Dr. John Marangos,¹I am grateful for the comments provided by Nadir Al-Kharusi Research Associate, ARANSI, Waliyi Olayemi Research Associate, Amanda Betag Research Fellow, Alex Conte Research Associate, Apungwa N. Cornelius Research Associate , Alex Kopytko Research Intern, and Shradha Parashari Research Fellow at the African Political Economy Lab at the Africa Center For Strategic Progress. Director, African Political Economy Lab
jmarangos@africacfsp.org

Introduction

The harmful economic effects of the coronavirus, COVID-19, pandemic in Africa are multifaceted. African nations face shrinking trade, financial transfers, declining tourism, diminishing oil, gas and commodities exports, and corresponding declines in foreign exchange reserves. For example, the impact of the pandemic on the oil and gas sector is affecting the economies of Algeria, Angola, Chad, Egypt, Equatorial Guinea, Gabon, Nigeria, and the Republic of Congo, countries that together create nearly half of Africa’s GDP.²African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 2020, 5. Concurrently, Africa is experiencing stifled business, trading, tax revenue, Foreign Direct Investments (FDI) and remittances. The pandemic will further burden fiscal and current account deficits and raise debt levels, constraining the ability of African nations to act in response to the COVID-19 crisis, and effectively administer the extensive socio-economic impact of the pandemic. For those African countries that are already experiencing high levels of debt with little fiscal room to address the consequences of the pandemic, fighting COVID-19 is quite a formidable challenge.

Thus, it is important to take stock of the research on the effects of the COVID-19 pandemic on Africa, with emphasis on research findings by the international financial organizations that act as the first source of external funding for Africa. This paper focuses on research produced by the African Development Bank Group, International Monetary Fund (IMF), United Nations, and The World Bank, forecasting the impact of the pandemic on Africa. These international financial institutions serve as the principal source of data and a yard stick upon which other international organizations and governments determine their financial assistance to Africa. To my knowledge, such an approach in presenting the research of the African Development Bank Group, IMF, United Nations, and the World Bank in a concise manner has not been attempted. Students of African Studies and international development, in general, would benefit from this synthesis of different methodologies and research output in determining the effect of COVID-19 on the African continent.  

The paper is structured as follows: section two discovers the idiosyncrasies of Africa that make the continent especially vulnerable to COVID-19; section three illustrates the economic effect of COVID-19 on Africa; section four synthesizes the forecasts by international financial institutions of the economic effect of COVID-19 on Africa; section five concludes by proposing the policy recommendations by international financial institutions in mitigating the economic effects of COVID-19 on the continent.

Africa’s Vulnerability to COVID-19

The United Nations Economic Commission for Africa in its report COVID-19 in Africa: Protecting Lives and Economics, outlines the reasons why COVID-19 is a serious threat to the continent:³COVID-19 in Africa: Protecting Lives and Economics (Addis Ababa, Ethiopia, 2020), 1–4, https://www.uneca.org/sites/default/files/uploaded-documents/COVID-19/eca_covid_report_en_rev16april_5web.pdf.

• Fifty-six percent (excluding North Africa) of the nearly 600 million urban population (that is 43.5% of Africa’s total population) live in slums. These communities are prone to sporadic outbreaks of infectious diseases, as they are overcrowded and poorly serviced, not to mention resistance towards enforcement of mitigation interventions.
• Regular hand washing and observance of basic sanitation habits have been proposed as the best way to control the spread of the COVID-19 disease, which is mainly transmitted through respiratory droplets. However, 36% of Africa’s population does not have any household handwashing facilities, while 30% have only limited access. 
• Nearly 60% of the African population is under the age of 25, and approximately 40% of children below 5 years old are undernourished; these two variables coupled with disease prevalence increases their vulnerability to COVID-19.
• The lockdown does not provide an alternative means of employment for the 71% of Africa’s unofficially employed workforce.
• Comparatively, the health systems in Africa have lower ratios of hospital beds, Intensive Care Units, and health specialists per population than the rest of the world. On average, Africa has 1.8 hospital beds per 1,000 people, while France, for example, has 5.98 per 1,000 people.
• Most African nations are net importers of medicinal and pharmaceutical products. As such, 94 % of Africa’s needs in medicinal and pharmaceutical products are imported.
• Worldwide, 25 countries are estimated to be most vulnerable to infectious diseases; 22 of those countries are on the African continent.
• Weak legal identity systems are an obstacle in identifying people in need of direct benefit transfers.
• The weak African economies cannot effectively mitigate the impact of the health and lockdown costs. 

