Impact of Covid-19 on the African Continent
07 April 2020
What are the likely global impacts of COVID-19 on international trade and investment?
UNCTAD predicts a drastic drop in global FDI flows by up to -40% during 2020-2021, reaching the lowest level of the past two decades. Covid-19 risks accelerating pre-existing trends of decoupling and reshoring driven by the desire on the part of MNEs to make supply chains more resilient.
The ramifications of Covid-19 on Africa will be compounded due to the oil glut in global markets and historically low prices. Exports of petroleum and petroleum products ($131 bn in 2018) account for a major share of the continent’s total exports (27%).
The pandemic could also have an important effect on food security if major cereals exporters adopt export bans, as experienced during the 2007-2008 food crisis. Production of major food items, particularly cereals, is concentrated in a few big countries where COVID-19 is in its expansion phase. There are also indications that some large cereals producers, including Kazakhstan and Vietnam, have suspended exports of wheat flour and rice, respectively, as a result of COVID-19.
How can international trade and the flow of goods and services be secured amid rising trade restrictive measures?
Africa relies on external supply for more than 90% of medications. Producing medical supplies for Africa to deal with the Covid-19 pandemic inside the continent is an important step forward. For example, Senegal (DiaTropix) announced to soon roll out rapid Covid-19 diagnostic kits with the support of a UK firm (Mologic) in a mirror manufacturing process that could be scaled up to meet demand from the entire continent.
We also need to keep Africa’s supply chains and borders open. This means expediting shipments for relief and medical consignments, paperless pre-arrival processing and digital solutions to respect social distancing. Governments need to keep on-line trade information and help desks operational 24/7.
Africa’s ports should remain open for ship calls with proper protection for seafarers and port workers. Land-locked countries, need to maintain their port access. Our TF partners in Africa are telling us that transit is indeed already being impeded by increasing health controls slowing down the flows of goods.
We are working with ports and port communities in Ghana, Benin, Cameroun, Côte d’Ivoire, Mauritania, Sénégal , and Togo, as well as South Africa to develop a list of best practice measures and a crisis protocol framework to ensure that flow of trade is secured amid rising trade restrictive measures
What collective responses can help overcome immediate and long-term impacts of COVID-19?
Mitigating the recession and accelerating the recovery requires coordinated efforts. These include linking fiscal stimuli to investing in SDGs sectors and financing SDG bankable investment projects to contribute facing the recession and accelerate recovery.
Equally important will be the coordinated efforts aiming at restarting and repairing damages to global value chains and supply networks.
What role for MSME) in driving the economic recovery and policy responses to support them?
Sustaining business operations is particularly challenging, if not impossible, for MSMEs that are badly hit by lockdowns, quarantine policies and social distancing. SMEs make up 90% of the economic engine of developing countries and employ the most people.
MSMEs’ capacity to re-start their operations and drive economic recovery will be hampered by different countries “re-opening for business” at different stages. They’ll face broken supply chains, cash flow constraints. MSMEs may also need to innovate new business models adapted to new consumer’s habits that may emerge as a result of the crisis.
Specific policy support should include active fiscal policies to support a fragile MSME sector; entrepreneurship-oriented instruments assisting MSMEs re-organizing their business; on-line business platforms and the use of IT-enhanced tools to guarantee business continuity; supporting the MSME investments in advanced technologies. There should also be specific focus on post COVID 19 measures addressing most vulnerable groups of entrepreneurs, like women and youth.