THERE IS NO ARGUMENT about the fact that the decade beginning from 2020 is a decade of Coronavirus. The year 2020 alone has seen a widespread impact of the infection, now regarded as a pandemic. It was a year of panic, experimentation, competition for solutions, fear-mongering and politicisation of a misfortune of mankind. The coming of coronavirus or COVID-19 brought with it some uncertainty, confusion, social and economic shocks which will have effects lasting through many years afterwards. The shockwaves transmitted through the global economy has disproportionately affected Africa in terms of adaptation. Going forward into 2021, a number of key risk factors need to be examined and pitfalls avoided.
Those countries of the West and East, particularly Europe and China respectively, will have to be watched. Africa stands the chance of conceding so much for so little in a desperate attempt to get over or escape the consequences of COVID-19. Markets will force the hands of many countries within the continent to part with many resources at suboptimal values if only to meet pressing needs and recover from the trap of the post-COVID-19 era. Determination of the end of the era itself remains more of an issue of conjecture in Africa for a number of reasons. Africa’s response to COVID-19 outbreak was not as comprehensive and far-reaching as in Europe, Asia, North America and South America. It could be because the outbreaks were not as devastating in Africa as in those countries.
Africa lags behind many other continents of the world in COVID-19 responses. Apart from the draconian lockdown orders that kept people indoors for months, no other official measure could be deemed as effective. The lockdown orders ignored the larger issues of livelihoods and economy which could either help or make a mockery of any other preventive or control measure. It ignored the understanding that human beings are social beings who must be made to willingly agree to comply if the compliance is to be effective. Responses from the developed countries will give an insight. After months of lockdown and many small and medium enterprises (SMEs) are going down, these SMEs – mostly sole ownership and employ only a handful of workers – are fighting back as their owners are beginning to resist governments’ official orders to stay shut down again as a way to prevent resurgence of infections. The case of the United States small business owners in the state of California recently clamouring for a recall of their state governor is instructive. The defiance of the same category of business owners and employees in the state of New York lends further credence to this reality. Back in Africa, where the rule of law is not as strictly adhered to, the small business owners might meekly but reluctantly comply, but the impact on their livelihoods is no less devastating.
It is therefore appropriate to begin, not only to take stock of the impact of COVID-19 on African economy in 2020, but to anticipate what 2021 has in stock. Recognising the fact that the continent’s economy is largely informal, highly dependent on the SMEs and commodity exports, the disruptions caused by COVID-19 needs to be put in perspectives for 2021 and beyond. On the intra-African trade and economy front, the African Continental Free Trade Agreement (AfCFTA) may offer some openings for economic boom, but a lot of legal, administrative, diplomatic and policy works need to be done in the years ahead. That means AfCFTA may not realistically begin to yield substantial and considerable fruits in 2021. It may therefore not be the short-term panacea that Africa should be looking forward to for turning the continent’s economy around from the devastation caused by COVID-19. On the inter-continental trade front, the most proximal market of Europe is deserving of attention. Africa’s trade with Europe has undoubtedly been upset by Brexit. Although the supply chain disruption caused by COVID-19 and related lockdowns seemed to have masked the impacts within 2020, such impacts will become more definite and remarkable in 2021 and beyond. As Brexit takes root, many African countries that gain access to the European Union (EU) market via the United Kingdom (UK) will have to fashion out new means, methods and channels of continued trade relations with the remaining EU 27 countries. These will include modifications of customs protocols and other forms of rules relating to import, export and market access. How Brexit evolves will still play a decisive role as Britain will remain relevant to Africa in trade relations.
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A distant eastern trade channel has been opening up in China. This is clearly a channel that Africa needs to view more critically in this COVID-19 decade as China-Africa trade has been largely asymmetrical in favour of China, a major consumer of commodities coming from Africa in raw, unprocessed forms that bring low income to Africa. The expansionist Belt and Road Initiative of China is a form of bait that Africa needs to be wary of. While infrastructural projects are being embarked upon by China in many African countries, the beneficiary countries need to rethink their strategies and critically look at the terms of engagement so that they are not giving away critical and strategic future assets of their countries to China as is now evident in Zambia. Djibouti stands the risk of going that way. Outside Africa, Sri Lanka is a poster child for China’s shrewd benevolence, from which the continent should learn a lesson as China took over a strategic port in exchange for a failed loan.