Economic Impact of COVID-19 upon Africa

North Africa is experiencing a drop in oil and gas prices, export revenues and tourism. In West Africa, deteriorating commodity prices are reducing export income, placing several countries in debt. Central Africa’s declining prices of oil, gas, and mining restrict economic growth. In East Africa, dwindling trade and tourism are the result of global instability; and Southern Africa is suffering from a reduction in remittances matching the decline in the prices of oil, gas, mining and commodities.⁴African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 5.  The United Nations Commission for Africa estimates that a fiscal inducement package of at least USD $100 billion is needed to directly address urgent medicinal and pharmaceutical needs, furnish a safety net, protect jobs, and support economic activity and build the foundation towards prosperity.⁵ COVID-19 in Africa: Protecting Lives and Economics, v.

Africa supplies the world with approximately 60% of the world’s raw materials.⁶African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 23. Oil accounts for 40% of African exports and about 7.4% of total GDP in Africa. Meanwhile, since the beginning of the year, the price of oil collapsed more than 50 percent.⁷United Nations Economic Commission for Africa, COVID-19 in Africa: Protecting Lives and Economics, 14. The United Nations Economic Commission for Africa⁸Ibid., 21. estimates at least a USD $65 billion loss to fuel revenues for this year. The export of commodities constitutes approximately 70% of total exports in nearly half of African countries. During the pandemic, prices of commodities, such as copper and coal, have fallen by at least 20%,⁹African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 23. and the United Nations Economic Commission for Africa¹⁰COVID-19 in Africa: Protecting Lives and Economics, 14. states that commodity prices have plummeted for more than 67% of African exports. Metal prices have decreased by 20% compared to December 2019 prices, the Food and Agriculture Organization (FAO) food price index deteriorated by 5% in the same period. Additionally, cotton which can be used as a proxy for textiles production tumbled by 26 percent.¹¹Ibid. COVID-19 has disrupted trade with China (11% of African exports and 16% of imports) and Europe (33% of African exports and 32% of imports), figures that cannot be ignored.¹²Ibid.

Diaspora remittances to Africa exceed foreign aid and Foreign Direct Investment (FDI) in some African countries. In Lesotho, Liberia, Comoros and Senegal, remittances consist of more than 10% of GDP, while Egypt and Nigeria received an average of USD $21 billion in remittances in 2014- 2018.¹³African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 24. Figure 1 presents the African countries that are most dependent on remittances, as a percentage of GDP. It is expected that remittances from the African diaspora are also likely to be dampened due to the pandemic.

Figure 1 Source: United Nations Economic Commission for Africa¹⁴COVID-19 in Africa: Protecting Lives and Economics, 21.

Africa imports USD $35 billion in food annually, since it is not food self-sufficient,¹⁵African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 24. and as such COVID-19 is creating conditions for a grave food security crisis across the continent. Food shortages are imminently leading to an increase in inflation as income in most households deteriorates, causing a drop in demand and causing food insecurity. Agricultural production is estimated to contract between 2.6% in an optimistic scenario, and 7% in a scenario with trade restrictions. Food imports are also forecasted to decline considerably, from 13 to 25 percent.¹⁶World Bank Group Office of Chief Economist for Africa, Africa’s Pulse. Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa, vol. 21 (Washington DC, 2020), 2.

