Africa like many regions across the world had a turbulent 2020.
The COVID-19 crisis tossed the continent in several directions and threatened to sink many of its economies. While countries across the continent have managed to curb the spread of the virus and are working actively towards a vaccine rollout, the anxieties unleashed by the pandemic from the previous year still persist.
The region experienced its first recession in 25 years, threatening to upend decades of hard-won economic progress. According to the World Bank, economic activity contracted by 3.7 percent last year, and growth is forecasted to remain at an average pace of 3 percent between 2021 and 2022.
As the rest of the world gets jabs, Africa risks being left behind. This has severe ramifications for its debilitating economy and its already vulnerable 1.3 billion citizens. There is also an imminent risk that living standards will drop dramatically with millions of people being pushed into extreme poverty, erasing all the progress made in the past decade.
In Nigeria, the most populous nation on the continent, the decline in oil prices combined with the nationwide lockdown forced it into its second recession in 5 years with the economy shrinking by around 4.1 percent in 2020. However, Nigeria is slowly nursing its economy back to life. It recently came out of its recession in the fourth quarter as growth in the agriculture and telecommunications sector offset the drop in oil production and led to a weak 0.11% increase in GDP growth.
In South Africa, rising COVID-19 cases, low commodity prices, high unemployment, structural challenges and power cuts may worsen its economic position. For the rest of the continent, the picture that has been painted by economic forecasts and estimates is far from idyllic.
The tourism and hospitality industry, which accounts for almost 18% of GDP and 25% of employment, in countries like Ethiopia, Kenya, Seychelles, Mauritius, Comoros, Cabo Verde, and other island nations will slow growth. In West and Central Africa, the decline in growth is expected to be driven primarily by oil exporters whose economies will feel the impact of crumbling oil prices. In non-resource-intensive countries, such as Ghana and Côte d’Ivoire, growth will be sluggish but will remain positive due to robust growth in the agricultural sector.
Despite the challenges that abound in the region, there are also opportunities that can be leveraged to steer the continent away from the brink and accelerate the rate of economic recovery. One of such opportunities is the commencement of trading under the AfCFTA on the 1st of January. The trading bloc has immense potential for the continent in terms of trade, employment generation, regional integration and industrialization. However, its success will largely be dependent on the ability of nations to harness their comparative advantage and foster mutually beneficial relationships.
Beyond the economic consequences, there are also social and political issues that have emerged in the past few months. While most of these occurrences, from #EndSARS to the Mali coup and the Ethiopia Tigray conflict have been looming long before the pandemic arrived, it is still a testament to the fact that a huge proportion of Africans are dissatisfied with the quality of governance and leadership or the lack thereof in their countries.
The chances of things returning to business as usual on the continent are slim. This pandemic deviated from the typical boom and bust cycle that global economies have become accustomed to over the past decades. It was a rude awakening for the entire world on the need to build robust systems and frameworks that can withstand an economic crisis of this magnitude.
This article explores what 2021 holds for the continent, with a focus on the priorities for governments, the challenges that may inhibit growth and the opportunities that can be harnessed to ensure that the region is on the right path to full economic rejuvenation.
- Economic recovery
Recent vaccine approvals raised hopes of a speedier recovery across the world. But, in Africa, the chance of a vaccine-fuelled recovery is uncertain. Moreover, a second wave and a new strain of the virus could hinder expected progress and magnify the negative effects of the pandemic in the short, medium and long term.
Bouncing back from this economic shock is the number one priority of the continent. Nevertheless, what this would look like will vary across countries depending on demographic composition, fiscal strength, policy measures and macroeconomic fundamentals. The level of regional GDP in 2022 is expected to remain below the level forecasted in January 2020. The languid growth is a result of continuous outbreaks in several economies that have prevented the full resumption of economic activity, especially in service sectors such as hospitality and tourism.
The road to economic recovery is threatened by a liquidity crisis driven by COVID-19. African governments spent between 1 to 7% of their GDP in 2020 on stimulus packages and welfare programs. The financing gap in the region is also widening alarmingly – around $290 billion – which will put brakes on the recovery process. In the absence of external financial assistance, several countries will struggle to ensure macroeconomic stability and meet the essential needs of their people.
In 2021, growth will primarily be driven by an improvement in exports and commodity prices as the world economy rebounds, alongside a recovery in both private consumption and investment. It will also greatly depend on how quickly countries are able to vaccinate their population and stimulate economic activity, primarily in non-oil sectors.
To mobilize external support, African authorities must clear the air of uncertainty by committing to improved accountability and transparency frameworks. Several countries including South Africa, Chad, Kenya, Uganda and Cameroon amongst others have put in place mechanisms to monitor and evaluate COVID-19 related spending through independent audits of crisis-related spending and by making crisis-related procurement information publicly available. These measures will not only plug leakages in their economies but will also create a favorable environment to attract foreign investment.
- COVID-19 vaccines,Africa’s best shot at a recovery
The next phase in the fight against the COVID-19 pandemic is vaccination. While Africa has been spared the health costs in comparison to other parts of the world, it has felt the economic and social impact of the pandemic. An effective vaccination strategy is pivotal in reconnecting Africa to the rest of the world and ensuring a smooth post-pandemic recovery.
However, it is not that simple. Africa faces the problem of affordability, availability and accessibility of vaccines.
