The Aftermatch of the Coronavirus in Selected African Economies

Abstract

African countries have been among the last to be hit by the global coronavirus pandemic. Yet, as the cases rise and governments rightfully take the necessary measures to slow the spread of the virus, the continent is likely to face widespread economic fallout as business slows to a near halt. Some countries like Angola and Nigeria, were already going to feel the pain from an oil price war – largely driven by a falling out between Saudi Arabia and Russia – but a pandemic that has already pummelled stock markets across the globe will only be an add-on to the unavoidable economic damage expected in the short term for these countries.The reality is that many countries across the globe are on recession watch…some countries may already be in a recession (albeit not yet by the technical rules of a fall in GDP in two successive quarters). For Algeria, things are very complicated because the country does not have a pro-business energy policy. The perennial issue the hydrocarbons law still has not been reformed. Add to that the problems of security and corruption, and you end up with conditions that are unfavourable to private investment. Moreover, oil companies have seen billions of dollars of their value wiped out losing 10% to 15%. This will therefore limit investment.

The COVID-19 could lead to Africa’s export revenues from fuels falling at around US$ 101 billion in 2020. Remittances and tourism are also being affected as the virus continues to spread worldwide, resulting in a decline in FDI flows; capital flight; domestic financial market tightening; and a slow-down in investments – hence job losses. Pharmaceuticals, imported largely from Europe and other COVID-19 affected partners from outside the continent, could see their prices increasing and availability reduced for Africans. With nearly two-thirds of African countries being net importers of basic food, shortages are feared to severely impact food availability and food security. Negative consequences are expected to worsen with the crisis becoming a pandemic. In addition, a decline in commodity prices could lead to fiscal pressures for Africa’s economic power houses such as South Africa, Nigeria, Algeria, Egypt and Angola.