The immediate challenge may be enduring economic paralysis to protect health, but what sort of future can we expect when Africa emerges from the coronavirus pandemic? David Thomas considers some of the deeper changes the crisis may bring about
Before it happened, the idea of locking down millions of urban Africans seemed unthinkable. From Johannesburg to Accra, Nairobi to Lagos, teeming streets and bustling markets sit at the heart of the vibrant, chaotic and joyful shared experience of millions.
Yet as governments implement harsh measures in a bid to save millions of lives, the continent’s restless, entrepreneurial energy has been boxed in with its citizens.
The economic mobility of the largest economies, where businesses have closed and hundreds of millions of workers remain shut out, has been halted in its tracks. Africa faces an economic contraction of up to 2.6% this year – the first continent-wide recession in 25 years – and at least 300,000 could die, according to UNECA.
As commodity prices crash and borders close, it is not only policymakers’ economic hopes that have been dealt a blow. From the urgent need for emergency loans to a reconsideration of Africa’s intimate embrace of China and a renewed focus on neglected healthcare, the pandemic is forcing leaders to rethink development.
The continent could take a generation to recover, argues President Paul Kagame of Rwanda, and the post-crisis future could look markedly different from the past.
‘No country will be spared’
With half of Africa’s nations under full or partial lockdown, the immediate challenge is to endure temporary economic paralysis in a bid to protect fragile health systems. On 9 April, while confirming an extension of the country’s strict lockdown, South Africa’s president Cyril Ramaphosa underscored its cruel necessity.
“We have closed our borders to the world, our children are not in school, businesses have closed their operations, many have lost their income, and our economy has ground to a halt… You have done so because you have understood the devastating effect that this disease will have on the health and well-being of all South Africans unless we take drastic measures.”
The costs of such painful trade-offs are mounting. Major African exports including textiles and fresh-cut flowers have been wiped out, says UNECA. Tourism, which accounts for 5% or more of gross GDP in 10 African countries, has halted, and the region’s airlines face potential revenue losses of $6bn, according to the IATA. McKinsey predicts that 100m informal and 18m formal jobs could be at risk.
The African Development Bank says that Covid-19 could cost Africa a GDP loss of up to $88.3bn in the worst-case scenario, while total public debt could increase to over $2.1 trillion this year. Speaking in a press conference, IMF Africa director Abebe Aemro Selassie explained the “deep and synchronised” nature of the downturn.
“The hit to growth reflects a poisonous cocktail of shocks that is affecting livelihoods and economic activity. Swift and decisive measures, closing borders, shuttering businesses, requiring people to stay at home, have had to be adopted to halt the advance of the virus before it overwhelms already stretched health services, but will also disrupt production and reduce demand sharply… Plummeting global demand will exacerbate the economic impact greatly by reducing demand for the region’s goods and services, tourism, [and] remittance flows… no country will be spared.”
IMF re-emerges as vital lender
Africa’s oil exporting economies, which were already reeling under a Saudi-Russia oil war, must now reckon with prices of less than $25 a barrel amid a savage global demand plunge. They are “simply unable to meet budgets as planned,” says AfDB president Akinwumi Adesina. Countries are scrambling to organise business relief measures and emergency budgetary support, but most have little option but to seek bailouts.
“It is clear that Africa does not have the fiscal flexibility or space to deal with the shocks from the Covid-19 pandemic, even though fiscal responses are critically needed to prevent economic collapse,” reports UNECA. Executive secretary Vera Songwe predicts that the continent needs $100bn to help address “immediate safety net needs”.
Nigeria, which has announced a N3.5 trillion ($9bn) economic stimulus package, is requesting $6.9bn from multilateral lenders. Long viewed with suspicion for loans contingent on structural reform, the IMF has re-emerged as a vital emergency lender. It has disbursed loans to Ghana ($1bn) Côte d’Ivoire ($886m) Senegal ($442m) Rwanda ($109m) and others, and says that it has received financing requests from at least 32 African countries.
As the IMF gains new popularity, policymakers are calling for existing multilateral loans to be deferred. French president Emmanuel Macron argues that a moratorium on African debt payments is “indispensable”.
“We should temporarily defer the debt owed to multilateral development banks and international financial institutions,” writes the AfDB’s Adesina. “This can be done by re-profiling loans to create fiscal space for countries to deal with this crisis. That means that loan principals due to international financial institutions in 2020 could be deferred. I am calling for temporary forbearance, not forgiveness.”
China’s popularity takes a hit
Whether China – which loaned an estimated $143bn to African governments and state-owned enterprises from 2000 to 2017 – will play its part remains to be seen.
“The origin of Africa’s debt problem is complex, and the debt profile of each country varies,” China’s foreign ministry told Reuters, while remaining open to the possibility of working with the international community.
But some African governments that are petitioning China for relief say that the country is warily demanding collateral, a further sign that ties are uncommonly strained.
In early April, several African ambassadors wrote a rare broadside to China’s foreign minister, calling for the “cessation of forceful testing, quarantine and other inhuman treatments meted out to Africans” amid widespread reports of racism towards Africans in China’s Guangzhou province. Such ruptures – and any sign of Chinese resistance to debt relief – could lead to a cooling of the relationship, say observers.
“A sober reassessment of this relationship by African officials, stripped of the ‘win-win’ rhetoric Beijing often touts, will be necessary for African states to achieve better partnerships on more even footing… [but] a deterioration of Africa’s relationship with its largest trading partner and official creditor will serve no one’s interests,” writes Stephen Paduano, executive director of the LSE Economic Diplomacy Commission, in a blog for the Council on Foreign Relations.
“In the weeks ahead, there will be no job more important than bringing China to the table on African aid and multilateral debt relief.”
Meeting the health challenge
The crucial importance of such debt relief is in helping the continent meet an unprecedented health challenge for which it remains fundamentally ill-equipped.
Early suppression could save 3m lives, argues UNECA. But African health systems are weak, with low ratios of hospital beds, ICUs and health professionals. In a best-case scenario, with suppression and intense early physical distancing, $44bn is required for testing, personal protective equipment, hospitalisation and intensive care treatment – a legacy of Africa’s abject failure to invest previously. One million tests pledged by the AU will not be enough to implement an efficient exit strategy.
The crucial lesson of Covid-19 is that the continent must invest long-term in healthcare as a crucial economic necessity, says AfDB public health manager Babatunde Omilola.
“At the beginning of the Ebola epidemic, fear and panic prompted some African governments to pay attention to shoring up their health systems, yet, when the grip of the epidemic loosened, business as usual continued. Africa cannot afford to go back to business as usual when the COVID-19 pandemic is finally halted. Such an attitude would be akin to settling down to sleep while our roof is on fire.”