Coronavirus Highlights Africa’s Problems
The spread of the coronavirus has impacted the global economy differently. In Africa, there have been over 2 million cases confirmed, compared to the 60 million recorded worldwide. Although these figures may not be an accurate representation of how the continent is coping with the spread of covid-19, due to the lack of testing in certain countries, the economic effects are threatening Africa’s economic success. In July, the United Nations Conference on Trade and Development (UNCTAD) released a report titled “Assessing the Impacts of COVID-19 on Africa’s Economic Development”. UNCTAD estimated that Africa’s GDP will drop by 1.4% if the world enters a deep recession. They explain that the reason for the contraction is due to the fall in revenue of primary commodity exports and loss in tax revenue that limits the government's ability to invest in public services (Gondwe, 2020).
The coronavirus has hit Africa hard in sectors that have contributed to the rapid economic growth of the continent. As the prices of primary commodities such as oil decline due to the fall in global demand, so does the export revenue for countries that rely on these commodities as a source of income. The UNCTAD has also projected this year a fall in total merchandise export by 17% (COVID-19: A threat to food security in Africa | UNCTAD, 2020). Tourism is another sector that contributes to the African economy. It makes up around 7.1% of Africa's GDP and contributes over €150 billion to the African economy according to the World Travel and Tourism Council (WTTC). However, due to the travel restrictions caused by the spread of coronavirus, international arrivals for tourism have contracted by 69% between January and August (International travel plunges 70% in the first eight months of 2020, 2020). This is equivalent to a loss of $55 billion between April-June announced by the African Union in July (Pandemic costs Africa travel, tourism almost $55 billion, 2020).
What can be done economically to recover the African economies whilst containing the spread of the coronavirus? The spread of the coronavirus pandemic has highlighted the growing inequalities between and within different countries, the lack of access to clean water, and the poor health infrastructure.
First, African countries must invest in their healthcare. This means improving infrastructure, the quality of services, and training more health professionals. Furthermore, with the spread of coronavirus, governments must step in to provide access to clean water, handwashing facilities, and to hand sanitizers that are effective in preventing further transmission. Investing in healthcare is beneficial in the future as it can prevent deaths from preventable diseases and treatable injuries during normal times. Improvements in the quality of healthcare can also promote economic growth since laborers, when ill, can now be treated properly by hospitals. As a result, their output will rise as they are able to work for longer with a healthier body, leading to increased economic output. Currently, the quickest way for African countries to recover economically is to contain the spread of the virus by investing in healthcare, as it is unclear when the COVID-19 vaccine will be ready for distribution to the continent or whether nations can financially afford to vaccinate its citizens.
Another way for African economies to recover would be to invest in retraining and re-skilling programs. Some of the jobs made redundant due to the pandemic were jobs that may be replaced by AI. It financially does not make sense to encourage people to retain these jobs, which are not sustainable in the future. Hence, the government must increase its efforts to increase the mobility of workers by equipping them with necessary skills, rather than to pay workers to stay at jobs that may not exist in the future. As the UN reported in 2018 that 85.8% of employment is informal in Africa, the retraining and re-skilling programs should be seen as an opportunity to decrease the informality of the economy, transforming it into a formal one (Nearly two-thirds of global workforce in the ‘informal’ economy – UN study, 2020).
These two proposals sound great. But they both require money to finance them, which some countries simply do not have. Although the IMF has stepped up during the pandemic and has so far provided loans of over $16 billion to more than 35 different African countries, this always comes at a cost of having to implement economic policies that may be unpopular at home. Furthermore, countries could become vulnerable to defaulting as they struggle with the economic consequences caused by the coronavirus. Recently, Zambia became the first African country to default on its loans since the pandemic, owing around $12 billion to external Eurobond holders and the Chinese (Asala, 2020). It is still not clear what will happen to Zambia, as the IMF will visit the country soon to negotiate a loan. Unfortunately, Zambia will not be the last country to default on its debt.
The coronavirus has highlighted the problems that Africa had before the spread of the coronavirus – rising inequality, corruption, the poor quality of healthcare, dependence on primary commodities for income, owing an outstanding amount of debt, and so on. Politicians must see the pandemic as a wake-up call and an opportunity to address these problems. As it is clear Africa, on its own, cannot recover from the effects of the pandemic, other countries and institutions must be there to provide financial assistance to put them back on the track to achieving rapid economic growth.
Gondwe, G., 2020. Assessing The Impact Of COVID-19 On Africa’S Economic Development. [ebook] United Nations Conference on Trade and Development. Available at: <https://unctad.org/system/files/official-document/aldcmisc2020d3_en.pdf> [Accessed 26 November 2020].
Unctad.org. 2020. COVID-19: A Threat To Food Security In Africa | UNCTAD. [online] Available at: <https://unctad.org/news/covid-19-threat-food-security-africa> [Accessed 26 November 2020].
2020. International Travel Plunges 70% In The First Eight Months Of 2020. [ebook] World Tourism Barometer. Available at: <https://www.e-unwto.org/doi/epdf/10.18111/wtobarometereng.2020.18.1.6> [Accessed 27 November 2020].
U.S. 2020. Pandemic Costs Africa Travel, Tourism Almost $55 Billion. [online] Available at: <https://www.reuters.com/article/us-health-coronavirus-africa-tourism-idUSKBN2431VS> [Accessed 23 November 2020].
UN News. 2020. Nearly Two-Thirds Of Global Workforce In The ‘Informal’ Economy – UN Study. [online] Available at: <https://news.un.org/en/story/2018/04/1008562> [Accessed 25 November 2020].
Asala, K., 2020. Zambia Declared In Default Of Debt Repayment To Creditors | Africanews. [online] Africanews. Available at: <https://www.africanews.com/2020/11/18/zambia-declared-in-default-of-debt-repayment-to-creditors//> [Accessed 26 November 2020].