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The Economic Impact of COVID-19 in Africa (part 3)

  • 27 March 2020

COVID-19 has hit Africa’s informal economy, which is the source of livelihood for most Africans.  So far most of the economic impact analyses have been focused on the formal African economy, like airlines losses, trade, infrastructure etc.  The informal economy in Africa has not been reported on.  The implication is that interventions to mitigate the impacts may miss those who really need support. 

The International Labour Organisation estimates that the average size of the informal economy as a percentage of GDP in sub-Saharan Africa is 41%.  It is a huge employer, representing  72% of total employment in sub-Saharan Africa.  Most of those in the informal sector are women and young people who have no other choice for their livelihood. 

The informal sector supplies merchandise ranging from textiles to electronics, mostly imported from China.  The shortage of supplies for business people in Africa means no income.  This situation is aggravating the already existing problem of poverty in Africa.  Today, one in three Africans, that is 422 million people, live below the global poverty line.  They represent more than 70% of the world’s poorest people. 

The economic impacts of COVID-19 can quickly reverse the gains made in poverty reduction in Africa in the last decade.  According to 2019 projections from the World Data Lab, for the first time since the start of the SDGs, more Africans were escaping extreme poverty.  It was expected the pace would increase but with the coming of the current crisis the pace will be reduced if not reversed.

What should African Countries do to minimise the economic impact of COVID-19?

Firstly, deal with the pandemic.  African countries must develop a viable plan to defeat the outbreak.  Containing the disease is the first step to mitigating the health and economic impacts.  Countries must build awareness on what to do.  The video image of President Kagame demonstrating how to sanitise hands is one such very good example.  The fact that the spread of the virus to Africa is slower than elsewhere is a blessing.  It is gratifying that the World Bank has already made available about $12 billion while the IMF has made available a loan of $50 billion for low-income and emerging market countries.  Of this $10 billion is available at zero interest for the poorest.

Strengthen the safety net. The economic impacts of COVID-19 will be felt most by the vulnerable, those least likely to have savings.  When bans for outdoor activities increase, they will not be able to work remotely.  Governments must make sure there is an economic safety net (e.g. sick leave, subsidised health coverage) in place.  Small enterprises which are losing business on account of shortage of supplies from China also need support.

Gathering Data.  Governments must ensure that data on populations experiencing the greatest hardships is gathered, including the informal sector.  Others have suggested simple data gathering as was done during the Ebola epidemic of 2014-15 can be employed. Researchers used phone surveys in Sierra Leone and in Liberia to gather information on the impacts of ill health and aversion behaviour.  Measuring impacts will ensure that the most vulnerable are helped.

Charlie Chilufya, S.J. is the Director of the Justice and Ecology Office (JEO) of the Jesuit Conference of Africa and Madagascar

This article is part of a series. See part 1 and part 2

Picture: Zimbabwe, Jesuit Missions