AFRICA should turn the current Covid-19 into an opportunity to create economies that are resilient to external shocks, according to a latest report by the African Union (AU) on the impact of the pandemic on the continent.
While African countries are relatively less affected compared to other regions for now, the spill over effects from global developments or broken down supply chains may lead to faltering economic activity in the continent.
The AU has projected that Africa’s growth will drastically fall to a negative rate of 4,49 percent this year due to Covid-19 ,which has negatively impacted on tourism, travel and exports.
The African Development Bank had projected Africa’s GDP will grow by 3,4 percent. With falling commodity prices, declining governments’ resources to finance public investment, it would be impossible to achieve this optimistic forecast of growth rates in 2020.
The highly dependency of African economies vis-à-+vis foreign economies predicts a negative economic spin-off for Africa, evaluated at an average loss of 1,5 points on economic growth 2020. Besides, it is practically impossible for the continent to take an economic advantage of the Covid-19 in other parts of the world due to its inability to transform its raw materials to respond to the potential high demand of goods and services.
Declared a pandemic by the World Health Organisation (WHO) on March 11, 2020, the highly contagious disease has become a global emergency, given its devastating effect on the entire global population and the economy. The crisis caused by the coronavirus pandemic is plunging the world economy to depths unknown since the Second World War, adding to the woes of an economy that was already struggling to recover from the pre-2008 crisis.
Beyond its impact on human health (materialised by morbidity and mortality), coronavirus, is disrupting an interconnected world economy through global value chains, which account for nearly half of global trade.
The pandemic has also resulted in abrupt falls in commodity prices, fiscal revenues, foreign exchange receipts, foreign financial flows, travel restrictions, declining of tourism and hotels, frozen labour market among others.
The spread of the virus has reached 50 African Union member states: about 10 500 cases, 1 074 recoveries and 519 deaths; and is showing no signs of slowing down.
Africa, because of its openness to international trade and migration is not immune to the harmful effects of coronavirus.
According to the AU report, nearly 20 million jobs in Africa are threatened if the situation is not contained.
“African countries are extremely exposed to external shocks,” said the AU report published this week.
“A paradigm shift is needed in order to change the trade patterns of African countries within themselves and with the rest of world particularly with China, Europe, USA and other emerging countries.
“Africa should turn the current Covid-19 pandemic into an opportunity to translate the policy recommendations on productive transformation . . . to create economies that are resilient to external shocks and achieve sustainable development.
“Therefore, African countries are advised to diversify and transform their economies by strengthening the productive capacity of African private sector to transform raw materials locally. This will also improve domestic resources mobilisation and reduce the continent dependence on external financial flows, which stands at 11,6 percent of Africa’s gross domestic product compared to 6,6 percent of developing economies.”
The World Bank, in its Africa Pulse April 2020 report also weighed in and said Africa’s policy response to the Covid-19 policy response needs to sow the seeds of future resilience.
“Policy makers and development partners need to think ahead and be mindful of economic policies that build greater resilience and would allow African economies to recover faster and thrive after Covid-19.”
It said only a resilient policy response will help avoid “another lost decade in African development”.
It noted that Africa’s commodity — exporting countries are facing difficult times ahead, as the Covid-19 pandemic looks set to depress prices for years to come.
“Actions taken in the coming months by the governments to ease the economic crisis and make investments for Africa’s economic future will shape the nature of the long-term economic trajectory of these countries,” reads part of the report.— ebusinessweekly.co.zw