In some African countries, tourism accounts for up to 38% of the GDP, with airlines that support tourism effectively non-operational.¹⁷Ibid., 21:v. Countries like Kenya, Seychelles, Cabo Verde, Mauritius, São Tome e Príncipe, Tanzania, Morocco, Egypt, Tunisia, and South Africa, which depend heavily on tourism revenues for foreign exchange and job creation, are bound to face a reduction in tourism incomes and investments.¹⁸African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 24. The tourism industry contributes more than 20% of GDP in the Seychelles, Cabo Verde, Mauritius, The Gambia, and São Tomé and Príncipe. International tourism revenues amount to more than 25% of export receipts in Cabo Verde, The Gambia, Ethiopia, Mauritius, the Seychelles, Tanzania, and Rwanda.¹⁹World Bank Group Office of Chief Economist for Africa, Africa’s Pulse. Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa, 21:32–3.

An increase in informal and vulnerable employment is anticipated, with more than 60% of men and nearly 75% of women informally employed in Africa²⁰United Nations Economic Commission for Africa, COVID-19 in Africa: Protecting Lives and Economics, 9. From a gender perspective, the burden of COVID-19 falls disproportionally upon women, impacting their health, livelihood, safety, and wages. Women have a multidimensional role as breadwinners and caregivers for children and family members including the sick and elderly in the household, a group vulnerable to COVID-19. This responsibility places a heavier burden on women who at the same time, risk their own health status. A lack of social protection policies exacerbates this burden, again causing the responsibilities of income and domestic household tasks to fall disproportionally on women. Consequently, the effect of COVID-19 in Africa is not gender-neutral.²¹African Development Bank Group, The African Development Bank Group’s COVID-19 Rapid Response Facility, 7.

Overall, the decline in export prices, remittances, tourism, and the non-neutral gender impact of COVID-19 have the potential to produce tectonic changes of a scale that the African continent has not experienced for a while.

Forecasts of the Economic Impact of COVID-19 upon Africa

Table 1 provides the projected impact of COVID-19 on the African continent by the end of the pandemic to millions of people. This data was produced by the Imperial College Epidemiological Model as of 25 March 2020. The table demonstrates the likely outcome under different scenarios regarding the pandemic, under which even with the most severe intervention measures, the outcome is devastating for Africa with 122.8 million infected, 2.3 million requiring hospitalization, 500,000 requiring critical care, and 300,000 deaths.

Table 1: Projected impact of COVID-19 on the African continent by the end of the pandemic 2020 (millions of people)

Source: Imperial College Epidemiological Model as of 25 March 2020 and United Nations Economic Commission for Africa.²²COVID-19 in Africa: Protecting Lives and Economics, 5. 

*Scenario key:

A: Unmitigated (worst case) – no intervention

B: Mitigation using moderate social distancing – Optimal outcome when the epidemic is mitigated through interventions to limit contacts in the general population, including social distancing (45% reduction in contact rate).

C: Suppression using intense social distancing (1.6) – the introduction of intense social distancing measures that reduce the contact rate in the general population by 75% once the 1.6 deaths per 100,000 per week trigger is reached.

D: Suppression using intense social distancing (0.2) – the introduction of intense social distancing measures that reduce the contact rate in the general population by 75% once the 0.2 deaths per 100,000 per week trigger is reached.

The United Nations Economic Commission for Africa²³Ibid., v. estimates the impact on African economies, in the best-case scenario, could be the decelerating of growth to 1.8%; in the worst case, a contraction of 2.6%, potentially placing 29 million people into extreme poverty. The African Development Bank Group²⁴The African Development Bank Group’s COVID-19 Rapid Response Facility, 6. estimates that this year the impact of COVID-19 will cost Africa GDP losses between USD $22.1 billion, in the best-case scenario, to USD $88.3 billion in the worst-case scenario. This is equivalent to a shrinkage of projected GDP growth of between 0.7-2.8 percentage points. Fiscal deficits in 2020 are estimated to widen by 3.5-4.9 percentage points, requiring financing an additional USD $110 to $154 billion. African Development Bank’s model-based estimates indicate that Africa’s total public debt could increase, under the best-case scenario, from USD $1,863 billion, 61% of GDP, at the end of 2019 to USD $2,018 billion, 64% of GDP, in 2020. In the worst-case scenario, total public debt can surge to USD $2,062 billion, 65% of GDP, in 2020. In the case of a no-outbreak scenario, total public debt was projected to be USD $1,907 billion, 61% of GDP.²⁵Ibid. 

