McKinsey warns of a coronavirus jobs bloodbath across Africa

The national lockdowns imposed on various African countries could wipe out about a third of jobs across the continent, a report by global consultancy firm McKinsey has warned.

President Cyril Ramaphosa joined other African states in imposing a lockdown in a bid to curb the rapid spread of the highly contagious coronavirus in SA. The virus has infected more than 2.09-million people worldwide and killed 139,469 since it spread from Wuhan in China in late December 2019. In SA, 2,605 people have been infected and 48 have died, according to latest figures from the government.

While a total lockdown such as SA’s could be the quickest way to “flatten the curve” of new infections, it has had the negative effect of leaving only about 30% of each economy operating, senior partner and chair of McKinsey, Acha Leke, said. The jobs or incomes of about 150-million people out of a 450-million working population in Africa will be affected.

The report coincided with a call by World Health Organisation (WHO) and the World Economic Forum (WEF) for measures to mitigate the economic impact of lockdowns that are imposing heavy costs on the population across the continent.

“The lockdown measures are difficult and they need to be accompanied, in our view, with very strong communication with people so that in addition to the police or the army enforcing what's happening, that people understand because somebody they trust and believe in is telling them, and they believe themselves that it is for their benefit,” Matshidiso Moeti, Africa regional head of the WHO told a virtual press conference on Thursday.

Elsie Kanza, head of the WEF in Africa, told the same conference that while the continent needs to keep “ahead of the virus in terms of testing, isolating and providing treatment to those who are affected”, the economic costs are high, with people forced out of work and food supply chains disrupted.

“Unfortunately we are also seeing the negative impact in terms of the economic squeeze, people are not able to work,” she said.

The McKinsey report said the retail sector will face the biggest loss, with up to 6-million jobs at risk in the formal sector. Manufacturing and construction will be equally hard hit.

Leke said that of the 140-million people in informal employment, up to 20-million could lose their jobs completely. “We think that another 30-million to 35-million people will have their salaries reduced. Some of them are going to be let go, some of them will have reduction in work hours,” Leke said.

While all sectors will suffer, some will escape the worst, he said. These include health care, information technology and communications, as well as food and the delivery of food.

Other countries that have introduced lockdowns in Africa include Nigeria, Ghana, Zimbabwe, Malawi, Kenya and Botswana, while the SA government said on Thursday it will phase out the lockdown instead of ending it in an abrupt halt. The lockdowns have affected key sectors, including manufacturing, travel, hotels and tourism.

The stimulus packages sought by African finance ministers, which average 1% to 1.5% of GDP, are not enough compared to those of China and the US (4% and 10% of GDP respectively), Leke said. The continent would need much more than the $100bn (R1.89-trillion) in total being called for by the finance ministers.

“It’s a crisis like you’ve never seen before. It’s very far from what we need. We think it’s the minimum of what they need,” Leke said.

McKinsey’s  report said the stimulus “should typically be targeted at securing basic incomes and availability of essential products and services; safeguarding SMEs [small and medium-sized enterprises] and the jobs of the people who work for them; and supporting key corporate institutions that are necessary for the long-term health of the economy, through a combination of both financial and operational support”. 

With Lukanyo Mnyanda

thukwanan@businesslive.co.za