The European Union is meeting today to discuss the 750 billion euro corona virus recovery fund.Germany is set to take over the EU Council presidency and German Chancellor Angel Merkel while giving a speech at the the German Bundestag ahead of the talks today called for collaboration and solidarity among members .
In her speech she says ,””Europe needs us as we need Europe,” ahead of a meeting that is expected to be fractious ,disagreements among members are on the size of the recovery and on what it should be spent on.
The number of coronavirus cases globally is now over 8 million with the numbers in Africa as of today just slightly over a quarter of a million.Africa also has fewer number of fatalities compared to other continents despite our poor health systems,though this can be explained by the average age of the population on the continent which remains young in comparison to other continents.We actually have a moniker in reference to this demographic phenomenon and we are called “the youthful continent.”
The discussion on the effects of the pandemic have mostly been on it’s health impact ,little if no impact is being given to the economic effects of #Covid-19 on African economies ,especially in Sub Saharan Africa where much of the economic activities remain in the informal sector.
The economic shocks that have ridden on the back of this pandemic have disrupted the flow of goods, services and people globally .Industries on the African continent like horticulture and tourism which are heavily reliant on surplus cash individuals have have been affected as people reign in their spending.Even if one had money to travel on holiday ,no airline is willing to do so as most have grounded their planes.For the remaining part of this year and maybe into early next year the travel industry will mostly be relying on domestic travel to boost its revenues.
When African countries went into lockdown,the most severely affected sector was the informal sector where a majority of the population on the continents gets its daily livelihood from.As the world outside of the continent is testing the waters on the way forward in terms of economic recovery,African leaders remain eerily silent on the way forward.The last communique on the AU website on the virus is on African parliaments to aim for increased health budgets amid the pandemic.
Just like the EU virtual summit ,one would have expected a similar gathering of African heads of states to discuss the way forward. Sub saharan African countries receive a significant amount of money for their development programmes and national budgets from multilateral funding agencies,donor countries and private lenders.
Some of the lenders during this period have agreed to a 6 month debt relief to 25 of the poorest countries of which 19 are in Africa.These countries are Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone and Togo.
China ,has become a major private lender to African countries and it has also agreed it would suspend both principal repayments and interest payments starting on May 1, 2020 until the end of 2020 to some countries. This would be applicable to all IDA-eligible countries (76 countries) , including 40 sub-Saharan African countries.
While that is a huge relief for Africa’s poorest countries ,the long term view that countries on the continent should take is how to increase their own productivity.Every country right now is running on a tight budget and we are likely to see decreased donor funding going forward,remittances which come from Africans working in the West and that they send back home have also decreased.We have to find a way to fend for ourselves as a continent and as individual countries.
At this moment,Africa needs us,as much as we need her.
We could do with better governance system,reigning in corruption and initiating projects that actually increase productivity levels .More than relying on donor funding would be for countries in Sub Saharan Africa to make their regional trading blocs work for them.We have 6 key trading blocs all which aim to achieve economic prosperity through regional integration.
The current pandemic is an opportunity that should not be wasted and we should be having a conversation on how we can increase trade with each other.Increases intra-African trade would protect the continent from the economic effects of the pandemic which are already being felt.Companies that have relied on China for their supplies are experiencing delays in deliveries and the reduced economic activities will see most countries not being able to meet their targeted revenue collection.Unemployment levels are on the rise as people are getting laid off and their need for something to meet their daily needs may result in increased insecurity reporting.
Way Forward ..
Countries need to diversify their sources of revenue.Trade among countries on the continent remains very low and it is estimated to be just 10% of the total external trade .By increasing country to country trade on the continent ,countries can cushion themselves from the decreased revenue flows from their international trading partners.More intra Africa trade allows for quicker turnover, and reduced costs for companies to ship products,making this a very attractive option for countries seeking new markets for their goods or services on the continent.
We have regional centres that can act as transit and logistic hubs for the economic blocs and the continent airlines could turn to cargo till passenger flights resume.From their cargo can find its way to its destination by road,rail,waterways.
Internet connectivity in Africa is one of the fastest growing in the world,largely as a result of its very youthful population.Already during the pandemic individuals and businesses have found ways to make use of technology,this should be amped up by improving accessibility and affordability in order to increase trade between countries.Better and faster connectivity will allow for people to work from home and those looking for work can source for it regionally or internationally and be able to service their clients from wherever they are on the continent.
Better spending of monies received as loans or grants during this time should be emphasized and it should go to activities and projects that can increase productivity.Increased local productivity means more jobs,lower unemployment levels.Governments could also do with being more transparent on how they have spent public money like loans and grants .
Role of the informal sector cannot be downplayed and governments need to find ways to support this sector as it remains the main driving force of most African economies.Most informal players on the continent go about their businesses with no support from their governments.Most during this period are relying on friends,family or venture capitalist to shore up their businesses.Increasing support through flexible lending plans would help this sector grow .This sector has the potential of creating more opportunities for revenue collection and also solving the high unemployment levels in Africa.The continents small and medium sized companies we see today will be the corporates of the future,providing jobs to millions of Africa’s youth.
Countries and companies the world over are swimming in uncharted waters and they taking hold of anything they can in order to remain afloat.We cannot waste this opportunity as a continent,it is a chance to work together to solve what is taking decades to eliminate-the endemic poverty spread in many parts of the continent.
Let us find a way to work together,collaborate and remember that “Africa need us as much as we need her.”