The fragility of healthcare systems across Africa has been driven home to me during conversations with healthcare professionals in my home country of Gambia. Pointing out that the country’s public hospitals possessed just two medical ventilators and 300 test kits between them, one doctor quipped, “We were trying to flatten the curve before corona”. The continent-wide prevalence of malaria, HIV, tuberculosis, cholera and malnutrition – and the high occurrence of multi-generational communities living in close quarters – give further reason for trepidation.
The 15,738 Covid-19 cases and 838 deaths in Africa reported by the Africa CDC – as of April 15 – represent a 50% increase in cases and a doubling of fatalities from a week earlier. Urgent preparations should be made for similar growth trajectories to those experienced by Asian and Western countries.
However, the implementation of lockdowns, social distancing and other preventative measures taking place elsewhere in the world pose distinct challenges in Africa. Community-wide lockdowns will not be viable for vendors whose daily survival depends on parading their wares in the Lagos and Accra traffic. While working from home is hardly an option for a Zimbabwean office worker whose cost of data is 289 times that of their Indian counterpart.
The disruption to African economies and businesses is perhaps easier to predict than the unfolding medical upheaval. The recent collapse in the oil price has already been felt in Nigeria, which last week announced a reduction in its budget and a 15% currency devaluation. Recent history tells us to expect similar depreciation for commodity-exporting economies, restrictions in the availability and transferability of hard currency and accentuation of parallel currency markets as central banks fight to support currencies in the face of dwindling foreign exchange reserves.
African countries do not have the ability to borrow cheaply and will be at increased risk of default on existing hard currency loans. The IMF has therefore called for lenders to temporarily suspend debt repayments from the poorest countries and has disbursed a $1bn credit facility to Ghana to ease budgetary pressure. Similar measures will no doubt follow in other countries.
The economic and commercial effects of the spread of Covid-19 are compounded by a supply chain shock caused by the halt in production by Chinese factories. For example, Kenya’s Mombasa Port received cancellation notices from 37 ships in March, and uncertainty remains concerning the fate of more than a hundred more. It led to hikes in the price of imported goods in East African countries dependent on the port. Although this disruption has subsided as China returns to productivity, it illustrates the need for investment in sub-regional and pan-African trade opportunities created by the recently enacted African Continental Free Trade Area.
The effects of this crisis will be writ large in economies throughout the continent by the end of this year. Nevertheless, one can expect a smaller drop in internal consumption relative to other parts of the world, given that non-essential items account for a smaller proportion of consumer demand. In the medium to long-term, Africa’s underlying demographics and emerging middle class, combined with rebounding demand for natural resources, all provide reasons for optimism. As the pandemic subsides, leaders should look to take advantage of global appetite to diversify supply chains and boost local production of Covid-19 related items where possible, given the likely continued demand for such items.
For now, business owners and investors should review portfolios and the assumptions underlying their strategies. Those with exposures in commodity producing countries should explore currency hedges, over the counter deals to minimise currency-related losses. Kenya, Nigeria and Uganda have relaxed VAT requirements in the face of the crisis and businesses should look to take advantage of similar tax relief provisions as they are announced. Early intervention will, in general, minimise losses and protect jobs.
Covid-19 is changing everyday life and disrupting economic activity in an unprecedented manner and Africa will not be immune to the fallout. But past experience has shown that swift and coordinated action at all levels can save lives and protect livelihoods.