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The Economic Impact of COVID-19 in Africa (part 2)

  • 25 March 2020

Microeconomic Impacts: Local Markets and Local Business

The virus is directly impacting local economies, which for Africa means small businesses who form the larger component of the African economy popularly known as the informal sector.   Goods imported from China and resold by small businesses dominate African informal markets.  Such businesses are a source of livelihood for many. 

Most of the economic impact is coming from “aversion behaviour” –  the actions people take to avoid catching the virus spurred by:

  1. Governments impose bans on certain types of activities e.g. flights from affected areas.
  2. Firms and institutions take proactive measures to avoid infection e.g. closing.
  3. Individuals reduce trips to the market, travel, and other activities.

This affects all sectors of the economy and lead to reduced income both through the supply side (reduced production drives up prices for consumers) and the demand side (reduced demand from consumers hurts businesses).  Traders are worried that products from China will soon run out completely.  “In Nairobi and several other African cities, stocks of certain goods, including groceries, from China have already been significantly decimated, leading to higher prices,” said Waweru, president of the Nairobi Traders Association.  “Electronic products in particular are getting scarce.”

Nigerian small businesses are equally among the worst hit. It is claimed that no other country in Africa consumes more Chinese products than Nigeria.  “Chinese products are usually found in all parts of Nigeria,” said a businessman from Lagos.  One group of business men and women affected in this regard are currency traders.  An operator of a currency exchange shop in Lagos shared that he has suffered considerable losses in recent days: “People are no longer coming to the exchange office to buy foreign currency because nobody wants to travel to China”, he said.  Business people have cancelled overseas trips.

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Similar stories came from Zimbabwe.  The country also appears to be experiencing considerable supply shortages.  This is a double blow to the already ailing Zimbabwean economy:  “Before the coronavirus outbreak, I ordered some goods from China. But they never arrived in Harare. Our customers are angry,” said a retailer from Zimbabwe. Many Zimbabweans travel to China to order cheap goods. 

Other than the reduced availability of Chinese supplies, the other impact is coming from governments directives to stop or minimise several activities like big meetings, weddings, religious gathering, etc.  Elizabeth Wanjiru, a supplier of flowers had this to say: “We are at a big loss. In the last two weeks we have made losses of unsold supplies of flowers and as you know flowers are perishable goods…What this simply means is that we have no income for food, housing and other basic needs. We are suffering.” Another supplier of household items in Nairobi, Johaden Mbula lamented for a whole day “I have only been able to sell USD $1 worth of goods.” 

Charlie B. Chilufya, S.J.

Read part 3 of this series. You can read Part 1 here. Please keep our partners in Africa in your prayers. 

Photo credit: Charlie B. Chilufya, S.J.