Examination of the impact of the Codvid-19 pandemic on the world economy, the one of Africa & in particular on SME's in Countries like Cameroon.

Introduction

Since November 17th, 2019 when a man was diagnosed with a disease (patient 0001) which should be called Covid-19 later (according to information from the ‘South China Morning Post’ ), the whole world now suffers from this coronavirus pandemic starting in China (First focus), Italy, the USA and even African countries. Now, the whole world is vibrating to the rhythm of this pandemic, from all sides there are substantial questions about the drug & medicine and the vaccine against this highly fatal disease. A disease which imposes draconian measures like archaic confinement as at the time of the first world epidemics like the plague; which confinement has an impact on everyday life and much more on the entire world economy: Closed schools, closed company which produces basic life necessities, closed seaports, closed Airports and so on.

It’s therefore clear that in the macro & microeconomic point of view, this crisis imposes very heavy negative impacts on the world economy and by extension even the smallest economies or companies are affected. In the current context, what about the consequences of this pandemic on developing economies like those of Africa in general and that of Cameroon in particular? Better yet, what about small and medium-sized businesses in these countries?

1-) Global view of the impact of the Corona Virus pandemic on the financial market

The international spread of the coronavirus means that the consequences for the world economy must be reassessed. The epidemic, which combines shocks of demand, supply and confidence, has a direct impact on the economy affected by the virus via the drop in spending and production (closing of factories and offices, restrictions on travel…). This, in turn, creates indirect effects at the international level: trading partners show a decline in exports to countries affected by the infection, but the disruption of supply chains can also lead to a fall in production. The overall impact depends on the size of the country and its place in the supply chain. These same channels of transmission are found in all countries where the virus is spreading, but the marginal effect of the international spread of the epidemic on the world economy should, a priori, be fairly limited. Indeed, countries like Italy whose weight is far less important than that of China should generate less indirect effects. In the case of Italy, the regional impact may, however, be more significant, with its economy representing 15% of GDP (Gross Domestic Product) in the euro area.

If you look at IMF (International Monetary Fund) calculations, the epidemic has resulted in little downward revision of global growth by 0.1% today. However, the empirical evidence is accumulating, showing the importance of the impact on businesses. The forecast results have been lowered or even deleted due to the lack of visibility. Analysts have also lowered their profit expectations. Some companies have announced cost-cutting measures to limit the impact on their results. These company-specific developments fuel fears of an underestimation of the overall macroeconomic impact. PAOLO GENTILONI, European Commissioner for Economic and Monetary Affairs, said, and it says it all, that it is still too early to fully assess the impact of the coronavirus.

Fig.1: Market reactions to the international spread of the Codvid-19

2-) Macroeconomic review of Africa over the past three years (The key points):

According to the book entitled “L’économie africaine” published recently by the financial institution AFD (The French Development Agency) jointly with ‘’La Découverte’’ editions and the report entitled ‘’African Economy Outlook 2020 (Developing Africa's Workforce for the future)’’, we note that:

? According to macroeconomic trends: Africa’s GDP growth would be +3.4% in 2019, records so far beaten only by Asia with +5.9%. Countries like Burkina Faso, Cape Verde, Gambia, Guinea-Bissau, Mali, Mauritania, Niger, Senegal and Chad have an average progression which varies around +5.4%; while the countries that have caused this rate to drop are the five largest on the continent (Algeria, Egypt, Morocco, Nigeria and South Africa) with an average growth rate of only 3.1% and on the other hand, Six African countries are among the ten fastest growing economies in the world (Rwanda at 8.7%, Ethiopia 7.4%, C?te d'Ivoire, 7.4% , Ghana 7.1%, Tanzania 6.8% and Benin 6.7%). All of this growth is forecast to drop from +3.4% in 2019 to +3.9% in 2020 and may be 4.1% in 2021.

? Regarding debt (One of the key indicators in macroeconomics): we note that, the stock of African public debt represents 56% of continental GDP, which is a good thing because if we lean towards the United States of America and many European countries, we note that they have exceeded 100%.

? Regarding the average inflation rate on the African continent: it fell by 02% compared to 2018, a rate of 9.2% in 2019.

