AFRICA'S ASCENSION
Philip Nanfuri
Media & Communications Professional || Astute Observer & Creative Writer- Financial Services, Corporate Governance, Macroeconomics
Sub-Saharan Africa 's economy is set to grow in negative territory for 2020 according to the International Monetary Fund. Growth projections for 2020 and 2021 for the region are -1.6% (lowest growth number for the region going as far back as 1970) and 4.1% respectively according to data from the IMF's World Economic Outlook, April 2020.
You can find Sub-Saharan Africa's projections at the bottom-right section of the image below.
Director of the African Department at the IMF, Abebe Aemro Selassie had this to say during the launch of the Regional Economic Outlook for Sub-Saharan Africa (SSA);
“The world is facing a serious challenge, and sub-Saharan Africa will not be spared. All indications are that the Covid-19 pandemic will exact a heavy human toll and cause an acute economic crisis. The region is facing plummeting global growth, tighter financial conditions, a sharp decline in key export prices, and severe disruptions to economic activity from the measures that have had to be adopted to limit the viral outbreak. Consequently, we now project the region will shrink by 1.6 percent this year—the worst outcome on record.”
The cocktail of issues that we have been confronted have dimmed our prospects for growth for 2020 but a partial recovery is expected in 2021. However this recovery (not only for SSA) is uncertain due to the unknown nature of the depth and duration of the pandemic.
Looking through the various countries that make up the region (SSA), you can easily deduce a significant proportion of countries that are experiencing very low to negative growth rates for 2020 are the commodity exporting countries particularly the oil exporters such as Nigeria (-3.4%in 2020) and Angola (-1.4% in 2020).
Anytime the world suffers a shock of some sort, commodities(gold,cocoa, oil, iron, copper etc.) suffer from weak demand and as a result their prices dip. A great number of countries not only in Sub-Saharan Africa but in other regions suffer because their economies are propelled by these commodities. They are the lifeline to these economies. I discussed Ghana's case sometime ago on Joy Business. Click link below.
Dependence on commodities is not necessarily a bad thing but when a crisis such as COVID-19 hits, it throws countries off their race and leaves them struggling lap after lap to pick up points.
Bloomberg Opinion wrote a fantastic piece on Ghana's growth prospects in February 2020. Below is an excerpt from the piece;
'Meanwhile, industrialization has proved to be a much more reliable path to national wealth. Manufacturing is less subject to the whims of global price movements than commodities, allowing for a more diversified and complex economy and -- most importantly -- it encourages learning and rapid productivity growth.'
The message is clear even more now than ever. We need to start accelerate our efforts in shifting away from just a mere dependence of commodities. This is just one of many solutions, albeit a long-term one on Africa's ascension in a post covid-19 world. We will discuss the way forward subsequently but let's examine some of the interventions and measures the international community is undertaking to assist the region.
1. Debt Relief has been provided by the IMF for countries it describes as 'poorest and most vulnerable'. This allows a pause on their obligations to the IMF specifically for a period of about six (6) months. Some of the African countries are; Burkina Faso, Central African Republic, Comoros, Congo, D.R., The Gambia, Niger, Rwanda, S?o Tomé and Príncipe, Sierra Leone,Togo. There are other countries(Non-African) such as Tajikistan and Yemen are included in this package. Managing Director of the IMF had this to say in a release on April 13, 2020 to that effect.
“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts.“The CCRT can currently provide about US$500 million in grant-based debt service relief, including the recent US$185 million pledge by the U.K. and US$100 million provided by Japan as immediately available resources.” (https://www.imf.org/en/News/Articles/2020/04/13/pr20151-imf-executive-board-approves-immediate-debt-relief-for-25-countries)
2. G20 Nations have also provided a pause on debt repayments, effective May 1, 2020. Find below an excerpt from the Managing Director of the IMF at a High-Level Virtual Event on ‘Mobilizing with Africa’.
"We wholeheartedly welcome the G-20’s decision to suspend debt service payments from IDA-eligible least developed countries (39 countries in Africa) to official bilateral creditors through end-2020, which responds to a joint call I made with David Malpass few weeks ago. I would like to recognize the work done by France, Germany, China, and Saudi Arabia in pushing through this deal." (https://www.imf.org/en/News/Articles/2020/04/17/sp041720-2020-Spring-Meetings-High-Level-Virtual-Event-on-Mobilizing-with-Africa)
This will undoubtedly free up space for these countries to spend on other crucial areas that will aid these countries in the fight against COVID-19. They also called on private creditors to undertake a similar gesture. Another excerpt from the aforementioned high-level virtual event;
"We call on private creditors to also be part of the solution. Together with the World Bank, we will pay close attention to countries faced with high burdens of debt."
There are some good lessons for the region post the pandemic. What are some of the things we should be cognizant of and what are some of the possible solutions? Phil presents a number of pointers for the way forward in Africa. (These will be very simplistic and straightforward )
It's about time we fix our healthcare system!
Diversification of our economies should not be a recital,though I admit some economies have begun making strides.
We need to really look at our debt (borrowing).
Social interventions need to be properly looked at to derive maximum output from limited inputs (resources).
Greater coordination and predictability is needed in our policy space.
A great time to really rally behind the African Continental Free-Trade Area (AfCFTA) and make sure we execute!
In subsequent discussions we will expand on the African story but I believe I have set the tone for a plethora of issues to run through your mind. Our region needs a lot but we can make it work.
NB: IMF classifies countries based on regions. The regions are ASIA & PACIFIC, MIDDLE EAST & CENTRAL ASIA, SUB-SAHARAN AFRICA, WESTERN HEMISPHERE & EUROPE. You won't find Tunisia and Egypt here. They are part of the Middle East and Central Asia region.
QUICK INFO- How many Sun-Saharan African countries have accessed financing from the IMF?
Well as at April 20th 2020 a total of 23 countries in SSA have accessed emergency financing assistance from the IMF, roughly about half of the region. Compared to the others how did we do?
ASIA & PACIFIC- 2 COUNTRIES
EUROPE- 5 COUNTRIES
MIDDLE EAST & CENTRAL ASIA- 6 COUNTRIES
WESTERN HEMISPHERE- 4 COUNTRIES
For more on the financing by region click on the link below.
Got questions, comments or clarifications? Get in touch on Linkedln-Philip Nanfuri, Facebook- Philip Nanfuri, Instagram-@philipnanfuri Twitter-@philipnanfuri or email- [email protected]
Philip Gandaa Nanfuri is an Economic & Financial News Analyst/Contributor, Researcher (Secondary research & Anecdotal Findings) and Presenter. His works span Financial Services, Macroeconomics, Microfinance and Corporate Governance.