector leading to economic uncertainties and challenges for public finances.
Poverty, gender and urbanization
The other channel through which COVID-19 will affect economic activity is through poverty, gender and urbanization. In addition, tfemale care-givers will be disproportionaltely impacted. To illustrate, 65% of all nurses are females, while 72% of all doctors are males. With the experience of Ebola, ECA have found that health workers were more likely the other groups to become infected and die after being infected.
While the Health of those affected by the virus is clearly of paramount concern, africans governments must also prepare for the pandemic’s economic effects to ensure that their countries emerge from the crisis stronger than before. Economic Commission for Africa analysis on impact of COVID-19 on the continent is here to help for combat the pandemic. The outbreak should be a call to strenghten global institutions.