The World Bank Group, Office of Chief Economist for Africa²⁶Africa’s Pulse. Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa, 21:1. states that Africa will experience its first recession in 25 years, estimating that economic growth in Sub-Saharan Africa in 2020 will decline between -2.1 to -5.1% from increasing 2.4% in 2019. This is translated into a cost between USD $37 and $79 billion. Model simulations by the World Bank forecast that average GDP contraction in Nigeria, South Africa, and Angola could reach 6.9 percentage points in the best-case scenario, and by up to 8 percentage points in the worst-case scenario. Compared to the non-COVID base case, oil-exporting countries may experience GDP reduction fall up to 7 percentage points and in metals exporters by more than 8 percentage points.²⁷Ibid. 

The IMF²⁸Sub-Saharan Africa Regional Economic Outlook: COVID-19: An Unprecedented Threat, April 2020, The Regional Economic Outlook: Sub-Saharan Africa, April. (Washington, DC, 2020), v, www.imf.org. estimates that sub-Saharan Africa’s economy is forecasted to contract to -1.6, the worst figure on record, a reduction from the October 2019 estimate by 5.2 percent. Growth in oil exporters is estimated to deteriorate from 1.8% in 2019 to -2.8% in 2020, a plunge of 5.3 percentage points as compared to the October 2019 Regional Economic Outlook for Sub-Saharan Africa. Resource-intensive countries are forecasted to experience a deterioration of about 5.0 percentage points, from 2.3% to −2.7%; in South Africa, growth is expected to fall from 0.2% in 2019 to −5.8%, and in Nigeria, the largest economy in Africa, GDP is expected to be reduced by -3.4 percent.²⁹Ibid., 5. Non-resource-intensive countries are projected to experience growth deterioration from 6.2% to 2.0%, and tourism-dependent countries such as Cabo Verde, Comoros, The Gambia, Mauritius, São Tomé and Príncipe, Seychelles, may see a real GDP decline by -5.1% in 2020, after an average growth rate of 3.9% in 2019.³⁰Ibid., 6.

Globally, COVID-19 related medical supplies face limitations or outright bans on exports by at least 71 countries, placing Africa, an importer, in a dangerous situation.³¹United Nations Economic Commission for Africa, COVID-19 in Africa: Protecting Lives and Economics, 4. Table 2 below presents the gap between the cost of COVID-19 medical supply response and the current health expenditure across Africa, by pandemic scenario. The percentage increase in health expenditures ranges from 321.16% to 31.83%, depending on the pandemic scenario.

Table 2: Cost of COVID-19 medical supply response (gap) across Africa by pandemic scenario.

Source: ECA cost estimates using Imperial College demand figures and various sources for prices and the United Nations Economic Commission for Africa.³²Ibid., 6.

*Scenario key:

A: Unmitigated (worst case) – no intervention

B: Mitigation using moderate social distancing – Optimal outcome when the epidemic is mitigated through interventions to limit contacts in the general population including social distancing (45% reduction in contact rate)

C: Suppression using intense social distancing (1.6) – Introduce intense social distancing measures that reduce the contact rate in the general population by 75% once 1.6 deaths per million per week trigger is reached

D: Suppression using intense social distancing (0.2) – Introduce intense social distancing measures that reduce the contact rate in the general population by 75% once 0.2 deaths per million per week trigger is reached

