The COVID Lockdown And The Economy
There are conflicting reports on the economic effects of the pandemic on Africa. While the SA Finance Minister has reported that SA’s economy will shrink by 7.4%, other African economies are proving their resilience. Standard Bank expects East Africa’s economy to grow by 2.2% this year, thanks in part to Kenya. While that would be a reduction from the 6.2% growth rate achieved in 2019, the fact that the region is expected to grow in the face of a deep global recession highlights the progress these economies have made. Further, the region’s growth comes despite major disruptions to some of its biggest industries, including tourism, horticulture, and foreign remittances; combined with the largest locust invasion and severe floods. Kenya has lowered tax rates for corporate and personal income, turnover tax, value-added tax and provide tax relief to low-income earners and employees. Uganda, on the other hand, will clamp down on tax compliance and raise some levies to collect more revenue for the economy and also to boost local industries and protect them against cheap imports. Tanzania is seeking as much as $272 million from the IMF’s Rapid Credit Facility and is in talks with bilateral creditors for debt relief.
Meanwhile, rating agency Fitch has warned that government debt burdens across sub-Saharan Africa are rising at a faster pace and to higher levels than elsewhere in emerging markets, heightening the risk of further rating downgrades and defaults. Africa’s main oil exporters – Angola, the Republic of Congo, Gabon and Nigeria – have been hit particularly hard given their high reliance on oil revenues for fiscal and external financing, and the dependence of the rest of their economies on crude oil earnings. Countries with a concentration on tourism, particularly Cabo Verde and Seychelles, have also been badly affected.
The World Trade Organisation (WTO) in a new report ( here.) points out that most lesser developed countries (LDCs) have experienced a significant decline in export earnings since the outbreak of COVID, and anticipates that the downturn in world trade in 2020 will continue to impose a particularly severe downturn on exports of textiles and clothing. The report stresses that the pandemic is undermining the development gains of countries such as Angola that were expected to graduate from LDC status in the near future. The report also notes that the international community is seeking to support LDCs’ participation in world trade by providing debt relief and strengthening social sectors. When borders around the globe are close, every country suffers, but those without access to the sea are affected in unique ways. The United Nations is urging governments to provide smooth transit transport for landlocked neighbours. On average, these 32 vulnerable nations lag behind the world average by 20% in the UN’s human development index. One-third of their 440 million inhabitants live in extreme poverty, 51% face food insecurity daily, and 40% lack access to electricity.
Another vital issue is the world’s reliance on maritime transport which makes it more important than ever to keep ships moving, ports open and cross-border trade flowing, and to support ship crew changeovers. UNCTAD and the International Maritime Organization have called for the urgent need for “key worker” designation for seafarers, marine personnel, fishing vessel personnel, offshore energy sector personnel and service personnel at ports. The UN bodies say that governments and local authorities must recognize that these workers provide essential services, regardless of their nationality, and should thus exempt them from travel restrictions when in their jurisdiction.
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