Africa’s grim prospects post-COVID-19

Africa’s boundless treasure, Social development

SIGNS OF WHAT to expect after the Coronavirus pandemic are already in the horizon. Those who fear the worst may ultimately happen have their point proven and corroborated by the unfolding realities. That point has just been amplified by Antonio Guterres, Secretary General of the United Nations. His worries were anchored on what he described as absence of unified global leadership in the fight against the pandemic. A disconnect among or between the global powers makes the leadership questions get more worrisome. The dysfunctional global leadership at this time is a bad news for the world as failures become so rampant in many  developed countries in the fight against Coronavirus. This was made more startling as their health systems proved inadequate and unable to cope with the unexpected challenge of Coronavirus pandemic. Confirming one of the Predictions of Peter F. Drucker, that, despite technological advancement and economic progress, nations of the world will become increasing more tribalised, isolationism has sprouted and mushroomed in Europe, America and in Asia, threatening whatever gains the globalisation boom may have generated.

The implications of these for the emerging economies are clear. For the developing countries of Africa, Asia, Caribbean, Latin America and the Middle East, the real crises are yet to become apparent. When the dusts of Coronavirus pandemic settle, the real attendant complications will become visible. We are already getting inundated with estimates of the percentages of contractions to expect in the economies of the US, China, Germany, France, the UK, Italy and some other notable economies, usually measured in GDP. The figures rolled out were in spite of the diversity of their economies. There are fears that many of these diversified economies will not recover fully in the next few years.

Although not much is yet said of the less advanced economies, as reliable statistical data are more difficult to obtain, the pictures are expected to be anything but rosy. What has emerged so far is nothing worth celebrating. For the Latin American and Caribbean countries, the picture painted by the UN is particularly worrisome. “The COVID-19 pandemic will herald the worst economic contraction in the history of Latin America and the Caribbean, with the projected -5.3 per cent drop in activity this year.”

The UN report on Latin America and the Caribbean disclosed that the pandemic will also reveal “an intensification of multilateralism’s fragility” as “there will be a more regionalised global economy centred around three poles: Europe, North America and East Asia.” This will drive a wedge between the global supply chains (or, more appropriately, supply webs), effectively leading to a splintering of the system. The growing seamless operations within the global value chain will be disrupted, with downward spiraling effects in many areas.

Anton Edmunds, Saint Lucia’s ambassador to the US intoned recently that the “COVID-19 pandemic may be catastrophic to the Caribbean tourism and regional economies.” The ambassador noted that land-based tourism is taking a hit, describing  “the segment of the industry” as the “major economic driver for most Caribbean  countries… It is the larger employer of people on the ground, the largest foreign exchange earner and it contributes significantly to tax revenues, making it the key determinant of whether governments will be able to service their debts.”

The World Travel and Tourism Council (WTTC) noted that, “in previous viral epidemics the average recovery time for visitors to a destination was about 19 months.” As the world grapples with Coronavirus pandemic, the recovery time may more safely be a guesswork at the moment. Countries that are heavily dependent on foreign tourism have cause to worry about their finances. In Africa, these include the countries in North Africa, East Africa, Senegal in the West, and South Africa. The small island developing states (SIDS) are particularly the most vulnerable because any shock of this magnitude is difficult to manage for small economies.

According to WTTC statistics, on the average, the tourism sector accounts for almost 30 per cent of the GDP of the SIDS. This share is over 50 per cent for the Maldives, Seychelles, St. Kitts and Nevis and Grenada.” It was projected that the Coronavirus pandemic will lead to losses  in revenues to the extent that affected SIDS will not have alternative sources of foreign exchange revenues to service external debts and pay for imports.

Africa’s tourism is rated as the second fastest growing in the world, with Kenya, Tanzania, Uganda, Rwanda and Burundi making up one of the strongest hubs of global tourism. In Senegal, tourism is adjudged to have generated about 12,000 jobs directly and 18,000 indirectly in the recent times. In 2018 alone, the contribution of travel and tourism to GDP for Senegal was 10 per cent. Within the continental Africa, Kenya, Senegal, South Africa and those North African countries are the leading economies. The negative impact of Coronavirus on their economic backbone is a bad omen.

Commodity-based economies are the next in line among the vulnerable economies that will be badly hurt by the Coronavirus pandemic. The major disruption to the global supply chain, the trending isolationism and a resort to greater emphasis on regional trade will put many African countries at a competitive disadvantage. As major offtakers in Europe, Asia and America begin to search for suppliers in close proximity, distance will pose  competitive barriers to those further afield. Countries of Africa that depend heavily on revenues from the export of cocoa, coffee and tea will need to go back to the drawing board. For them, and for those who earn foreign exchange from fresh produce export, the post-Brexit disruption to their access to the EU market through the UK will require new market entry strategy.

The roles of the World Trade Organisation (WTO) will become increasingly marginal and tangential. As richer nations reset their economic compass, more stringent condtionalities may return into bilateral or multilateral negotiations that have hitherto been done with relaxed rules. The trade war between the US and China may not likely abate, but might rather escalate. The export of many agricultural products from developing nations  may face new non-tariff barriers (NTB), effectively shutting Africa out of many foreign export markets.

The failure of OPEC, the oil cartel, to translate oil production cut to a global petroleum price increase is already a distressing foreboding for member countries. In addition to a sluggish global demand that will follow in the aftermath of Coronavirus pandemic due to slow economic recovery, the drastic reduction in the commodity’s price is not likely to transform into an upswing in the short term. This will hurt the economies of Angola, Nigeria, Libya, Sudan, South Sudan and Ghana significantly.

Countries with thriving manufacturing sector are about to experience the harsh realities of an unprecedented pandemic. In their attempts to balance their corporate books, the major casualties will be the employees as their company boards will find the temptation to downsize very difficult to resist. Imminence of labour union unrests and resistance may not prevail either in persuading or intimidating the corporate decision makers to shelf their retrenchment plans. A new global rat race towards the replacement of humans with artificial intelligence will take a new dimension and gather greater speed as African manufacturing sector will become more committed to AI, by investing more into this new technology.

The informal sector will become more crowded and chaotic as more unemployed people enter, either as a result of job loss or for want of any formal employment. The limited and unimpressive attention of governments towards the informal sector will lead to greater frustration as it will be difficult for governments to rescue failing enterprises or supporting the startups since they are mostly out of official radars. The multiplier effects in Africa could be catastrophic in material and human terms. In addition to more economic volatility, social unrests could be on the rise, putting more presure on the governments to deploy substantial proportions of human resources and revenue to defence and internal conflict management. The ripple effects of these on national productivity could only be negative, on the aggregate.

The scales at whIch these scenarios play out in reality may vary from country to country, but the direction is already evident. Countries of Africa need to brace for the worst while hoping for the best. The time for African Union to show its relevance is now. How best the political leaders work together in finding pragmatic solutions to these looming crises will be a test of their grasp of the global trends, their responsiveness and of their resolve to turn the tide. There’s no time to waste. African leaders must wake up and rise up to the challenge. It is time to turn adversity to a platform for prosperity.

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