The United Nations Economic Commission for Africa³³Ibid., 9. forecasts that between 5 to 29 million people will be driven below the extreme poverty line of $1.90 per day, compared to the baseline 2020 African growth scenario. Meanwhile, there is an increased probability of African citizens shifting into transient poverty by 17.1%, a 4.2% increased probability of staying in poverty for a decade or longer, and a fall in the probability of moving out of poverty by 5.9% for vulnerable households affected by COVID-19. Pre-COVID, low-income households already spent an average of 36% of their income on healthcare-related expenses, coupled with lower terms of trade and lower employment. COVID-19 will have an impact on household welfare, with losses amounting to 7% relative to the no-outbreak scenario in 2020 but can be 10% greater in the case of a lengthy crisis.³⁴World Bank Group Office of Chief Economist for Africa, Africa’s Pulse. Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa, 21:1. 

Compared with the baseline growth scenario, annual formal job creation of 3.7 million is forecasted to drop between 1.4 to 5.8 percent.³⁵United Nations Economic Commission for Africa, COVID-19 in Africa: Protecting Lives and Economics, 9. While Africa experienced an increase in vulnerable employment by 10%, due to the 2008 global financial crisis, the International Labor Organization (ILO) anticipates 19 million job losses in Africa due to the pandemic.³⁶Ibid. 

Conclusion: Policy Recommendations Mitigating the Economic Impact of COVID-19 in Africa

The African Development Bank Group, IMF, United Nations, and the World Bank, summarized their policy recommendations as follows:

• People first: The policy priority for Africa is to expand health capacity, increase public health expenditures, and suppress the virus outbreak irrespective of fiscal and debt status³⁷ IMF, Sub-Saharan Africa Regional Economic Outlook: COVID-19: An Unprecedented Threat, April 2020, vi. 
• African countries should strive to preserve trade during the pandemic to guarantee access to medicinal and pharmaceutical products, as well as food and other critical items. This requires keeping borders open, as much as possible, and avoiding obstacles to trade, such as export bans or taxes³⁸Paul Brenton and Vicky Chemutai, Trade Responses to the COVID-19 Crisis in Africa, Trade and COVID-19 Guidance Notes Global Trade and Regional Integration Unit of the World Bank, 2020, 1.
• African nations should decrease taxes and duties on trade to simplify trade procedures and to assist transport and logistics services in retaining cross-border and international value chains³⁹ Ibid.
• African states should establish trade policies jointly to fight the pandemic. Coordinated actions consist of bilateral cooperation on border management, joint information campaigns, coordinated purchasing of medicinal and pharmaceutical products, partnering on repurposing production to produce medical goods, and management of health professionals⁴⁰Ibid.
• Fiscal, monetary, and financial measures should care for the vulnerable groups, alleviate economic losses, and boost the recovery. Once the pandemic is under control, the fiscal stance should revert to a viable position⁴¹IMF, Sub-Saharan Africa Regional Economic Outlook: COVID-19: An Unprecedented Threat, April 2020, v.
  
• Fiscal policy should target the most vulnerable people and firms, especially those in the informal sector. Measures could include cash or in-kind transfers to people and temporary support to hard-hit firms⁴²Ibid., vi.
• Monetary policy should target the injection of liquidity in sustaining firms and jobs establishing a more accommodating monetary stance⁴³Ibid.
• International solidarity: The fiscal response to the pandemic is highly dependent on sufficient external aid made available from the international financial donors.⁴⁴Ibid. Support from all development partners should address the sizable financing requirements, containing debt relief for countries in distress. Development partners can provide analysis, technical assistance, and operational projects⁴⁵Brenton and Chemutai, Trade Responses to the COVID-19 Crisis in Africa, 1.
• The African Development Bank Group will provide resources up to USD $10 billion in 2020 to member countries and their private sector enterprises and offer liquidity to countries facing fiscal and balance of payment issues. This would ideally provide stability and maintain the basic public services and social infrastructure during the pandemic, as well as offer support in a fiscally sustainable direction while averting an increase in debt burden.⁴⁶The African Development Bank Group’s COVID-19 Rapid Response Facility.