opINIoN
The impact of COVID-19 on African infrastructure
T
he novel coronavirus pandemic has had a devastating global impact on public health and economies. The worst global recession since World War II and the effects of large-scale shutdowns of all non-essential businesses worldwide, cutting off international and regional supply chains and halting all non-essential travel, have also rippled across Africa. The International Monetary Fund is forecasting a 1.6% contraction in the continent’s GDP, and the outlook is expected to worsen when revised later in the year. The continent has a less well-resourced health-care sector and much lower fiscal capacity to support businesses and people negatively affected, but it is worth noting that Africa’s mortality and contagion rates have so far been significantly lower than initially feared. COVID-19 spread later to Africa, enabling many countries to learn vital lessons from other parts of the world. It is also important to recognize there have been drastically different government interventions from each of Africa’s 54 nations, some introducing quick and draconian lockdowns, while others imposed curfews or made minimal changes to daily activity.
Author: Standard Bank corporate and investment banking CE Kenny Fihla
We expect to see a marked economic slowdown through this year and into 2021. In the context of lower oil prices, commodity exporting countries such as Nigeria and Angola will be more severely impacted from a fiscal perspective. However, ultimately the rate of Africa’s economic recovery will depend on each country’s response. We do not expect to see a V-shaped recovery but being later into lockdown and early out of it could mean African countries will begin to recover sooner — cautious optimism that has been boosted by China, a key supplier, reopening and easing pressures on supply chains.
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For infrastructure projects under construction, most countries have restricted the movement of people rather than goods, allowing for instance, power and renewable energy projects to continue on-site activity, with South Africa as the exception, even during the height of the outbreaks.
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14
January-February issue l 2021
For large-scale infrastructure, institutional investors’ main area of focus has been on the power sector, where projects have invariably been deemed to be “essential services” by African governments, allowing them to remain operational throughout the lockdowns — a position that has resulted in continued revenue generation and has underlined the resilient nature of these assets. For infrastructure projects under construction, most countries have restricted the movement of people rather than goods, allowing for instance, power and renewable energy projects to continue on-site activity, with South Africa as the exception, even during the height of the outbreaks. Given the less developed supply chains, African projects typically hold more equipment on site than in other parts of the world and have time buffers
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