“Africa is pushed into a recession for the first time in 25 years”

Trade is going to be severely impacted by the pandemic — Image : United Nations

As AU Chairperson, SA’s Cyril Ramaphosa prepares for the African Union Extended Bureau of Heads of State virtual meeting, with African business leaders today, to discuss the continental impact of the #COVID19 pandemic & the continental response, we want to bring specific attention to the details contained in a World Bank report released last week on 16 April 2020.

Image : Cover of the Spring Africa Pulse report Vol 21 released 16 April 2020

Economies in Sub-Saharan Africa could lose between $37 billion and $79 billion in output losses in 2020 due to COVID-19 (coronavirus), according to the new World Bank regional economic analysis.

Click here for full report http://hdl.handle.net/10986/33541

The COVID-19 (coronavirus) outbreak has set off the first recession in the Sub-Saharan Africa region in 25 years, with growth forecast at -5.1% in 2020 from a modest 2.4% in 2019. This is according to the latest Africa’s Pulse, the World Bank’s bi-annual analysis of the state of the region’s economies.

To make matters worse, Africa could also face a severe food security crisis, with agricultural production expected to contract between 2.6% and 7%. The World Bank Group and the International Monetary Fund have called for a “bilateral debt standstill,” which, according to the report, should be an important part of the global response to limit the impact of COVID-19 on Africa’s poor, as the impact on household welfare is expected to be equally dramatic with welfare losses in the optimistic scenario projected to reach 7% in 2020, compared to a non-pandemic scenario.

The decline will be primarily due to large contractions in South Africa, Nigeria, and Angola driven by their reliance on exports of commodities whose prices have already declined as well as other structural issues. Growth is projected to recover to positive levels by 2021, although it will remain below the levels of economic growth in 2018 and 2019.

This is as a result of a combination of influences, including the disruption in trade and value chains affecting commodity exporters and countries with strong value chain participation. Add to that, the reduced foreign financing flows of foreign direct investments, foreign aid, remittances, tourism revenues, and capital flight, as being highlighted in the World Bank’s press release.

The report recommends a fiscal-policy approach with two primary objectives :


The immediate actions to consider, in achieving this should include:
• Focusing on strengthening health systems
• The availability and allocation of financing for the health sector is still a major concern in Sub-Saharan Africa
• The medical personnel in the region should be protected and properly equipped
• Implementing social protection programs to support workers, especially those in the informal sector
• This calls for cash transfers, in-kind transfers (food distribution), social grants to disabled people and the elderly, wage subsidies to prevent massive layoffs, and fee waivers for basic services (e.g. electricity tariffs and mobile money transactions)
• Minimize disruptions within countries and in the critical intra-African food supply chains
• Keep logistics open to avert a looming food crisis in the region

“The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said Hafez Ghanem, World Bank Vice President for Africa

The AfCFTA comes into effect on 1 July 2020 — what will be the impact to it, or will it impact the economies across Africa?

As the virus causes a disruption in world trade, disturbance in global supply chains, interference in tourism flows, and pressure on Chinese economic growth, recommendations for businesses involved in trade, are as follows :
– List critical products
– Accessibility to significant suppliers
– Have you done your contingency plans? Are they in place to be activated?
– Consider all your financial access points and resources
– Look at any legal implications and issues that may arise
– Communicate communicate communicate

We wish the African Union and the Heads of State all the best for their meeting today — it cannot be easy to do what they do, so let’s support and encourage, while holding them accountable.

Until next week!