Coronavirus: for Africa’s sake, the West should be selfish this time

in depth

This article is part of the dossier:

Corona Chronicles: 13 April – 17 April

By Carlos Lopes

Posted on April 14, 2020 13:41

Virus Outbreak South Africa
A man wearing face masks and gloves to protect against coronavirus, walks on the street at Alexandra township in Johannesburg, South Africa, Saturday, April 4, 2020. (AP Photo/Themba Hadebe)

The coronavirus pandemic will wreak havoc across much of Africa, but this can be stopped by the West, even if the reasons behind it are selfish.

The recent warnings of coronavirus type of infections had been limited in geographical range to circumscribed regions, but strong enough to justify world preparedness. As we know better now, these alerts did not produce serious vigilance or readiness.

“Herd mentality did the rest”

Unsurprisingly the economic actors acted in panic as the full extent of the current outbreak unfolded. Herd mentality did the rest. We are now in the middle of a discussion on whether the world will face a recession or a depression. The former defined as a slowdown of economic activity whereas the latter is associated with a long-term downturn of the same.

We shall know soon. But in the meantime, we can predict that African countries will most likely find themselves in the depression category unless some major effort is made to rescue their precarious economies.

In all honesty we cannot blame the Africans this time.

READ MORE: AU paints grim picture ahead of finance ministers’ meeting

Potential damage of COVID-19

Before COVID-19, the IMF economic growth forecast for the continent this year was 3.2%, with 16 African countries amongst the 30 best performing in the world, and more than half of the population in the continent living in countries with 5% economic growth or more.

The naysayers will point to the myriad of problems the African continent has not been able to address, and they are right. Inequality, unemployment, lack of proper safety nets and slow structural transformation progress are sizable challenges, not fake news.

But we are forced to admit the positive changes taking place in many fronts are notable; allowing Africa to post in the last two decades some of its best socio-economic indicators since independence.

In just a few weeks all the above seemed like history. The competition is now to size the amount of damage COVID-19 will cause. McKinsey predicts a loss in the continent between $90 and $200bn this year; the World Bank estimates an economic contraction between 2.6% and 7% while the African Union predicts a more modest drop of 1.1% from earlier growth projections, if the crisis lasts a few months.

Scarier global forecasts such as the ILO are projecting 200 million jobs at risk; UNCTAD estimating a 40% foreign direct investment contraction, the WTO is worried about a fall between 13% and 32% of world trade. With the IMF talk of serious recession already upon us, let our imagination worry about the size these impacts will have across Africa.

READ MORE: Coronavirus: together we can come out stronger and united

“A perfect storm is brewing”

African leaders have been swift in taking measures to flatten the virus infections’ curve, such as curfews or more stringent confinement rules; imitating similar measures taken by more powerful economies. The difference is that rich countries can attenuate the damaging economic costs of social distancing with compensatory packages that protect employment and social safety nets. Such measures drag economies into a halt. This is hard to follow for most African countries.

There is a dramatic return to Keynesian policies by those who once kept at arm’s length what they considered a sin: to consider public services as public goods that are to be properly funded.

Additional health-related costs necessary to combat the pandemic are punitive for African economies to face at the time of shrinking fiscal space. With 22% of revenues being used to service sovereign debt, local currencies are losing up to 30% of their exchange rate value, evaporating income from depressed commodity prices and a stoppage of global value chains. Indeed a perfect storm is brewing, and it’s one that’s risks evaporating the immense reform efforts of the last two decades.

It is reassuring though, to realize that COVID-19 has democratized this crisis. African dilemmas and difficulties may be one gamut higher than rest, but it seems that the world is in this together. Flattening the curve only serves to give respite to overwhelmed health facilities and personnel, falling short of eliminating the threat. The virus can come back in a second or third wave.

READ MORE: Africa needs debt relief to fight COVID-19

The power of the virus

Since we cannot quarantine inequality, the virus can viciously take shelter amongst the less protected in order to strike again when convenient. After all only health conditions everywhere protect more anywhere.

The COVID-19 virus has demonstrated that we can do many things that seemed impossible. In just a few weeks it has managed to suspend essential activities and production lines all over the world. An economic system which we were told was impossible to slow down or redirect just seized. To the ecological arguments on the change of richer countries and elites’ lifestyles, we always opposed the argument of the rules of the markets, even their exuberance. Yet the world reversed gears fast this time.

We are now allowed to think it is possible to contemplate a different set of rules and norms. There is a dramatic return to Keynesian policies by those who once kept at arm’s length what they considered a sin: to consider public services as public goods that are to be properly funded. Treating them as investments instead of as liabilities though the promotion of a fiscal system brutally more progressive, capable of catering for what we all require rather than playing with what we all need.  There is recognition that the key role of the state is back.

READ MORE: Coronavirus: South Africa’s Ramaphosa mounts economic relief efforts

Changing roles of states

The best examples of structural transformation taking shape in Africa were inspired by the developmental state model that has successfully achieved both economic growth and historical poverty reduction and social transformation across South East Asia and in China.

The role states are already playing and will continue to play in OECD countries – with historical stimulus packages, historical debt to GDP ratios, historical social spending and historical domestic consumer lending – will hopefully curtail any criticism of what Africans were trying themselves to do, albeit in a more modest way and with limited resources.

The new economic policy debate playing field can makes us believe it should be possible to calmly address divergent views about the preferred trajectory for Africa’s structural transformation.

The realization that it is time for a fresher look is, nevertheless, extremely urgent.

Seize the moment

The pandemic drama may allow a more creative way of addressing Africa’s many challenges. This moment – propped with benign support from the continent’s traditional partners – should be seized. Debt relief, investment drives or food security and humanitarian and health response are welcome, but remain in the short term.

There is a need for an overhaul of Africa’s policy space as well. It has become more evident  that it is in the best interest of Africa’s western partners to be more generous, more open-minded and less cynical.

The world will be a better place if it is not threatened by a virus that certainly loves the poverty that is prevalent in many parts of Africa; poverty that will shield it. And if we deal parsimoniously with the current threat, it is just a matter of time before another pandemic may surface.

For selfish reasons – if not for other reasons- the West should not allow that to happen. The costs are too high.

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