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The Economic Impact of COVID-19 in Africa (part 1)

  • 23 March 2020

A common trend has emerged in African capitals just like elsewhere.  Travelers are cancelling flights; businesses are asking workers to stay home and, in some cases, curtailing employment contracts.  A global health crisis that has not affected Africa as much as China and the Northern countries is becoming a social and economic crisis for Africa and many other low and middle-income countries of the world.  The African economy is “infected”.  We sympathise with all those infected and directly affected by the Coronavirus and our thoughts and prayers go out to them. In any health crisis, our first concern is and should be the health of those affected. 

However, the economic impacts are also having dramatic effects on the wellbeing of communities.  In low-income countries, lost income due to an outbreak like COVID-19 can translate to spikes in poverty, missed meals for children, and reduced access to basics like health care.  For Africa the spread of COVID-19 is translating into economic impacts that will affect the most vulnerable. 

Macroeconomic Impacts

COVID-19 has resulted in mass production shutdowns and supply chain disruptions due to port closures in China, causing global ripple effects across all sectors in a rare “twin supply-demand shock”.

In Africa, concern about COVID-19 is growing.  Countries have put in place strict measures to ensure that the virus does not spread.  Though Africa is not as infected as the rest of the world, its economy is already “infected”.  From the demand side, the immediate exposure for Africa to the economic impact of COVID-19 is trade.  China is Africa’s biggest trading partner. 

Demand for African commodities has decreased.  Importers in China are cancelling orders due to port closures and reduced consumption.  Over three quarters of African exports natural resources and any reduction in demand impacts the economies of the continent.  This will put a strain on their currencies as their main source of foreign exchange are their exports to China.  Countries such as Zimbabwe, Nigeria and Ghana are significantly exposed to risk in terms of exports to China.  Sellers of export commodities are being forced to offload products at a discounted rate.

Now that COVID-19 has spread, especially in Europe, Africa is being double hit.  From the supply side, machinery, manufacturing and transport equipment constitute over 50% of Africa’s imports. Imports from outside of Africa account for more than half the total imports to African countries, with the most important suppliers being Europe (35%), China (16%) and the rest of Asia (14%).  COVID-19 disruptions will decrease the availability of manufactured goods in Africa.

From the demand side, African exports to Europe have dwindled.  The Standard Newspaper reported that Kenya’s fresh exports have taken a huge beating following last-minute flight cancellations, leaving tonnes of flowers to rot.  Flowers are the second biggest source of foreign currency for Kenya, earning over USD $ 1.2 billion last year.  “We are very worried about the trend in the main markets because we are running into a big problem,” Kenya Flower Council Chief Executive Clement Tulezi was quoted as saying.

Charlie B. Chilufya, S.J.

Read part 2 of this article series. Please keep our partners in Africa in your prayers. 

Photo: A village in Zambia, Jesuit Missions