The Coronavirus continues to spread globally with more than 15,210 cases in Africa alone. Many countries have had to implement lockdown measures as a response to stop the spread of the virus, effective by closing the borders and applying local and cross border travel restrictions.
The pandemic has forced African countries to make difficult decisions to prioritize saving lives while allowing the economy to fail. The African economy is struggling, and additional financing is urgently needed to facilitate relief measures such as improving the capacities of the health system, supporting business and vulnerable citizens.
The Economic Commission for Africa (ECA) estimates that Africa may lose half of its Gross Domestic Product (GDP)with economic growth falling from 3.2% to about 2%. This loss is largely due to the continent’s economic linkage to other affected economies of the European Union, China and the United States. The pandemic has disrupted the global supply and value chains and the ECA has further estimated that African countries will need more than US$10.6 billion for expenditure in the health sector to stop the spread of the virus
With limited domestic financing options, African countries will have to borrow more money. The emerging challenges from the pandemic require significant additional financing. Considering our narrow tax bases in Africa which have weak tax collection mechanisms and also the significant dependence on commodity revenues has limited Africa’s response to the Coronavirus African countries need significant additional financing to develop new policy responses or approaches to overcome the emerging socio-economic challenges.
At the regional level, the Southern Africa Development Communities (SADC) have been working to harmonize and coordinate their efforts to respond to COVID-19 in the region. Mechanisms have been put in place to share capacities and expertise in this emergency and to draw experiences from other continents. The immediate priority for most African countries is to save the lives of people but at the same time, all the lockdown measures have resulted in an economic downturn and this has, in turn, hurt the livelihood of many citizens within the region.
As the impact of the Coronavirus takes its toll, the lockdown measures and travel restrictions have resulted in the loss of income, unemployment, limited access to health care and reduced remittances to families of migrants, among other challenges. We discuss a few sectors that have been affected by the pandemic and are the main economic activity for the poorest and most vulnerable in southern Africa.
The Informal Economy
The informal sector in developing countries contributes to about 35% of GDP and employs more than 75% of the labor force. According to the World Bank, this sector covers 89% of employment in sub-Saharan Africa. During this pandemic, citizens participating in the sector have lost their income due to the closure of trading places. Also, most of them do not have pensions and unemployment insurance schemes available to them. The African Union (AU) assessment of the impact of the Coronavirus has estimated that nearly 20 million jobs could be lost in both formal and informal sectors.
An urgent response to support citizens in this sector is to provide financial support for the loss of income, so they can access their necessities during the lockdown period.
The COVID-19 is a potential threat to food security in southern Africa because of the reduced agricultural productivity. The World Bank estimates that agricultural production is likely to contract between 2.6 percent and 7 percent particularly if trade blockages continue to be imposed. Furthermore, food imports may also decline substantially from 13 to 25 percent due to a combination of higher transaction costs and reduced domestic demand. Furthermore, border closures have affected the movement and supply of food. Transport restrictions are affecting the supply of fresh foods. Relief measures should be directed towards ensuring citizens have access to food.
Also, the lockdown measures have meant the labour force available in the agriculture sector has reduced. This has impacted how much food is being produced. Vulnerable groups such as smallholder farmers are not working on their fields, affecting their agricultural productivity. Markets are closed therefore they cannot sell their produce. Migrant workers, particularly seasonal workers working on farms, have returned home, losing employment and income.
The weakening of African currencies will eventually lead to increased inflation. The immediate response to COVID-19 by central banks has been to cut interest rates to support the economy, which has assisted some countries to remain in single-digit inflation. Despite these efforts, the African currencies have continued to weaken due to Chinese demands subsiding sharply. For example, the South Africa rand shed 5% against the US dollar and the Zambia Kwacha lost 3%.
Barriers to Trade
Limited trade is taking place due to the lockdown measures and travel restrictions that have affected the movement of people as well as goods. As of March 29, 2020, 31 African countries had closed their borders . The closure of the border has affected cross border traders. They have been unable to undertake trade whilst they contribute to 30-40% of SADC intra-regional trade. Most of these small-scale traders are involved in agriculture commodity trade and women are mostly affected by these measures. 70% of cross border traders are estimated to be women and the value of trade conducted by women in the SADC region is approximately US$20 billion annually. Whilst we fight the COVID-19, how do we keep the borders open? It is a dilemma, whereby on one end trade must continue to happen but we must contain the virus.
