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WILL AFRICA’S ECONOMIES BUCKLE UNDER THE CORONAVIRUS? By Ronak Gopaldas
Since January across the world, governments had to rethink their operation as the newly formed pandemic, the COVID-19 has been infecting their economies, healthcare systems and work environments. Compared to the most affected countries such as the United Kingdom, United States or Italy or China, the number of cases in the African continent is pretty minimal thus it is worth to examine the possible reasons and even future consequences. The slow propagation of the virus in Africa does not mean that the countries there will not suffer human and economic consequences later on, but it does mean that they have more time to prepare and learn from others’ mistakes. To understand the negligible presence of the Covid-19 in Africa it is important to note that the governments there have an outmost experience with the negative influence of pandemics and epidemics as up to this date malaria, HIV, cholera and Ebola still present there. What will happen to Africa is not something that solely depends on the African governments’ security measures or health equipment quantity but rather on the world’s performance in fighting the virus. Everything is interconnected, Africa’s export and import maintains a close relationship with China, Europe and the US and if these countries increase their export prices or lower their product demand, even if Covid-19 didn’t directly damaged the African economies, through the commerce it will, indirectly. Consequently, it is foreseen that Africa’s economy, if affected, will experience a severe and long-lasting fallout. African currencies have inevitably weakened while bond yields have soared. The rand shed 5% against the greenback while South African 10-year bonds jumped 32.5 basis points. The Zambian kwacha lost more than 3% to the dollar in the same period. This is crucial because weaker currencies mean that the cost of repaying debts and continuing trade will rise dramatically. The global economy was under pressure before the COVID-19 outbreak as the trade war between the United
States and China weighed on growth. The epidemic already has economists downwardly revising their global growth forecasts with some suggesting it may tip the world into recession. Since China’s and US’s GDP was fallen along with numerous other significant economies, trading, investing and consumption will be particularly hit worldwide as a result. Africa greatly depends on mining, having a wide variety of minerals including iron in South Africa, oil in Nigeria or copper in Zambia. If trading partners are unable to buy the minerals Africa’s income will not be adequate to continue financing their own economies and development. Next to mining, tourism is another sector in Africa, which will suffer enormously due to travel restrictions, Mauritius, Madagascar, Kenya, Seychelles and Tanzania are among the countries where tourism adds a big amount to the total revenue. Despite tourism and mining will be in crisis, it is impossible to completely separate the economic effects from the political issues. While trade under the African Continental Free Trade Area agreement has yet to commence, any dramatic falls in trade or border closures volumes could push out free trade ambitions and curtail acceleration in African growth over the medium term. Xenophobia could also increase against people of Asian origin for their perceived link to the coronavirus – a situation that will be exacerbated by rising unemployment, youth disaffectedness and competition for scarce resources as trade volumes contract. Also leaders can use this situation to implement racist or protective approach in their election campaign to win the next national election. Although Africa has yet been greatly influenced by the coronavirus, it is easy to see that the worst is yet to come. The economic and health shock globally is not something that will only influence a part of the world, but rather each country will somehow experience the negative effects either monetary-, economic- or health-wise.
