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Time for an Ambitious Response to COVID-19 from Africa - FBNQuest

Oct 09, 2020   •   by   •   Source: Proshare   •   eye-icon 1056 views

Friday, October 09, 2020 / 03:30 PM /by FBNQuestResearch / Header Image Credit: UNOWAS

 


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The international media have picked up on the themethat "Africa has done all right" in the fight against COVID-19. This isunderstandable in terms of the number of cases and deaths: 1.3 million casesout of 35.8 million globally and 37,000 deaths out of 1.0 million globallyaccording to the EU's European Centre for Disease Prevention and Control. Asmany as 680,000 cases and 17,000 deaths have been reported from just onecountry (South Africa).

 

We hear the rejoinder that the data are suspect andthat the number of cases for Africa appears low because the scale of testinghas been relatively low. The release of data has been fiercely contested in advancedeconomies due to different methodologies.  The point about testing is morevalid. In the past month airports, schools, restaurants and places of worshiphave been reopened in many African countries. We can say that Africa has doneall right if it is not subjected to a second wave (as much of Europe has).


Public resources were already stretched before theemergence of COVID-19 and have been hit since by the fall in tax revenue acrossthe continent. Governments have not been able to throw money at the problem asthe Organisation for Economic Co-operation and Development (OECD) states havedone. However, they entered the crisis with some transferable expertise fromcombating Ebola in West Africa and in eradicating polio.

 

That said, the economies have taken a hammering fromCOVID-19. Taxes on spending, income and commodities have all plummeted. Thesupport from multilateral agencies, led by the IMF's conditionality-freefacilities to tackle external shocks such as COVID-19, has not been adequate tocover the gap. The result is that worthwhile infrastructure projects, which areone of several proven routes out of underdevelopment, have often been deferred.

 

With a few exceptions such as gold, commodity pricesare far lower than they were pre-COVID. Tourism, particularly at the high end,is vulnerable to changing trends. Expensive holidays in, for example, Namibia,Rwanda and Mauritius have become much harder to sell. We are talking carbonfootprint as well as COVID-related fears.

 

Foreign direct investment (FDI) inflows are expectedto decline by between 20 and 40 per cent this year according to the UnitedNations Conference on Trade and Development (UNCTAD). For remittances, theWorld Bank anticipated a fall of 20 per cent for emerging and frontier marketsin March. In this uncertainty, these are brave forecasts but the multilateralsare expected to make them. Q2 2020 data for Nigeria show remittances down byover 30 per cent year-on-year although the picture is much better in Kenya. Forforeign portfolio investors, there was initially a huge exit from all emergingmarkets, put at US$90bn in March alone. This is the estimate of the independentInstitute of International Finance in Washington, which thinks that about halfhas been recouped.   

 

There are some obvious winners in terms of industriesfor Africa as elsewhere. Payment platforms, mobile operators and e-sales ingeneral spring to mind, and we should mention the opportunities for offshoringas multinationals identify the savings from moving back office functions to newand cheaper jurisdictions. Sadly, there are losers too, horticulture in Kenyabeing one of many. 


We will feel more comfortable if Africa avoids a majorsecond wave. The youth of the population may prove critical in this respect.The economic damage has been huge however, and the resources to drive arecovery are limited. This is the time for the settling of differences betweenstates and the pushing of bold reforms. Where better to start than a grandproject about which we have had many doubts, the African Continental Free TradeArea which is scheduled to become operational soon?.

 


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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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