That brings the subject of China loans into focus. African countries’ leaders in 2018 went heads-over-heels to Beijing to attend the Forum for China-Africa Cooperation (FOCAC), desperate to shake hands with Xi Jinping, the Chinese President, and to be considered eligible for more of China’s generosity. African countries need to do a lot of risk analysis and SWOT analysis in their dealings with China in the decade ahead. As Africa’s debt crisis grows amid COVID-19 pandemic, the continent will need to be more nimble, more cautious and more risk-conscious. At the peak of COVID-19 outbreak in 2020, a debt service relief package was approved by some of the world’s biggest lenders, including the World Bank, the International Monetary Fund (IMF), the G20, all Paris Club creditors and the African Development Bank, to help more than 25 African countries free up more than $20 billion that could be spent on health services and other essentials. Although China that is so eager to lend to Africa is not keen on blanket debt forgiveness, it is shrewd, but compassionate, enough to consider the forgiveness of interest-free loans. Financial analysts can interpret the essence of such a decision where it applies.
Countries that are suffocating under the weight of foreign loans have little or no fiscal space to develop in the COVID-19 decade. Mozambique, a country weighed down by some high-impact natural and man-made events, was already having difficulty repaying its $14 billion external debt before the advent of COVID-19 in 2020. Slowly recovering from the devastations caused by Cyclones Idia and Kenneth a year earlier, and still grappling with a new crisis of the insurgents on the northern side, both of which have caused human displacements, deaths and hunger, Mozambique has retrogressed from a debt-to-GDP ratio of 100 per cent in 2018 to 130 per cent in 2020. This is choking Mozambique economically. Left to itself, Mozambique will become a breeding ground for more crises in the decade ahead – from international banditry and insurgency to a land of prevalent hunger and malnutrition and a hotbed for illegal oil trade once the insurgents succeed in taking over the country’s oil installations. This is a challenge for Africa. A choice has to be made, either to turn a blind eye to Mozambique’s predicament and allow the crises to fester, or to come to its rescue.
The limited fiscal space occasioned by the complications of COVID-19 on economies is a major task that Africa has to confront as a continent and at country levels, bearing in mind all the peculiarities of the various countries. Two important areas that Africa needs to address are manufacturing and service sectors, in both of which the continent plays minimal role on a global scale. Beginning with the supply chain and value chain disruptions driven by COVID-19 in 2020, the commodity market where Africa has relative advantage is not an area of strength for now. This is because many corporations and enterprises that depend on global supply chain have begun to restructure and redirect their operations, with many of them now preferring to deal with sources from close proximity. That will effectively shut out Africa from many off-takers of commodities of African origin where transit time and cost of freight are major issues.
The largely informal nature of countries’ economies is a major reason why service industry is not thriving in Africa. The COVID-19 pandemic should have been expected to give a boost to the service industry in Africa, but the consumers’ market will need to be ready first. Except for the opportunities for the use of information and telecommunication technology (ICT), other forms of services – even those that depend on ICT – may not yet attraction in the short term. It will be commendable to see the technologies of the likes of M-PESA of Kenya in all other African countries as means of facilitating widespread commercial activities and overcoming obstacles posed by terrain, time and space. But these may not have as much impact if they are only used by those who contribute least to the high value-adding economic activities. African countries in the COVID-19 decade ahead will therefore have to latch on uncommon innovation, policy options and political audacity that could radically transform the economy, providing food, means of transportation, healthcare services, communication services and jobs for the teeming youthful population. Without these in place, Africa is entering a phase in a decade of COVID-19, which will be an extension of 2020 – a year characterised by a lull in economy and a retarded growth. This will be most undeserved.