On 30 July, oil giant Total wrote off $8bn of its fossil fuel reserves, admitting they were stranded assets that would never be used due to weak oil demand and the impact these assets would have on the climate.
What if coronavirus is an opportunity for African economies?
African leaders should know that the discourse of their Western colleagues has always been inconsistent.
We can only hope that this crisis will remind Africa that contracting out the attributes of its economic independence to others is a mistake.
“The time of the finite world begins.”
This idea from French poet Paul Valéry accurately reflects the end-of-an-era atmosphere enveloping the planet as the death toll of the COVID-19 pandemic mounts.
Africa is not immune to the panic, although the sentiment is more frequently observed among the continent’s globalised urban elite than among rural populations. The latter, typically excluded from development, know all too well that despite coronavirus’s dangerousness, it will not cause as many deaths in Africa as the scourge of malaria.
The IMF shifts dramatically, becoming more Keynesian than ever before
Yet, malaria has never led many African leaders to declare state-of-emergency measures or call for a “coordinated response,” as they are more eager to parrot the bellicose semantics of their Western peers, with a mimicry that verges on the ridiculous, than to be attentive to the essential needs of their populations.
Be that as it may, the coronavirus pandemic has the potential, if we accept to learn from its still poorly assessed impact, to bring about a welcome change of perspective as to the economic policies Africa should adopt, both in the short and medium term.
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In the short term, announcements regarding the resources mobilised are dizzying: $3trn in the United States, €2.5trn ($2.8bn) in Europe and more than 450bn CFA francs ($756m) from the Banque Centrale des États de l’Afrique de l’Ouest, a remarkable feat for a financial regulator little used to so much extravagance when it comes to money creation.
Even the IMF is continuing its intellectual shift, becoming more Keynesian with every major crisis than the most orthodox disciples of British economist John Maynard Keynes, standing at the ready to inject astronomical amounts of cash into the global economy.
A cruel financing gap for income-generating activities
These counter-cyclical measures are all the more welcome in Africa, as its economies are cruelly affected by a financing gap for income-generating activities and a massive decline in global demand. The continent is facing consequences such as falling oil prices, now below $25 a barrel, and the end of a globalised form of tourism, as confirmed by widespread border closures.
Africa, already vulnerable to debt distress risks, is bearing the brunt of this shock to global demand. Three of its six leading economies (Algeria, Angola, Egypt, Morocco, Nigeria and South Africa, i.e., 65% of the continent’s GDP) are highly dependent on oil (Algeria, Angola and Nigeria).
In the Central African CFA franc zone, countries will undergo a downturn on par with that of 2015-2016, which has renewed fears over a devaluation of the CFA franc similar to that seen in the second half of 2016.
Foregoing neoliberal discourse espoused by lenders
This period represents perhaps an extraordinary opportunity for the continent to forego the neoliberal discourse espoused by lenders, the likes of which has led us to neglect to build states worthy of the name and key sectors (health, education, etc.) under structural adjustment programmes and their many recent avatars.
You shouldn’t sleep on other people’s mats, as it’s like sleeping on the ground
Our leaders should know that the discourse of their Western colleagues is – and has always been – inconsistent. Today, the intransigent guardians of austerity are suddenly more pragmatic and far from making their usual speeches about the urgency of a “balanced budget” and “monetary stability”.
Finding a structural response to development challenges
For Africa, the main medium-term lesson of the coronavirus crisis is as follows: the continent will continue to be vulnerable to outside shocks as long as it refrains from finding a structural response to its development challenges. One thing is clear: the perpetuation of the continent’s over-involvement in the primary sector of international trade – that is to say Africa limiting itself to exporting raw materials to the rest of the world and passively waiting in return to receive the volatile financial resources that fuel rentier economies – is truly toxic.
Processing raw materials at home
What Africa really needs is to process raw materials onsite, which alone is actually capable of creating value and jobs and diversifying the productive base of economies. Via its own production, Africa will be able to supply its future domestic market of more than two billion inhabitants and reduce its dependence on the rest of the world.
The Burkinabé historian Joseph Ki-Zerbo said: “You shouldn’t sleep on other people’s mats, as it’s like sleeping on the ground.”
Today, Africa is on the ground and waiting for the umpteenth time for the rest of the world to come to its rescue. Let’s hope that Africa will be able to lift itself up on its own and finally understand that it cannot endlessly contract out all of the attributes of its economic independence.