Economic Consequences of Covid-19 and Structural Changes in Africa. Mali case study

African economies are experiencing their first recessions in more than 25 years. Indeed, due to the Covid-19 crisis, growth in sub-Saharan Africa will have retracted sharply from 2.4% to -5.1% on average over this year 2020. Under the combined effect of the disorganization of trade and value chains, the World Bank estimates the production losses linked to the pandemic at between $37 and $79 billion in 2020, penalizing commodity exporters and countries that are highly integrated in global commodity chains such as Nigeria, Angola and South Africa.

In the case of Mali, the consequences are disastrous: growth forecasts for the year 2020 dropped from 5% to 0.9% with an immeasurable impact for an economy whose stimulating engine is the informal sector. Even prior to the regulated agricultural sector, the informal economy is the main source of employment throughout the national territory, accounting for more than 60% of gross domestic product (GDP). 99% of the Malian companies operating there provide 95% of the jobs created; the informal sector alone accounts for 70% of economic activity. For a country whose economic actors live hand-to-mouth, restrictive measures such as border and market closures, and lockdown of populations, presented as the most effective solutions for slowdown of the transmission chain, are a "Malian chimaera" without accompanying measures understood and shared by economic operators.

The tertiary sector, dominated by trade, administrative activity and other services, is the most dynamic sector that has already contributed 38% of the GDP as at 2019. However, it is well known that the Malian economy remains structurally very poorly industrialized with a manufacturing sector that is struggling to develop. This situation partly explains the country's high import requirements and a current account deficit that amounted to 5.4% of the GDP in 2019; including a structurally low tax revenue mobilization (representing 14.3% of the GDP), below the West African Economic and Monetary Union (WAEMU) standard of 20%.

Against this background, the eventual closure of borders will lead to a decrease in the mobility of people, goods, services and capital. Mali, which depends largely on the import of goods and services, will see its stock of foodstuffs diminish in the long term. This decrease will present an opportunity for sellers to increase prices. The resulting inflation will generate a fall in household purchasing power and consequently diminish domestic consumption. In order to protect themselves against a sudden virus outbreak, households will make sporadic purchases in order to build up reserves. In both cases, public procurement policies should be implemented to avoid stock shortages, which are a source of loss of purchasing power.

As regards the health sector, more than 90% of the medical drugs consumed are imported, and the limited number of health care personnel in addition lacks the necessary professional knowledge. Healthcare materials are limited or even non-existent in some hospitals. This is the time to reflect and design a large-scale investment plan for the health sector, through training, recruitment, hospital construction and the provision of essential equipment. It is in this respect that the current crisis shall become an opportunity for Mali to redress its governance and stand up for the well-being of its people.

Covid-19 has further reinforced the need for more national autonomy in terms of production and stimulation of domestic demand. Indeed, in a situation of border closures, macroeconomic policy orientations are actually domestic, and each State is solely concerned with meeting its domestic needs. This is the reason why the current health crisis is exacerbated owing to the structural impact.

The current crisis is an opportunity for the country to rethink its policies through the establishment and implementation of a strategic vision at the national level, taking into account the potentials of each region, with a diversified industrial sector, on the basis of primary sector raw materials as a common thread. Education policies must therefore adapt to this changing and uncertain context. Institutional governance must be of good quality, and public policy coordination capacities must be up to standard.

Waste of public resources and privatization of the state-owned apparatus for the benefit of an organized gang among cronies and the irresponsibility of certain state officials must be stopped to make way for more virtuous governance.

Etienne Fakaba SISSOKO is a Professor at the Faculty of Economics and Management, USSG of Bamako/Mali and a Researcher at the “Centre de Recherche et d'Analyses Politiques, Economiques et Sociales du Mali”.