The Economic Impact of COVID-19 in Africa: A Round-Up of This Week’s Analysis

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A word cloud of the most common words used in the pieces linked.

The coronavirus pandemic continues to take its toll on the African continent. While the continent as a whole still accounts for relatively few deaths from the disease, the numbers are rising, with more than 4,700 confirmed cases and 127 deaths. As countries scramble to contain the virus—and are affected by the efforts of other countries to do the same—the economic impacts grow.

Here’s a selection of this week’s coverage on the observed and expected economic impacts across the continent, divided into growth and income, sectors and sub-populations, policy responses, and commentary.

Growth and income analysis

• McKinsey proposes different scenarios for Africa’s growth in the wake of COVID-19. Before the crisis, the 2020 growth estimate for the continent was 3.9 percent. In the “least-worst case,” characterized by the outbreak being somewhat contained both globally and in Africa, growth drops to 0.4 percent. In other scenarios (including a lack of containment globally and in Africa), the rate drops as low as -3.9 percent. The scenarios explicitly do not take into account either fiscal stimulus packages or currency devaluations.

• Breisinger and others estimate monthly GDP losses for Egypt under a range of scenarios, with estimates around 0.7 to 0.8 percent.

Sector and sub-population analysis

• The World Food Programme’s analysis for West and Central Africa highlights that 2019/2020 had been a strong agricultural season “with overall higher than average production of cereals,” which is good for food security. But despite that, the “consumer price index for food is at its highest since 2008 in the Monetary Union of West Africa zone.” They talk about informality, remittances, and migration, and here’s their take on agriculture:

  “More than 80 percent of rural population rely on subsistence farming in West and Central Africa. The 2020 off season harvests should be reaching markets and providing substantial incomes of stallholder farmer. However, market closure, restriction on internal and cross borders movement limit markets access. Planting period starts in May/June for the main agricultural season while the Covid-19 epidemic is forcing governments to cut agricultural expenses and to prioritize health-related expenditures. If the above-mentioned restrictions continue, famers won’t have access to market to buy good quality seeds and fertilizers.”

• Reardon, Bellemare, and Zilberman propose seven ways that COVID-19 will likely affect the food supply. They also discuss policy paths for the short, medium, and long run: “In the short run, implement new, broad safety nets for SMEs and workers in the midstream and downstream segments of FSCs; for example, governments could use cash-for-work schemes to employ workers to distribute emergency food rations, upgrade sanitation in wholesale markets and wet markets, and maintain essential operations in their own enterprises so that the latter are there when the crisis passes.”

• In Kenya, day laborers are dramatically affected, according to Mpungu’s Al Jazeera report: “The coronavirus containment measures are expected to bring additional economic hardship in a country where … informal labourers account for 83.6 per cent of the total workforce.”

• Resnick highlights dangers for informal traders during lockdowns: “African governments have a history of cracking down on informal traders, especially during public health outbreaks. When the Zambian government used the military to close down markets during Lusaka’s 2018 cholera outbreak, farmers who sold their fresh produce to informal traders lost a significant amount of income.”

• Kestler-D’Amours at Al Jazeera highlights the particular dangers in Africa’s refugee camps: “Scary, distressing, catastrophic: A bleak assessment by experts, humanitarians and epidemiologists on what a severe coronavirus outbreak would look like in countries across Africa sheltering millions of refugees and other vulnerable people.” She reports that the UN High Commissioner for Refugees is taking steps to change the crowd dynamics in camps.

• Turse writes that Burkina Faso, the first country to suffer a COVID-19 fatality, faces “a new kind of threat to a country wracked by a war that has displaced around 700,000 Burkinabe in the last year. Many of those people now find themselves under great physical and emotional strain, lacking proper shelter, food, and the other necessities — all of which makes them more vulnerable to the pandemic.”

Economic policy responses

• Various countries are implementing social safety net policies, as reported by Gentilini: Uganda is allowing businesses to reschedule social security contributions, Namibia is offering an emergency income grant to workers who lost jobs, Cabo Verde is offering cash transfers and food assistance, and the Central Bank of West African States has abolished a number of transaction fees.

• Dell’Ariccia and others at the International Monetary Fund propose three key objectives of economic policy in the face of COVID-19—guarantee functioning of essential sectors, provide resources for people hit by the crisis, and prevent excessive economic disruption. At the end of their post, they propose a series of economic policy options to target households, businesses, and the financial sector.

• Zimbabwe entered a COVID-19 lockdown this week, following other countries. Dzirutwe reports that “unlike in South Africa, where many citizens defied calls to stay indoors with some clashing with security forces at the weekend, Zimbabweans mostly stayed home... Central Harare's streets were deserted. Banks, government offices and businesses were shut.”

• Kenya has proposed tax relief and governments leaders are accepting pay cuts, as reported by Golubski.

Commentary

• Monga of the World Bank proposes a series of economic steps that countries across Africa should take: “In the short term, Africa needs greater fiscal space to boost health expenditures, contain the spread of COVID-19, help the hardest-hit sectors, and stimulate domestic consumption, while the continent’s central banks should cut interest rates and channel liquidity to firms and households.”

• Stith repeats the refrain that in contexts with high levels of extreme poverty, shutting down the economy could have its own dramatic effects. “While every place has problems because of the coronavirus crisis, countries like South Africa don’t have the capacity or resources to rebound on their own, unlike the United States, Britain and even China. They will need debt relief, budget supplements, and a commitment to get back to business as usual as soon as possible. For Africa’s sake, hopefully, the world will do a better job of coordinating the relief effort than it did responding to the virus.”

• Akumu writes that “in Uganda, the situation of poor people is encompassed in a euphemism… “Omwavu wakufa”, the poor person is meant to die… Even as the government issues directives for people to stay at home, it has promised no financial bailout or tax relief. People who live from hand to mouth, barely earning enough to feed their families each day, know that hunger may kill them before coronavirus does.”

• Mugabi of DW proposes that “some countries like Rwanda and South Africa have taken bold steps to protect businesses. Other countries with liberalized economies, such as Uganda, Kenya, and Nigeria, Africa's largest economy, can do much better.”

Many thanks to Amina Mendez Acosta for identifying many of the articles.