Many African countries are cash-strapped. The fiscal capacity of African states has further been constrained by the pandemic, and as such financing vaccine procurement and delivery will be a herculean task. The continent will have to rely on COVAX, a co-financing vaccine procurement facility set up to ensure fair and equitable access to COVID-19 vaccines for lower-income countries across the world. This global effort is co-led by Gavi, the World Health Organization and the Coalition for Epidemic Preparedness Innovations (CEPI). COVAX is expected to provide 88.7 million doses of the AstraZeneca/Oxford and Pfizer-BioNTech vaccines to 47 African countries. The COVID-19 vaccine should be available for use in Africa in mid-2021. Even so, it could take years to secure the requisite doses to immunise 60 per cent of the continent’s 1.3 billion people – which is the threshold for achieving herd immunity.
During the WHO Director-General’s opening remarks at the 148th session of the Executive Board, he expressed that “More than 39 million doses of vaccine have now been administered in at least 49 higher-income countries. Just 25 doses have been given in one lowest-income country. Not 25 million; not 25 thousand; just 25”.
These staggering figures have raised many valid concerns on vaccine nationalism and the moral obligation of developed countries when it comes to ensuring equity and fairness in vaccine availability and distribution. Africa might struggle to vaccinate its burgeoning population if the global north insists on this “my country first” approach.
While COVAX is a start, it is certainly not sufficient to meet the vaccination needs of the continent. Likewise, there are several impediments to wide-scale vaccine distribution. These include poor transport infrastructure and distribution systems, fragile health systems to effectively execute large-scale vaccination programs and insufficient cold storage systems to preserve the vaccines at the stipulated temperature. As such, each country will need to design its own vaccination prioritization and distribution strategy to fit its own reality and based on demographic composition and epidemiological data.
- Climate change
Climate change is a hot topic globally. At the end of this year, world leaders are expected to come together in Europe to upgrade national climate plans under the Paris Agreement, reinforcing the urgency of the issue. It is even more heated in Africa as the region is predicted to face the disproportionate impacts of climate change and environmental degradation. Despite having the lowest carbon emissions and contributing the least to global warming, climate change poses a serious risk to African economies, infrastructure, water and food systems, public health, agriculture, and ultimately livelihoods.
In 2019, Africa was severely hit by extreme weather events such as Tropical Cyclones Idai and Kenneth which had far-reaching humanitarian and economic impacts. Countries in Southern Africa such as Mozambique, Malawi, and Zimbabwe were at the forefront of the crisis with around 3 million people being displaced. Drought-prone countries on the continent are also facing food insecurity as the number of undernourished people increased by 45.6% since 2012, according to the Food and Agriculture Organization (FAO).
Climate change will significantly lower Africa’s GDP through channels such as reduced agricultural activity and labor productivity, lowered crop yields and human health costs. Estimates suggest that COVID-19 will cost the world economy up to 5% of GDP. Meanwhile, climate change in Africa is already costing most of the continent’s economies between 3% and 5% of GDP annually with some countries experiencing losses of up to 10% of GDP. This highlights that climate change poses a far greater risk to lives and livelihoods than the COVID-19 pandemic thus far and as such both issues should be treated with the utmost priority.
Climate change also has implications for health on the continent. Africa has a high burden of climate-sensitive diseases and low preparedness and response capacity at the institutional and community levels. The rise in temperatures combined with changes in rainfall patterns will amplify the transmission of infectious disease across the continent by creating an enabling environment for diseases such as dengue fever, malaria and yellow fever to thrive.
The alarm bells of an impending global pandemic have been ringing for several years but, very few paid attention. Climate change is one of the most defining problems of our time and should be adequately addressed as such before it snowballs into a bigger issue akin to the current pandemic we are currently facing. For African countries, attending conferences at Davos and signing agreements is not enough. There needs to be a feasible action plan to ensure mitigation and adaptation at a communal, national and regional level. In the journey towards a post-covid society, climate change should be prioritised to ensure that we meet the needs of both people and the planet.
- The Fourth industrial revolution
The world is on the brink of a fourth industrial revolution which is characterized by technological breakthroughs such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, quantum computing and so on. The 4IR is expected to raise global income levels and improve the standard of living for populations around the world. For example, AI, the Internet of Things (IoT), and blockchain technology can improve data gathering frameworks and analysis which will drive evidence-based and data-driven policymaking at all levels of governance.
In the past few months, the pandemic has emphasised the importance of technology and digitization. Social distancing and lockdown measures forced individuals, firms and nations to reconfigure the way they live, work, learn, relate with one another and even govern. This paradigm shift, fostering what is now popularly termed as the “new normal”, will accelerate efforts towards technological advancement across the world, but Africa risks being left behind again.
Across the various indicators, infrastructure, education and technology access that are necessary for the 4IR, the continent is struggling. Electricity is still epileptic across many countries on the continent, internet penetration is low and data costs are increasingly high. Most of the growth in the continent’s ICT sector has been spearheaded by expanding mobile digital financial services in countries like Kenya, Nigeria and Rwanda. In 2017, Africa only used about 1 percent of the world’s total international Internet bandwidth and the percentage of individuals using the internet in the region was 28.2%, in comparison to the global average of 53.6% in 2019.