Africa must work together against Covid-19 economic effects
The continent must acknowledge that simply resuming production of commodities is not going to lift it from the current recession
When the Covid pandemic first hit early in the year none of us, from the east to the west, north to south, had any idea how long it would last or the extent of the human and economic impact.
Historically we have seen the larger, more established economies able to emerge from global shocks unscathed, but in this instance the devastating impact has been felt globally, and Africa is no exception.
Measures taken to curb the spread of the virus not only saw economic activity grind to an unprecedented halt but also disrupted global supply chains and trade flows. Global trade activity had already come under pressure in 2019 due to rising trade tensions. The impact of Covid-19 has provided us with a sobering glimpse of what a world with increased protectionism and trade restrictions could look like. Looked at from an African vantage point the picture can appear even grimmer.
In October the IMF cautioned that it expects Sub-Saharan Africa’s economy to shrink 3% this year. This first recession in the region in 25 years can largely be attributed to the expected recession in SA, which is forecast to see its economy shrink by about 8% this year, in addition to the austerity measures caused by Covid coupled with falling commodity prices. Whether it is oil, coal, coffee or copper, African economies still rely heavily on commodity exports to the rest of the world.
According to the UN Conference on Trade and Development (Unctad), exports to the rest of the world made up 80%-90% of Africa’s total trade from 2000 to 2017. By contrast, intra-African exports made up only 16.6% of Africa’s total exports in 2017. It is therefore important for Africa to acknowledge that simply resuming production of its commodities is not going to be the panacea to lift ourselves from the current recession. What is required is a simultaneous and sustainable global recovery to ensure demand for these commodities. Covid is revealing (as did the previous global crises) just how vulnerable Africa is to declining demand from the rest of the world.
What this means is that policies and goals that were needed to drive African development before the pandemic are still required, with even greater urgency. Covid-19 should be encouraging African governments to work together and focus on boosting intra-African trade with even more vigour. An African solution for an African problem is what is required.
Intra-African trade, defined by Unctad as the average of intra-African exports and imports, was about 15.2% during the period from 2015 to 2017. The comparative figures for America, Asia and Europe were 47%, 61% and 67% respectively. Physical borders may be closed, but country borders and physical distance now matter less in sharing knowledge, building networks and doing deals. Africa should grab this opportunity with both hands to not only build new trade linkages with the rest of the world but, more importantly, within the continent.
While it is broadly acknowledged that African governments do not have the fiscal firepower available to many of our counterparts in developed markets, we do have the opportunity to increase regional co-operation, harmonise trade regulations and reduce tariffs and other trade barriers. The implementation of the African Continental Free Trade Area (AfCFTA) is a crucial step to achieving this.
The AfCFTA envisions creating a single continental market for goods and services, with free movement of people and investments, by bringing together 55 member states of the AU. Trading under the agreement was due to start in July this year but due to the pandemic the date was pushed out to January 1 2021. The continent cannot afford for this deadline to be postponed again.
The encouraging news is that most African leaders appear to understand the mutual benefit and are committed to embracing digital technology to help finalise the implementation of the AfCFTA. For example, the AU Commission has welcomed support from the private sector, notably the African Virtual Trade-Diplomacy Platform (AVDP), which aims to keep the AfCFTA on track using technology by enabling member states to participate effectively and securely in the outstanding negotiations.
Other challenges to intra-African trade also remain. Addressing a lack of infrastructure to facilitate transport linkages, poor internet connectivity and weak energy security will be important to strengthening African trade.
Due to our excellent infrastructure these factors may be less of a concern within SA than among our neighbours, but in 2019 only about 27% of SA’s exports went to the rest of the continent. Increasing this number remains one of the greatest opportunities available to the country and should be an important priority in our strategy to rebuild the economy post-Covid.
On this front, the department of trade, industry & competition should be commended for its efforts to continue trade discussions despite the restrictions imposed by Covid, most recently by hosting an SA-Ghana trade & investment webinar to replace the need for physical meetings.
With the pandemic far from over, predicting how soon the world economy will recover is impossible. Uncertainty is still high, which means Africa is unlikely to benefit from increases in foreign investment over the short- or medium-term. As a continent — and as a country — we cannot afford to wait for the world to recover or to turn its attention back to us. We must look inward and make sure we realise opportunities in SA and the greater Africa.
• Egberink is head of global banking: SA & Southern Africa at Standard Chartered.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.