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Opinion

Preparing for the Covid-19 recession in sub-Saharan Africa

Published on 10 July 2020

Image of Gerald Bloom

Gerald Bloom

Research Fellow

Kevin Deane

Most sub-Saharan African countries have not yet experienced a major Covid-19 outbreak, and governments have already taken action to reduce its impact. But if the objective of the response of governments and international organisations is to reduce excess mortality in Africa, they must not concentrate only on one illness, and their actions should take into account the need to protect livelihoods and health during a possible economic crisis.

Risk of recession in Africa

The World Bank’ Global Economic Prospects predicts that GDP in sub-Saharan Africa will shrink by 5 per cent in 2020. Many African economies depend on export commodities like oil, gas, coal, and minerals, whose prices have plummeted as world-wide measures to contain the pandemic have reduced travel and global industrial activity.

Remittances from Europe and North America have been forecast to contract, reducing disposable income for a large proportion of African households. Worth in excess of $550 billion worldwide, remittances have become the largest source of external financing in developing countries, representing 10-15 per cent of national GDP in Gambia, Cape Verde, Liberia, Zimbabwe, Senegal and Nigeria.

The tourist industry employs 19.7 million people, accounting for over 6.5 per cent of GDP in sub-Saharan Africa. Many countries, such as South Africa, Namibia, Zimbabwe, Cape Verde, Kenya and Tanzania, rely on tourism as a source of investment and foreign currency; but with the predictions that tourism will contract by 20-30 per cent in 2020, damage may accrue to this nascent sector as well as to the livelihood of many households. Falling exports and remittances, together with the flailing tourism industry have created a scarcity of dollars and currency volatility, which may consolidate in the depreciation for the more exposed African currencies.

The health costs of a Covid-19 recession

It has been estimated that Covid-19 could push an extra 71 million people into extreme poverty in 2020. Africa’s underlying conditions – its high prevalence of malnutrition, diarrhoea, tuberculosis, HIV-AIDS and malaria, its fragile health systems, and lack of social protection programmes are likely to compound the effects of a Covid-19 recession.

Food production in Africa has already been disrupted this year by natural disasters and the largest locust infestation in a generation, with the substantial risk that the next harvest will fail, particularly in the Horn of Africa. Measures to slow the progression of the pandemic by promoting social distancing and shutting down businesses and services carry dramatic consequences for trade and national economies where 60 per cent of employment is in the informal economy.

Sub-Saharan Africa’s health systems are underfunded, fragmented, and of poor quality, with an average expenditure of less than $80 per capita, or 5.5 per cent of GDP. Many key services like immunisations and medical supplies procurement are traditionally supported by international donors and carried out by external organisations, who are likely to at least temporarily reduce their engagement because of their own domestic crises. Disruptions in the supply-chain for antiretroviral drugs and vaccines – procured and shipped internationally – are to be expected. The Covid-19 recession is likely to compromise Africa’s patchy progress towards Universal Health Coverage, deteriorating depth and quality of services, as well as the population’s ability to pay for them.

What can be done?

If the pandemic takes hold, funds will certainly need to be directed towards action to test and treat patients. But African governments need to look at the implications of the economic recession that is already unfolding, and identify solutions that take into account falling commodity prices, Africa’s debt crisis, and the likely absence of international donors preoccupied with their own domestic crises.

Stimulus measures are needed to sustain local economies and keep people out of poverty. Payroll support to existing businesses will be more suitable than unemployment benefits, with an eye on keeping businesses afloat, weathering the storm and trying to reopen as soon as recovery starts next year, as predicted. However, many governments in Africa are in too weak a fiscal and monetary position to increase social spending or relax monetary policies. This year, fifteen countries in sub-Saharan Africa spent more on servicing their debt than on public health measures. The temptation to resort to austerity measures to balance budgets should be resisted, as plenty of evidence shows that such policies harm population health and health systems.

The International Monetary Fund and The World Bank have made new conditional credit and financing facilities available for the response to Covid-19 in Africa, and debt moratoria have been put in place to create immediate fiscal space. However, debt forgiveness and grants – not loans – are needed to avoid exacerbating Africa’s debts. Mindful of their own domestic crises, Africa’s traditional bilateral donors have not been forthcoming; but a substantial proportion of fresh funds and debt relief will need to come from them.

The time to act is now

Africa has been here before, and it has felt the pain of pandemics, financial crises, wars and natural disasters. Covid-19 may not have spread as badly in Africa as in the rest of the world, but past mistakes of focusing on a single illness should not be repeated. Realistic preparation and investment needs to be made now to prime health systems and economies for rapid reconstruction and recovery.

 

Giuliano Russo and Kevin Deane are Lecturers at the Queen Mary University of London. Gerald Bloom is a Research Fellow at the Institute of Development Studies.

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