*By Omar Thiam
Most African countries face many challenges in improving the health of the population during the Covid-19 period, while promoting a renewed globalisation based on health and social development objectives and not only on economic growth measures.
In recent years, globalisation has come under considerable threat from the rise of nationalism, forcing governments and companies to define new patterns and priorities. This response to the conflicting forces of globalisation and nationalism has given rise to the term ‘slowbalisation’, quoted by The Economist as describing the decline in trade, multinational profits and foreign investment and leading to arguments that we are now past the ‘peak of globalisation’. Covid-19 seems to have introduced additional fear and uncertainty among populations, leading to new behaviours and beliefs. Stakeholders are becoming increasingly wary and skittish.
As African governments rush to strengthen measures to contain the spread of Covid-19 in the context of fragile health systems, several pertinent questions arise. How can socio-economic development spurred by globalisation practices linked to increased international trade be sustained or, alternatively, reformed to further improve livelihood opportunities? How might African governments succeed in limiting the communal transmission of Covid-19 while also providing economic assistance to families and businesses affected by physical distancing or ‘barrier’ strategies? In this analysis, we explore the challenges most African countries face in improving population health during Covid-19, while promoting a renewed globalisation based on health and social development objectives and not just on economic growth measures.
Socio-economic impacts of Covid-19: what about globalisation?
As the Covid-19 crisis continues to worsen, the health and economic consequences are crippling even the most developed countries. With less than 4% of the world’s confirmed cases in Africa, the continent seems so far relatively unaffected by the unfortunate direct health consequences of the Covid-19 pandemic. Nevertheless, the disease has already had a destabilising effect on the lives of millions of Africans with a disproportionate impact on the poor. With Covid-19, there have been disruptions in global supply chains. Africa, faced with falling oil prices and a decline in global demand for African non-oil products, faces a threat to its economic stability. Projected losses from oil shocks alone could reduce Africa’s export earnings by about $101 billion in 2020 according to the World Bank. This decline in oil prices disproportionately puts oil-dependent countries such as Angola, the Democratic Republic of Congo (DRC), Nigeria and other oil-exporting African countries at economic and fiscal risk.
Before the virus spread to Africa, the International Monetary Fund (IMF) in mid-February 2020 warned the continent of the imminent risk of an economic slowdown because China, where the virus has emerged, is the largest trading partner and foreign investor of many countries on the continent. Most African countries are interconnected with the affected economies of the United States and the European Union. The slowdown in growth in these major economies is having a negative impact on the price of goods exported from Africa such as minerals and metals. Conservative estimates suggest that COVID-19 could lead to a decline in Africa’s GDP of three to eight percentage points with projected economic losses of between US$90 billion and US$200 billion in 2020 alone. The United Nations Development Programme (UNDP) estimates that the pandemic could result in the loss of almost half of all jobs in Africa, where unemployment is already a major concern. This could further exacerbate Africa’s fragile economic situation, where up to 422 million people (one in three Africans) live below the international poverty line of $1.90 a day.
In an attempt to combat Covid-19, many African countries have adopted certain international policy trends such as border closures, strict migration measures, the imposition of quarantines and the application of house arrest orders for community cases. These measures embody the complexity of contemporary globalisation: on the one hand, they reflect the rapid communicative and even hegemonic nature of the global exchange of knowledge; while on the other hand, they accentuate rather than erase borders and limit interactions between the socio-economic, political and technological spheres. This substantial disruption to the economic integration of globalisation has led to a slowdown in key sectors such as air transport and tourism, with a concomitant reduction in trade, remittances, especially from the diaspora, and investment. With declining official development assistance to the continent and capital flight, unemployment and food insecurity are likely to worsen across the continent.
The role of economic policies …
In the face of the pandemic and its socio-economic impact on African countries, it is essential that interventions focus on women, children, people with disabilities, youth, the elderly, low-income workers and small and medium-sized enterprises. These and other vulnerable groups, such as those working in the informal sector, internally displaced persons and refugees, are more likely to suffer the devastating social and economic consequences of the virus. These socio-economic consequences could precipitate health problems such as depression, anxiety, high suicide rates, child abuse and intimate partner violence among these vulnerable groups.
The provision of loans and credit guarantees with limited conditionality can be a means of boosting private sector participation in maintaining economic productivity, increasing the liquidity of small businesses and limiting job losses. This financial assistance can be provided directly by African governments using innovative strategies. Groups such as the World Bank, the International Monetary Fund (IMF) and the European Investment Bank are making funds available to the African continent, but mainly in the form of loans. This will only increase the debt burden already borne by most of these countries. Already, many African countries have risky debt profiles as more than half of the countries have current account deficits that exceed 5% of their GDP and external debt to GDP remains high. However, the current low fiscal capacity of African countries could be addressed on an ad hoc basis by providing multilateral financial assistance in the form of grants rather than loans; and by suspending or cancelling a large part of their current debt to relevant financial agencies (such as development banks, the IMF and bilateral donors). This must be done with a requirement for fiscal discipline, good governance and a commitment to fiscal policy reform.
In April 2020, the G20 countries agreed to suspend debt payments for poor countries (most of which are in Africa), freeing up $20 billion for government interventions against Covid-19. This one-year suspension gives governments some fiscal space to focus on developing economic relief plans with limited policy conditionalities that would otherwise limit future spending on health and social protection. But the amount is considered insufficient for the needs and should be extended to all forms of multilateral and private debt.
The current pandemic crisis also offers an opportunity to explore new strategies to diversify African economies and limit their dependence on external financing (loans, grants or investments) by promoting trade and a more regionalised (continental) form of globalisation. The African Continental Free Trade Agreement (AfCFTA), which has entered into force, can be promising in this respect. The guiding principle of the AfCFTA is to eliminate tariffs over a period of five to eight years on 90% of goods, with all tariffs on all goods eventually removed, in order to promote trade in goods and services between African countries. This agreement could be activated and, although its economic benefits are exaggerated, stimulus packages could be provided to facilitate cross-border trade on the continent. There are criticisms of the Zlecaf agreement that not all countries on a continent are equal (in fact, only three countries, Nigeria, South Africa and Egypt, account for more than 50% of continental GDP), and that the largest and richest could quickly dominate continental markets without a compensatory social agreement. Specific policies will need to be incorporated to circumvent these unfavourable outcomes.
Maintaining cross-border trade and cooperation could potentially maintain some financial resources to help many high-risk African countries fight the pandemic, although reworking trade agreements to ensure fair gains is more likely to be a post-pandemic undertaking. In the shorter term, African countries could come together to collectively reduce their tariffs on all Covid-19-related medical supplies (the meaning of the Covax initiative) and regulate their domestic prices. Under the auspices of the African Union Regional Office and/or the World Health Organisation (WHO) for Africa, member states could enter into cost-sharing arrangements to ensure that large African countries with larger budget pockets (or borrowing capacity) do not outbid smaller, poorer countries.
The Covid-19 pandemic poses a major challenge to African leaders, and it is imperative that they work closely with scientists and development policy experts to design feasible actions. This crisis is a real opportunity to put in place new strategies and impose new methods, such as accelerating the industrialisation of the continent, demanding good governance or readapting the education system, to diversify African economies and limit their dependence.
Source: La Tribune Afrique
*Dr. Omar THIAM is Director of the School of Management & Research of the ISM Group. During his career, he has also been a consultant and has notably worked on the action plan of the industrial policy of Senegal.