A preliminary analysis of the economic impact attributed to Coronavirus Disease 2019 – COVID-19 has estimated that Africa’s GDP growth in 2020 could be cut by 3 to 8 percentage points.
The paper entitled; "Tackling COVID-19 in Africa” released this week by global auditing firm McKinsey & Company’s experts indicated that Africa’s economies could experience a loss of between $90 billion and $200 billion in 2020 because of COVID-19 pandemic.
"We find that the pandemic and the oil-price shock are likely to tip Africa into an economic contraction in 2020, in the absence of major fiscal stimulus,” the experts said in their analysis.
The pandemic’s spread within Africa could account for just over half of this loss, driven by reduced household and business spending and travel bans.
The global pandemic could account for about one-third of the total loss, driven by supply-chain disruptions, a fall-off in demand for Africa’s non-oil exports, and delay or cancellation of investments from Africa’s Foreign Direct Investment (FDI) partners.
Finally, oil-price effects could account for about 15 percent of the losses, the analysis noted adding that in the month of March 2020, oil prices fell by approximately 50 percent.
The experts argued that the COVID-19 pandemic is primarily a health crisis and a human tragedy, but it also has far-reaching economic ramifications.
In Africa, they observed, it is already disrupting millions of people’s livelihoods, with disproportionate impact on poor households and small and informal businesses—and the pace of this disruption is likely to accelerate in the weeks ahead.
The assessment indicated that travel bans and lockdowns are not only limiting the movement of people across borders and within countries, but also disrupting ways of working for many individuals, businesses, and government agencies.
Recommended bold actions
Given the potentially devastating impact of the pandemic on health and livelihoods, nothing less will do, the experts warned.
They recommended that African governments and development partners could explore several far-reaching solutions.
They include Africa Recovery Plan which would entail an extensive stimulus package or economic development plan, modelled on the Marshall Plan that provided aid to Europe following World War II.
They also recommended Africa Solidarity Fund, whereby businesses and individuals could contribute to a fund earmarked for immediate relief for the most vulnerable households and businesses.
Also, a private-sector liquidity fund that could offer grants, loans, or debt for equity swaps to support businesses and limit job losses, should be considered.
Others are African procurement platform, a common platform to procure medical supplies and equipment to combat the pandemic could provide an Africa-wide solution to challenges that each individual country is trying to address.
In addition, an Africa Green Program should be mulled over. Considered a get-to-work program that plants billions of trees across the continent, it could provide employment and help solve global and local climate-change issues by using the currently out-of-work labor force.
Meanwhile, the Bureau of the Assembly of the African Union Heads of State and Government Teleconference on COVID-19, Held on 26 March 2020 agreed to establish a continental anti-COVID-19 Fund to which member states of the Bureau agreed to immediately contribute $12, 5 million as seed funding.
In a communiqué the Bureau issued the same day, it noted the critical role of the Africa Centres of Disease Control and Prevention (Africa CDC) and its under-funding. In this regard Member States of the Bureau agreed to contribute $4.5 million towards boosting its capacity.
Given the limited health infrastructure in Africa and the reality that most of the pharmaceuticals and medical supplies consumed on the continent are imported, the Bureau called on the international community to encourage open trade corridors, especially for pharmaceuticals and other health supplies.
The Bureau also urged G20 countries to provide an effective economic stimulus package that includes relief and deferred payments. In this regard, the Bureau called for the waiver of all interest payments on bilateral and multilateral debt, and the possible extension of the waiver to the medium term, in order to provide immediate fiscal space and liquidity to governments.
In a tweet he posted on Thursday, April 2, 2020, Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization said that many developing countries will struggle to implement social welfare programs of which include free food rations and cash transfers during lockdown to prevent the COVID-19 spread.
"Broad and expedited agreement on debt relief are essential to enable them to care for their people and avoid economic collapse,” he said.
"Countries are asking people to stay home and shutting down population movement to limit COVID-19 transmission. These steps can have unintended consequences for the poorest & most vulnerable. I call on countries to ensure these populations have food & life essentials during the crisis,” he added.