Dark Clouds & Silver Linings: Part 1
Covid 19’s impact on Africa’s macroeconomic picture
In both big or small ways, Covid 19 has forever changed our lives. In a two-part blog post series, I discuss the macroeconomic impacts of the pandemic on the continent as a whole (Part 1). In Part 2, I look at some socioeconomic changes that have arisen, and at some unlikely, uniquely African opportunities this worldwide crisis has created.
The Covid 19 pandemic has ushered in an era of rapid change – both in Africa and beyond our borders, in some cases accelerating changes we have already seen taking place, whilst in other cases fundamentally altering the way we work, travel, and live.
Sub-Saharan Africa is projected to grow by 3.4% in 2021. Growth will be mainly driven by rising commodity prices, improving consumer demand, higher government spending and vaccines administration in countries with high COVID-19 cases. The economies of Nigeria and South Africa will expand by 2.5% and 3.1%, respectively. Non-oil economies are expected to experience relatively higher growth in 2021 as Ghana and Kenya are projected to grow by 4.6% and 7.6% respectively. While Nigeria posted positive growth in 2021Q1, South Africa recorded its fourth consecutive quarterly contraction following the spread of COVID-19.
The economic impact of the pandemic on Africa
The sudden stop in the global economy had the effect of radically reducing income sources critical to African countries – pertinent examples include foreign remittances, travel, and tourism, transport, trade, and agriculture. Further drivers of the contraction such as falling commodity prices and large foreign financial outflows, coupled with lockdowns and travel bans have drastically constrained labour markets and economic activity. This of course has driven a loss of tax revenue which reduces the capacity of governments to extend public services necessary to respond to the crisis. Additionally, borrowing costs have risen dramatically off expectations of widespread defaults.
The impact on African countries has been monumental.
Of course, Africa is not a country, and the effects have been different across countries that display different economic types:
Diversified economies such as the Ivory Coast, Senegal, Ghana, Kenya, Uganda, and Tanzania have fared slightly better than their oil-producing counterparts (Algeria, Angola, Nigeria), with the IMF reporting that these diversified economies are still managing to grow despite slowing activity. Tourism-dependent countries like Morocco, Tunisia, and the Seychelles have seen their primary source of income devastated, with international travel brought to a standstill. South Africa, the continent’s second-largest and arguably most sophisticated economy, has been hit the worst given that it was already in recession before the crisis hit.
The pandemic has pushed up to 40 million people into extreme poverty across Africa. Women, youth, low-skill labour, and those in the informal sector remain most affected by lack of access to social safety nets and income opportunities. In addition, businesses are struggling to stay afloat as another wave of the pandemic in form of the delta variant spreads across the region. The protracted nature of the pandemic will lead to further vulnerability of households and SMEs alike as governments fail to consolidate a systemic approach to containing the pandemic.
Read Part 2 of this blog series for my take on some of the socioeconomic changes Africa has seen since Covid, along with the upsides of opportunity the pandemic has brought.