A new African Union report released last night — ‘Impact of the Coronavirus Covid-19 on the African economy’, highlights the dramatic impact on employment, with an estimated 20 million jobs being threatened, both in the formal and informal sectors, completely destroying the continent, if this is situation continues. The scenario is gloomy with a potential loss of 20 -30% of African government’s fiscal revenue, estimated at 500 billion in 2019.
But the report also says that there is a need for a “paradigm shift in order to change the trade patterns of African countries within themselves and with the rest of world. Africa should turn the current Covid-19 pandemic into an opportunity”
The study method was scenario-based, and even though the analysts were faced with scarcity of data, and quantifying the real impact, and the unknown future progress and path of the virus, the end result achieved is about policy recommendations for potential socio-economic repercussions, so that there is a measured and focussed response to the crisis.
The lessons learnt from the study will give more enlightenment on the way forward, as the continent is in a critical phase of the implementation of the Continental Free Trade Area (AfCFTA), coming into effect on 1 July 2020.
Previous pandemics are being used to establish a comparison and scenario planning, but the nature of this pandemic is unlike any other, so the risks due to unknown factors are immense, and therefore much cannot be done to anticipate and manage risks.
COVID-19 is disrupting the very integrated and interdependent global economy value chains. Almost half of global trade can be attributed to this, as well as precipitous declines in fiscal revenue, commodity prices, foreign exchange receipts, foreign financial flows, restrictions in travel, complete regression of revenue of tourism and hotels, an embargoed labour market, and the list goes on.
There will be a global economic crisis, unlike anything we have seen before.
The comment by the AU that “Africa should turn the pandemic into an opportunity” is a mammoth statement that will require an immeasurable and substantial strategic intent, to make that a reality. When looking at the landscape of African trade products, at the face of it, it seems (almost) impossible for the continent to take an economic advantage of the wide spread of Covid-19, because of the lack of capacity and inability to transform its raw materials to respond to the potential high demand of goods and services of both domestic and international markets. It will also be an additional constraint on the existing production infrastructure making trade even more difficult.
Whether we are trying to be optimistic about current circumstances or not, it is a fact that this global pandemic will have severe socio-economic impact on Africa.
We will unpack the report further on Friday, with inputs from key stakeholders in Africa’s economy.
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