Working through regional blocs will help Africa fix virus-hit economies
First of three meetings should focus on country-specific recovery plans and how rest of the world can help continent convalesce
Shutting down its economy like the rest of the world is a price Africa cannot afford to pay, I wrote in an opinion piece for the South China Morning Post in March on the effect of the coronavirus on the continent.
I said that because extreme poverty and the size of the informal economy across the continent would leave too many people vulnerable. The poverty rate across Africa is about 40%. The range of the informal sector is 40%-85%, depending on the country. If those folks don’t work, they don’t eat. It’s that simple. A shutdown of the economy for almost any duration is, literally, life threatening.
The effect of a shutdown on African stock markets and bond markets would furthermore be just as devastating. When I arrived in Johannesburg in February the exchange rate was R15.4 to the dollar; at the time of writing it is R18.30. For a country already struggling with foreign debt the cost to borrow will be higher and the cost of repaying already accumulated debt will increase too. Some version of this horror show is being played out across the continent.
My argument was you can’t expect better health outcomes in Africa by creating poorer people and poorer countries. The World Bank recently released its report on Africa and the coronavirus, echoing the main thrust of the argument I made a month ago. All considered, the World Bank calculates the costs of the corona crisis for Africa at $37bn-$77bn, from now until the end of the year.
The critical question is, what’s next for Africa as it moves from strategies to contain the virus to correcting for the economic contagion caused by the virus? At the top of the list is the need for a co-operative and co-ordinated recovery effort. One of the irrefutable truths underscored by the crisis is that viruses and economic contagion don’t respect boundaries or borders. Go-it-alone approaches thus won’t work. Likewise, given the new African Continental Free-Trade Area treaty, single-country solutions for recovery run counter to the open-border approach to free trade, which is critical to secure Africa’s economic future.
African governments should initiate the following three meetings to incorporate vital aspects into their policy and strategic plans to rebound from the coronavirus-crisis:
- The regional blocs — The Southern African Development Community (Sadc), East African Community (EAC), and Economic Community of West African States (Ecowas) — should discuss follow-up strategies on the varying initiatives to deal with the outbreak and devise strategies to jumpstart member country economies. The agenda should include sharing country-specific recovery plans and how the rest of the world should be engaged to help Africa rebound and recover.
- The AU should initiate a meeting that engages Africa’s Brics allies. Given the extent to which China, India, and Russia are engaged on the continent, this is a no-brainer. Brics countries account for 40% of the world’s population and 30% of the global economy. There is substantial economic firepower in this group. This strategic alliance should be mobilised so that its member states and allies can co-operate and co-ordinate their respective efforts to move their countries towards recovery.
- Talks should be held with the leaders of the G20 and multilateral institutions. Jump-starting the global economy requires a global agenda. African leadership should angle talks to ensure that the global response is not a top-down approach. Trickle-down strategies generally result in those at the bottom being trickled on. Everything from debt forgiveness to fiscal support should be on the table. Up until 2001 African countries were growing at an enviable clip. Since then there have been three major shocks to the global economy — 9/11, the 2008 financial meltdown, and the coronavirus-crisis. None of these were Africa’s fault, yet the continent has had to bear a disproportionate share of the burden.
The World Bank is proposing a $14bn fast-track fund to shore up immediate containment efforts and $160bn over the next 15 months to assist with the overall recovery of the continent. While these numbers sound big, it’s a drop in the bucket by world standards. The US recovery package of $2-trillion translates to overall benefits of about $6,000 for every person in the country. The World Bank commitment to Africa calculates to about $160 per person. That’s not fair, it’s not right, and it’s not enough.
Multilateral institutions as well as bilateral aid from the US, UK, EU, China, Russia, and the Scandinavian bloc should be substantially increased to help dig Africa out of this hole, which it didn’t cause.
Beyond budgetary support, there is also the issue of debt. Debt relief is not enough; debt forgiveness should be the primary point of conversation. Africa’s bond and sovereign credit ratings should in future be calibrated based on the strength of their economies before 9/11. That’s fair, and it also represents the best shot for Africa getting back on track.
Africa’s leaders, and its people, have done their part to stem the tide of the virus. They shouldn’t have to bear the burden of their recovery alone. What I’m suggesting is the sort of progressive agenda that will ensure that Africa, and the rest of the world, will be ready to withstand the next virus outbreak. It is this sort of progressive agenda that will ensure Africa will truly be on the road to recovery.
• Stith, who served as US envoy to Tanzania under Bill Clinton, is nonexecutive chair of the Johannesburg-based African Presidential Leadership Centre.
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