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Globalisation linkage to COVID-19: How Africa’s Economy is Impacted?

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Globalisation linkage to COVID-19: How Africa’s Economy is Impacted?

15 April 2020
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Globalisation linkage to COVID-19: How Africa’s Economy is Impacted?
NEPAD
Since the cure for COVID-19 yet to be found, the number of infected is expected to rise day by day until the spread is fully contained in Africa and other parts of the world.

By Seleman Yusuph Kitenge

Since the rise of globalisation, the world has now become like a small neighbourhood where people can easily interact with each other without facing any serious barriers. This has become both beneficial and detrimental to the social, political and economic sphere as far as the welfare of the people is concerned.

Meaning despite the free movement of people, goods, and services led by globalisation being the stimulus to social-economic development, it has also become a source of spreading diseases. As a result, due to the technological development factor of globalisation, an outbreak such as COVID-19 has turned into a major pandemic disease that affected over million people around the world regardless of their geographical location differences.

This is simply because technological advancement which is one of the main forces for globalisation made it easier for people to travel by land, sea and even air from one part to the other without facing any obstacles. In that case, if these people have contacted the disease such as COVID-19 in the city or country (A), they can easily transmit it to the city or country (B) which had no infections if proper healthcare measures are not in place to prevent the spread to the general public.

In the context of Africa in particular, WHO reported that the region had 7647 confirmed cases and 326 deaths of Coronavirus disease 2019 (COVID-19) by 8th April 2020. Therefore, since the cure is yet to be found, these numbers are expected to rise day by day until the spread of the COVID-19 is fully contained in Africa and other parts of the world.

However, the measures used in the process of containing the transmission of the disease since was announced as a global pandemic by WHO and the first case being recorded in the continent up to date, is likely to create major economic shocks resulted by retardation of key economic sectors such as tourism, air transportation, manufacturing industries, and trade. 

According to Brookings  Institute, Africa is the world’s last frontier in the fight against extreme poverty where one in three Africans−422 million people−live below the global poverty line. Consequently, this fact signifies the bigger gap between the have and have not in the continent where the consequences of COVID-19 in the economic sectors will push the efforts to reduce the income gap backward rather than forward and increase the number of people living below the global poverty line.

This fact is cemented by UNDP which stated that the COVID-19 crisis threatens to disproportionately hit developing countries–Income losses are expected to exceed $220 billion, and nearly half of all jobs in Africa could be lost.

Therefore, measures such as national lockdown and many strict mitigation actions taken by governments within and outside Africa to limit gatherings and the mobility of people as a way to curb the spread of the virus will severe the production of goods, provision of services and trade activities. As a result, most countries across the continent will be economically affected by the paralysis of essential economic sectors.

As other parts of the world already started to experience the socio-economic shocks, Africa which has less recorded cases than other continents is also expected to face the same fate if this contagious disease is not fully managed on time to allow countries to go back to normal economic activities.

Having fewer confirmed cases of COVID-19 compared to other regions does not mean that Africa is out of the risk of the disease itself and the aftermath, particularly economic shocks. Economic Commission for Africa projects that Coronavirus's new blow to economic growth expected to drop from 3.2% to 1.8%. According to ECA Executive Secretary, Vera Songwe, “the Continent’s interconnectedness to affected economies of the European Union, China, and the United States was causing ripple effects.”

She reiterated that the continent would need up to US$ 10.6 billion in unanticipated increases in health spending to curtail the virus from spreading, while on the other hand revenue losses could lead to unsustainable debt. The unbudgeted increases in health spending are likely to disrupt other planned development activities due to the rerouting of the funds to address the pandemic. As a consequence, this move may cause serious harm to economic growth and making the effort to end extreme poverty almost impossible.

ECA states that COVID-19 could lead to Africa’s export revenues from fuels falling at around US$ 101 billion in 2020. ECA  further states that remittances and tourism are also being affected as the virus continues to spread worldwide, resulting in a decline in FDI flows; capital flight; domestic financial market tightening; and a slow-down in investments - hence job losses.

Notably, unemployment is already a major concern in African countries since the public and the private sector does not produce adequate jobs to cover the majority population especially new graduates. This leads most people to be forced to create alternative employment for themselves by establishing small businesses as well as engaging in agriculture activities etc.

Hence, if they are forced to close as a result of Coronavirus disease 2019, then losses of jobs are likely to escalate. On the other hand, most Africans who are based on rural settings depend on agriculture activities for subsistence.

Hence if these majority farmers both small, medium and big along with their labourers cease to operate means another wave of job losses in the agricultural sector which employ most Africans. Statistically, Mckinsey & Company describes that more than 60% of populations in Sub Saharan Africa are smallholder farmers and about 23% of the GDP in the region comes from agriculture.

Arguably, the ceasing of agricultural activities owing to COVID-19 pandemic means losses of 60% jobs of those involved in the sector in the Sub Saharan Africa region. Also, unmanaged farms may produce fewer crops than usual leading to the decline of the GDP affected by less production in the agriculture sector if the crisis is not contained soon enough.

These repercussions in key economic sectors in Africa will have severe damage to the prosperity of its people and hinder the efforts to achieve the continental development blueprint, Agenda 2063 as well as the global development blueprint, Agenda 2030 respectively.

However, ECA advises that African governments could review and revise their budgets to reprioritise spending towards mitigating expected negative impacts from COVID-19 on their economies. This entails that if Africa plays its card correctly the chance of saving its economy from the aftermath of Coronavirus disease 2019 is still valid.

Africa: Corona Virus new blow to economy Growth expected to drop from 3.2% to 1.8%

Africa: Corona Virus new blow to economy Growth expected to drop from 3.2% to 1.8%
Africa: Corona Virus new blow to economy Growth expected to drop from 3.2% to 1.8%
ECA
Announcement