COVID Attacks African Economies
African finance ministers, co-chaired by SA Finance Minister Tito Mboweni and Ken Ofori-Atta of Ghana, have asked the International Monetary Fund, World Bank and EU for bilateral, multilateral and commercial debt relief to overcome the economic crisis caused by the pandemic. Africa is facing the impending global economic downturn in a very difficult position. Many observers have pointed out that the main exports from Africa are extremely vulnerable – plummeting oil and commodity prices, a sharp reduction of tourism and of many agricultural products (especially fresh fruits, vegetables and flowers) and weaker currencies. The ministers said the Continent’s development partners should consider a debt relief and interest rate freeze over a 2 to 3 – year period for all African low-income and medium-income countries and they called for a $100 billion stimulus package, including a suspension of debt service payments.
The African Development Bank (AfDB) estimates that Africa’s total public debt, under the best-case scenario, could increase from $1.86 trillion at the end of 2019 to over $2 trillion in 2020, compared to $1.9 trillion projected in a ‘no pandemic’ scenario. According to AfDB’s March 2020 report, these figures could reach $2.1 trillion in 2020 under the worst-case scenario. The bank has committed up to $50 billion over 5 years in projects to help with adjustment costs that Africa will face as it deals with the knock-on effects of Covid-19.
The World Bank concurs, saying that Africa is headed towards its first recession for 25 years, which can mainly be attributed to disrupted value chains, reduction in FDI and remittances, and direct hits to sectors such as tourism and oil. While no industry can truly be recession-proof, the World Bank believes that tech-enabled sectors may be more likely to withstand these shocks. Both Emerging Markets Group identifies 3 sectors that are likely to survive and even grow in the face of the economic crisis: – fintech and mobile payments are likely to become more popular, spurred by stay-at-home orders and debates over the risk of infection due to the handling of cash. Other growth services include teleworking, video streaming, gaming and ecommerce platforms. Several education innovators have developed new, promising solutions to enable students to continue learning while at home. And finally, technology is helping the African countries bridge their healthcare gaps by providing software for self-assessment and symptom checking freeing doctors to attend to severe and urgent cases. A new UNCTAD study shows that the pandemic has massively disrupted key services sectors, especially tourism, hospitality and retail. This contrasts with the resilience witnessed during the 2008 great recession and the 2011-2013 eurozone sovereign debt crisis, particularly in comparison to trade in goods. The study has found that in the eurozone, the purchasing manager’s index (PMI) indicator, a measure of prevailing economic trends, in services and the composite PMI both contracted from above 50 points in January to minus 28.4 and minus 31.4 respectively by mid-March. The UNCTAD study concludes that developing countries must continue to nurture exports of personal services as an important source of income and to fast-track and upgrade skills in knowledge-intensive skills, such as those powered by ICT, in the future.
However, although the coronavirus crisis is boosting ecommerce as more people shop online all over the world, the least developed countries (LDCs) are not adequately prepared to tap the ensuing opportunities. UNCTAD’s rapid eTrade readiness assessments conducted in Benin, Mali, and Niger found that those 3 west African countries need far-reaching reforms to seize the benefits of online commerce https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2352&Sitemap_x0020_Taxonomy=UNCTAD%20Home;#2140;#e-Trade%20for%20All;#1713;#Information%20and%20Communication%20Technologies
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