At a global level, African countries participating in the global trade has slowdown and there has been a fall in commodity prices. One of the major export destinations for Sub-Saharan Africa is China, but the pandemic has slowed down economic activities that reduced the demand for Africa exports.
At a regional level, SADC has responded to adopt regional guidelines to facilitate trade and at the same time, contain the virus. The guidelines aim for the harmonization and facilitation of the movement of critical goods and services across the region during COVID-19. To limit the spread of COVID-19, SADC will implement transport-related COVID-19 measures in cross-border transportation, facilitating the flow of essential goods such as fuel, food and medicines. The guidelines will also limit unnecessary and mass movement of passengers across borders and reduce the close contact between the customs, border officials and traders. The implementation of simplified trade and automated systems at the borders can expedite the movement and clearance of goods.
Weak Health Systems
The response to COVID-19 can only be as good as our health system, to contain the spread of the virus. In the southern Africa region, our health system is very weak because of limited staff capacity, lack of medical equipment, poor management of health facilities, and no available medicines to administer to patients.
With the outbreak of COVID-19 and limited funds available to respond by policymakers, national governments will need to fundraise to prepare for a possible surge in cases. This surge will require purchasing new medical equipment such as ventilators, testing facilities, etc.
Most African countries will have to borrow more money to support the health sector,which will increase the country’s indebtedness and limit support to other sectors. The health sector expenditures are mostly covered by donor financing. For example, in Zambia, donor financing covers 43% of total health care expenditures.
The low health service coverage in Africa is also caused by supply barriers, weak health system and low population density causing service delivery to be expensive. With limited economic activity taking place due to the pandemic, countries have limited resources to invest in and respond adequately to COVID-19.
How Has COVID-19 Affected Vulnerable Groups and Citizens?
As African countries have been rapidly urbanizing, it is estimated that at least 50 to 70 percent of the urban population are living in slums. These areas are densely populated which has posed a challenge to reach these communities during the pandemic. We must assess whether reliable information on the COVID-19 is reaching these groups and the appreciation among these groups on the importance of social distancing and quarantine methods.
There are an estimated 80 million young people in vulnerable employment and 110 million who are not contributing to the economy. The pandemic could increase the number of unemployed youth and loss of income.
In the densely populated communities, several young people who have limited activities due to the lockdown, school closures may begin to engage in activities that may have long-term consequences leading to changes in behaviour and lifestyle. Female youth are even more vulnerable to dropping out of school because of the long closure.
The high prices resulting from panic buying and the economic downturn has affected the livelihood of many citizens. The closing down of markets, shops and restaurants has meant the loss of employment and income for the poor and vulnerable, particularly those in the informal economy. Women are the most vulnerable in the informal sector. In Uganda for example, which is a similar story for most SADC countries, over 70% of women are working in the informal sector. The closure of markets has meant a significant loss of income to meet their necessities such as food.
Another group significantly impacted by the pandemic are migrants and migrant workers, some of whom have lost their jobs. Travelling back home for migrants has meant a loss of income for many families. Others have become stranded because they are unable to go home. In a scenario where funds are available during this lockdown period, there are limited remittances services. Migrants are unable to send money home because the money transfer services are closed and are categorized as a non-essential service. It is important to note that an estimated number of 3.3 million migrants in South Africa send at least 11 billion Rands to other SADC countries in a year.
Migrant mineworkers have also returned home, many that are affected with occupational diseases such as Tuberculosis and Silicosis are unable to access health care because of travel restrictions within the region. Most of them, because of pre-existing conditions of Tuberculosis and Silicosis, are more vulnerable to contracting COVID-19. They need support to access health treatment and most importantly, enough nutrition.
There is an urgent need for the policymakers, civil society and private sector to act together to stop the spread of the pandemic and safeguard livelihoods in the region.
As the Southern Africa Trust, we will utilise our strategic positioning within the region to facilitate dialogues and implement actions that will contribute to finding lasting solutions to assist the most vulnerable in the region during the COVID-19 Pandemic. We also create opportunities for the voices of those most affected to be heard in relevant policy spaces. We will organise dialogues with key stakeholders to ensure that policies and action undertaken to stop the Coronavirus, will integrate the priorities of the poor and vulnerable in the region.