? Budget balances have improved over the past two years, with the weighted average deficit-to-GDP ratio in Africa increasing from 5.9% in 2017 to 4.8% in 2019. The revenue-to- GDP ratio increased by 0.3 percentage points on average for the 54 African economies, but by more than 01 percentage point among oil exporters, such as Angola whose ratio increased by 2.2 percentage points.

? Regarding external contributions: we note that in 2017 for example, remittances from African diasporas to their country of origin reached $ 74 billion, 50% more than public aid from the rich countries from which Africa benefits.

Based on the main characteristics of the African economy, we can briefly highlight the impact of this pandemic on in developing countries and event on small and medium-sized enterprises in such developing countries like Cameroon.

3-) Macroeconomic impact of the corona virus pandemic on Africa:

Africa in global view, is highly dependent on imports and exports; the second case, to say that of exports, conditions the GDP of almost all African states. The export that conditions the life of Africa's macro-economy turns particularly to the export of key raw materials such as oil (Petrol), gold, Brent, copper, wood ... and many other activities such as tourism, air transport, hotels, not to mention the disorganization of production chains in energy…

Speaking of these export products, we note the already harmful effects that are being felt, especially that in recent decades CHINA has risen as one of Africa's essential economic partners both for the export than import.

? Talking about Oil: The price of Brent (Petroleum) thus went from 66 to 59 dollars per barrel between January 22, the date when the epidemic is officially recognized in Wuhan, and February 20, with a trough in the wave at 53 dollars a barrel on February 10. Finally, on March 09, the price of a barrel fell to 33 dollars. If all the major crude producing countries of the continent such as Algeria, Nigeria and Angola are affected by this drop, those with China's first client suffer more than the others, because China accounts in particular for 61% of exports crude oil from Angola and 95% from crude oil from South Sudan. Nigeria which is less turned towards China has barely 01% of its oil production which goes to China but, however 94% of its trade is based on oil towards other destinations of the world and allows to generate more than half state revenues.

Besides Nigeria, there are the countries of CEMAC (ECONOMIC AND MONETARY COMMUNITY OF CENTRAL AFRICA) whose economies are still based at more than 80% on oil revenues, these are: Congo, Gabon, Equatorial Guinea and Chad. Besides these, only one, namely Cameroon, has a diversified economy. For Cameroon the impact will be reduced, at least that is what the forecasts give us because with the suspension of production by the National Refining Company (SONARA), Cameroon, now an importer of petroleum products, should benefit from the lower world prices with a decrease in fuel price subsidies.

? Talking about copper: Since January 22, the price of copper went from 6,300 to 5,700 dollars per ton on February 20. A decline that will necessarily affect the Democratic Republic of Congo and Zambia, which are the two largest African exporters.

? Talking about zinc: South Africa and Eritrea, the largest producers, are also terribly affected in the same proportions as copper.

? For minerals like iron: countries like Mauritania are also affected in the same proportions as copper.

We note that most African countries are greatly affected by the Corona virus crisis in view of the fall of the main raw materials dedicated to export which represent close to 80% of the GDP of most of these countries. What about the Cameroon case in particular? What about small and medium enterprises in Cameroon and also small trades business?

4-) Impact of the corona virus pandemic on Cameroon economy:

Cameroon ranked 15th of the richest countries in Africa according to its GDP of 40.13 billion dollars in 2019 is the first economic power in the sub-region of Central Africa. But, on March 17, 2020, after a crisis meeting to tackle Covid-19, the Prime Minister, Joseph DION NGUTE, decreed 13 measures almost putting the country in a state of critical emergency. These measures have brought an end to the economic impact of the corona virus pandemic in Cameroon. Consequently, the borders of the country are closed (that mean commercial exchanges with neighboring countries stopped), movements inside the country are limited, schools are closed, it is prohibited to have gatherings of natural persons of more than 50 people, the regulation of flows in the markets and the slowing down of certain commercial activities and small businesses (restaurants, alcohol shops, barber shops, nightclubs …) all closed from 06PM, requisitions of hotels and accommodation structures for reception and confinement of new arrivals from the diaspora, etc.

