Africa and Covid-19: Searching for new economic strategies?

It is still too early to say which way the virus will turn on the African continent. Yet in some 60 contributions over the last 3 and a half months this blog has chartered some of its path so far, describing the plight of market women in Cameroon and the travails of migrants in West Africa; pointing out the accompanying threats to press freedom everywhere and the business model of religious institutions in Nigeria; looking at how conflicts in Mali, South Sudan and at the Horn of Africa are being exacerbated through the pandemic and how China adapts its Africa strategy to Covid-19; but also showing how African countries have learned to fight multiple diseases and how African photography is starting to “own its stories”; and providing us with feminist perspectives and economic prescriptions.

In many countries the infection rates are rising at an alarming rate, in others, they are declining, in still others, the number of people infected daily remains the same. A closer look at the respective statistics reveals that on some days there are no reports at all, that figures are occasionally corrected retrospectively or that the course of events appears erratic, which is rather untypical for pandemics. With the exception of the island states Mauritius and Cape Verde, the number of tests per one million inhabitants is below the worldwide average; barely one-third of the African countries do not report at all about the number of tests accomplished. Thus, statements about the spreading of the virus in the respective population are not very meaningful and conceal the reality. The death figures are still fortunately comparatively low, which is partly due to the high proportion of very young people.

At the national level, governments usually continue to focus on crisis management. The primary concern is to care for the sick and maintain the few intensive care units, to introduce social measures for those directly affected and to prepare support measures for the private sector. To a large extent, this is done with the help of foreign partners, either bilaterally or with multilateral institutions. Technical assistance and the facilitation of debt service through interest rate moratoria and the postponement of loan repayments are at the forefront of discussions.

Little official thought is given to the medium and long-term economic and social consequences of the global pandemic. However, it is true that the International Monetary Fund (IMF), the World Bank, the OECD, and the African Union are constantly publishing new figures on the extent to which the contraction of the economies in Europe, Asia and America will affect the continent's growth rates in the coming years. The IMF estimates that the continent's economic output is expected to shrink by up to 2 percent this year. Only six months ago, growth of 5 percent was predicted. With an annual population growth of 2.7 percent, average incomes are under severe stress.

In view of the heterogeneity of African societies and economies, no recommendations for action can be deduced for an individual country from the global data. Oil-exporting countries such as Nigeria, Algeria, and Angola will lose half of their export earnings in 2020. The prices of African agricultural products such as cotton, palm oil, and soybeans have fallen sharply since March of this year. Rice, on the other hand, which has become the most important foodstuff for African households, especially urban ones, has become more expensive. Additionally, the transfer payments made by African migrants to their families on the continent are likely to fall by about a quarter this year. Countries such as Gambia, Cape Verde, or Lesotho, for example, whose national income is covered by transfer payments to the tune of more than 10 percent and where more than a third of the population depends on them, are extremely affected. Many people will have to tighten their belts.

The cooling-down of the demand in industrialized and emerging countries highlights the need for structural transformation of African economies, which are mostly dependent on commodity exports so that external shocks have less of an impact. However, this requires not only reforms in the countries themselves but also a transformation of international trade relations in such a way that investments in national and regional value chains are worthwhile, productivity in agriculture and manufacturing rises, and jobs are created in Africa.

A strategic reorientation requires answers to a number of questions, which must of course be tailored to the respective national framework conditions.

Firstly, it must be clarified to which markets national production should be geared to. Although Africa's trade flows have shifted more strongly to East and Southeast Asia in recent years, they are - like their previous main markets in Europe concentrated on unprocessed products and raw materials. However, diversification and value creation make it necessary to pay greater attention to domestic and regional markets. The creation of the African Free Trade Area only provides the legal framework for increased intra-African trade; political will and political action are essential for its realization.

Secondly, it must be determined which value chains are to receive special support. In addition to the sales markets already mentioned, selection criteria are the availability of local raw materials, employment effects, and effects on upstream and downstream sectors.

Finally, allocation decisions have to be made that relate both to the physical infrastructure (energy supply, transport, and communication) and to human capital (education, health, social security).

The current great willingness of international partners to support the African continent should be used to design and implement such national strategies. Will African governments utilize the shock of Covid-19 and the lessons from the pandemic to search for new and homegrown approaches to a sustainable and more inclusive economic transformation? The clarion call was loud enough …


Hans-Joachim Preuss is the resident representative of the Friedrich-Ebert-Stiftung in Cotonou/Benin and co-host of this blog.