Can a world already in despair save Africa?

2020-04-03

Thanks to an invisible but deadly enemy, the global economy is likely to shrink by 1.8% this year, the United States economy by 6.2% and Europe by 9%, according to Goldman Sachs. China will grow by a meagre 3% (versus 6.1% in 2019). The South African economy is expected to contract by 4% and the sub-Saharan economy as a whole to grow by a miserly 1.5%.

As economist Ricardo Hausmann of Harvard Kennedy School puts it, for African and other developing countries especially, ‘When it rains, it pours.’ They have been hit by simultaneous shocks – COVID-19 itself; a collapse in access to foreign income through a collapse in commodity prices, tourism and probably in remittances; and a collapse in access to capital markets.

To add to Africa’s woes, it now seems unlikely that trading under the African Continental Free Trade Agreement will begin on 1 July as scheduled, officials told ISS Today.

In Africa the full force of the pandemic hasn’t yet been felt. The latest figures are almost 6 400 infections and 236 deaths across the continent. But the picture of the impact in Africa is probably murkier than anywhere else as testing kits are in short supply. Chinese philanthropist Jack Ma did however last week donate 1.5 million of them to the African Union (AU), plus 100 tons of infection prevention and control gear.

The great fear of epidemiologists is that the virus – which has so far been largely confined to people returning from Europe, China and the US – could break out of this corral and spread fast through crowded informal settlements, quickly overwhelming skimpy health facilities.

It’s unlikely that trading under the African Continental Free Trade Agreement will begin on 1 July

The demographics, though, remain something of a mystery. London’s Imperial College last week forecast scenarios for sub-Saharan Africa, ranging from 2.4 million deaths if governments did nothing to 298 000 if all governments introduced aggressive suppression measures, including general lockdowns, early enough. This is a better projected death rate than all other regions, based on the continent’s younger population and indications that older people are more susceptible to COVID-19.

The Imperial College forecast could be way too high, of course. Their scientists acknowledge that their predictions are general, as so much is still unknown about how the coronavirus functions in different environments.

Nonetheless African economies are already taking a huge hit, directly in medical costs and indirectly in the wider domestic and international economic impact of the virus. How will Africa cope? In richer countries philanthropists have pledged support – for example, in South Africa, R1 billion each from Patrice Motsepe, Johann Rupert and Nicky Oppenheimer and R1.5 billion from Naspers; and 200 million naira from Aliko Dangote and 1 billion naira from Femi Otedola of Nigeria.

Wealthier countries have also been able to introduce solid support measures, notably Botswana which has guaranteed commercial bank loans and promised wage subsidies to the most-impacted businesses. For much of the rest, Africa will have to get help from the international community.

Hausmann, normally fiscally conservative, advised African countries essentially to throw fiscal caution to the wind in the short term. He suggested putting all capital expenditure on hold and borrowing whatever and wherever they could to save their people’s lives and their economies.

The demographic forecasts around the pandemic in Africa remain something of a mystery

The New Development Bank of the BRICS countries (Brazil, Russia, India, China and South Africa) is doing that already, temporarily suspending its normal rule of lending only for infrastructure development. It has just given its biggest loan ever – US$1 billion – to China, for medical equipment and services and is ready to do the same for South Africa.

Continentally, the AU’s Africa Centres for Disease Control and Prevention is taking the lead, providing extensive training and equipment to the neediest countries. Last week African finance ministers appealed to the International Monetary Fund, World Bank, European Union, African Development Bank, African Export-Import Bank and regional development banks to lead the international community in providing a US$100 billion aid package to help Africa.

This would comprise budget support, extended credit facilities and an immediate waiver of all interest payments on all debt estimated at US$44 billion for 2020 with a possible extension.

The ministers also called for assistance for the private sector, including the immediate waiver of all interest payments and injection of liquidity via central banks to keep businesses open and save jobs. And they asked for financial help to bolster health systems and the relaxation of border closures and export restrictions to maintain the delivery of essential medicines and foods.

Last Thursday South African President Cyril Ramaphosa, wearing his AU chair hat, presided over a virtual summit of the AU Bureau which decided to form five regional task forces to coordinate Africa’s COVID-19 response, and also endorsed the finance ministers’ plea. The five countries present – South Africa, Egypt, the Democratic Republic of the Congo, Mali and Kenya – established an African coronavirus fund and themselves immediately put US$20 million into it.

At a virtual summit of the G20 on coronavirus responses later the same day, Ramaphosa put the appeal for help directly to his peers, calling for a ‘robust economic stimulus package’ for African economies. He told journalists that although no ‘hardcore’ decision was taken to support Africa’s appeal, ‘the sentiment, the views and the position’ were supported by a number of countries, specifically Germany, France, Canada and Russia.

The full force of COVID-19 hasn’t yet affected Africa but its economies are already taking a huge hit

John Kirton and Brittaney Warren of the G20 Research Group criticised the body that represents most of the largest economies in the world, for failing concretely ‘to commit to debt relief for the poorest, in a way that could give hard-pressed recipients the funds for healthcare that they badly need.’

The effects of the coronavirus could be aggravated by certain leaders with autocratic tendencies using it as an excuse to postpone elections. More positively, other countries such as South Africa and Botswana, are showing signs of using the crisis to implement necessary but politically difficult structural economic reforms.

Asking the world for help at a time of crisis may seem like reprising an all too familiar African playbook. Yet this is a time of genuine emergency and all shoulders must be put to the wheel, and quickly.

The consequences of allowing Africa to succumb to the coronavirus would be felt by all, as Colin Coleman, Senior Fellow at the Jackson Institute for Global Affairs at Yale University, told Foreign Policy this week. Collapsing economies could spark or aggravate social and political instability including terrorism. This would spill over Africa’s borders, including through soaring emigration.

Whether a hard-pressed world, already struggling to cope with its own economic implosions caused by COVID-19, will also spare resources to save Africa, though, is a very big question.

Peter Fabricius, ISS Consultant

In South Africa, Daily Maverick has exclusive rights to re-publish ISS Today articles. For media based outside South Africa and queries about our re-publishing policy, email us.

Picture: Peter Kováč/Alamy Stock Photo

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