From these 13 measures, it is clear that the closure from 6 p.m. of alcohol shops and other restaurants, as well as the limitation of flows in these places, will be a major blow to the brewing and tourism industries, as well as to all their chains of values. The same goes for the cancellation of all conferences, seminars and other business trips, which generally provide a lot of revenue to hotels. The closure of schools when it has a direct impact on the intra-urban transport chain because taxis and buses will no longer experience peak hours with the departure for school in the morning and the exit of classes or courses coinciding generally with the return to home of workers in both the public and private sectors, not to mention the food street-vendors and other treats in the vicinity of schools and universities. Even small and very small businesses around universities specializing in photocopying, printing university documents, as well as dissertations, homework, and other university work done by students will take a big hit because they will be out of business. Besides that, one of the main activities linked to internal trade in Cameroon locally called BUYAM-SELAM will take a big hit because now the markets are regulated by reduced hours and other conditions ...

The companies involved in the provision of various services are mostly out of business and for those capable of doing telework they do; everything is now idling. Some very rare schools in the country like ICT-U University use telework and e-learning to continue their university activities ...

Since the declaration of this pandemic, the Minister of Livestock, Fisheries and Animal Industries, Dr TA?GA, for example suspended in early February, the import of fishery products from areas with active foci of the epidemic. At the forefront, China with around 19.6% of the market share, China represents Cameroon's second largest supplier of fish. Imports help fill the big gap between supply and demand. Even if local production reached 292,675 tons in 2018, it does not meet consumption needs estimated at around 400,000 tons per year.

Also, we noticed that, several companies in the tertiary sector have mostly dismissed their employees who are now on technical unemployment, thus imposing a negative impact on the whole chain, life will become more difficult in the days to come because it will from now on meet basic needs, to know, eat, drink, sleep and heal.

Conclusion

It is therefore clear that Cameroon from an economic point of view will be affected very negatively by the corona virus pandemic, although it cannot precisely estimate the damage that will affect all sectors of activity up to the smallest individual activities from the informal sector.

In fact, in a study made public on March 13, 2020 in Addis Ababa, the United Nations Economic Commission for Africa (ECA) predicts, for Cameroon, a 3.1% drop in income from tourism and exports oil and non-oil, due to the Coronavirus crisis.

The Central Africa office of ECA is even more alarmist. According to this authority, the losses that Cameroon could record on its income from tourism and exports will represent up to 4.1% of the country's GDP. With a peak of 2% of GDP on revenues from crude oil exports, 1.5% of GDP on tourism revenues and 0.6% of GDP on revenues from exports of other raw materials and products export.

References

·       AFRICAN ECONOMIC OUTLOOK 2020 – Developing Africa’s Workforce for the future; African development bank group/ African Development fund.

·       https://www.allnews.ch/content/points-de-vue/coronavirus-propagation-internationale-et-risques-de-perte-extr%C3%AAme

·       https://www.afrikmag.com/classement-des-economies-les-plus-performantes-en-afrique/

·       https://quotidienmutations.cm/laj/coronavirus-poussee-de-fievre-de-leconomie/?utm_source=rss&utm_medium=rss&utm_campaign=coronavirus-poussee-de-fievre-de-leconomie

·       https://www.financialafrik.com/2020/03/16/coronavirus-chute-du-petrole-et-impact-sur-la-cemac/

·       https://quotidienmutations.cm/laj/coronavirus-poussee-de-fievre-de-leconomie/?utm_source=rss&utm_medium=rss&utm_campaign=coronavirus-poussee-de-fievre-de-leconomie

·       https://www.financialafrik.com/2020/03/16/coronavirus-chute-du-petrole-et-impact-sur-la-cemac/

·       https://www.jeuneafrique.com/900070/economie/coronavirus-comment-londe-de-choc-economique-se-propage-en-afrique/

·       https://www.investiraucameroun.com/sante/1803-14213-coronavirus-une-tempete-s-annonce-sur-l-economie-camerounaise-apres-les-mesures-radicales-prises-par-le-gouvernement

·       https://www.afdb.org/fr/news-keywords/african-economic-outlook-2020

·       https://www.afdb.org/fr/documents-publications/perspectives-economiques-en-afrique

·       https://www.jeuneafrique.com/882671/economie/les-grandes-tendances-economiques-de-lafrique-en-2020-analysees-par-lafd/

·       https://www.businessinsider.fr/le-premier-cas-de-coronavirus-en-chine-remontrait-au-17-novembre-2019-soit-bien-plus-tot-quon-ne-le-pensait/

https://www.leparisien.fr/societe/sante/coronavirus-ce-qu-il-faut-savoir-sur-les-origines-de-la-pandemie-17-03-2020-8281749.php