A long-term Egyptian recovery in place since currency devaluation in 2016 can resume after the war between Russia and Ukraine ends, Mathias Althoff, ... partner at Swedish frontier markets investor Tundra Fonder, tells The Africa Report.
Sub-Saharan economies are already minor players in global trade. COVID-19 has further marginalized them by cutting links to China, Europe and North America. That makes internal integration and free trade more urgent than ever.
AfCFTA is one the most ambitious free trade projects ever, aimed at radical reduction of barriers to trade, and boosting economic prospects of a continent of over 1.3 billion people. But instead of implementing a self-supportive regionalism through enhanced intra-African trade, the African Union delayed the plan.
- As former Assistant US Trade Representative for African Affairs Florizelle Liser has noted, if Africans were able to increase their share of world trade from 2 to 3 percent, that 1 percentage increase would generate about $70 billion of additional income.
- That’s about three times the total development assistance Africa gets from the entire world.
There is plenty of work that could and should have continued despite COVID-19. AfCFTA is a process rather than an event.
- The task of fine-tuning AfCFTA’s industrial rules of origin and other strategic protocols should not have stopped.
- The AfCFTA secretariat, which is temporarily operating out of Addis Ababa, should have continued staff recruitment, and started people off working from home across the continent.
The International Monetary Fund (IMF) June 2020 Regional Economic update on sub-Saharan Africa is a brutally frank assessment of what the coronavirus pandemic has done to the region. Yet it is essentially silent on the vision needed from the region’s leaders to rebuild the shattered economies.
According to the IMF:
- Coronavirus will wipe out almost 10 years of progress in economic development in sub-Saharan Africa. The pandemic could push about 26 million more sub-Saharans people into extreme poverty in 2020, and up to 39 million if economies worsen.
- Economic growth in the region will fall the most in tourism-dependent and resource-intensive countries, while growth in non-resource intensive countries will come to a near standstill.
- All but two countries in Sub-Saharan Africa will experience falls in real per head income of between 0.1% and 15%.
- Many economies have reopened before the infection has peaked, which risks overwhelming health systems.
International financial institutions have provided much-needed assistance to sub-Saharan Africa. As of mid-June, 2020, 29 sub-Saharan African countries have received IMF support totaling about $10.1bn.
This is not enough. African countries still face financing needs amounting to over US$110 billion in 2020 alone. Most important is a better understanding of what the region need to do to rebuild itself. The IMF and African leaders should be actively discussing promotion of trade and new areas of growth.
- IMF emergency funding and the G20 relief payment are important but should not become ends in themselves.
- Structural reforms are needed to enhance competitiveness.
- Above all, AfCFTA must not be further delayed.
Missing in the IMF update is how Sub-Saharan Africa is to transition to robust recoveries that are not driven by more aid injections. Leaders and their policy remedies are far more important than money when It comes to rebuilding shattered economies. Delaying AfCFTA and focusing on funding is like treating the symptoms while ignoring the cause of the disease.
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