News October 12, 2020 at 11:00 am

COVID-19 could drive 40 million people in Africa into extreme poverty

Abu Mubarik October 12, 2020 at 11:00 am

October 12, 2020 at 11:00 am | News

A view of a street in Walikale, the Democratic Republic of the Congo. Photo CREDIT: Enough Project / Laura Heaton / CC BY-NC-ND

The growth rate in Africa is predicted to fall to -3.3 percent in 2020, according to the World Bank, driving up to 40 million people into extreme poverty and as well as erasing at least five years of progress in fighting poverty. The fall in growth rate could also push the region into its first economic recession in 25 years. 

In Africa’s biggest economy, Nigeria, the real GDP contracted by 6.1 percent year-on-year in the second quarter of 2020 — the worst result in more than a decade. In South Africa too, where the country had to operate under severe containment measures, real GDP contracted by 17.1 percent year-on-year in the second quarter of 2020.

Angola, sub-Saharan Africa’s second-largest oil producer after Nigeria, saw its economy contract by 1.8 percent year-on-year in the first quarter of 2020.

The decline in growth has been stronger among metals exporters where real GDP is expected to contract by six percent, partly reflecting the large drop in output in South Africa, the World Bank said in a statement. Among oil exporters, after expanding by 1.5 percent in 2019, real GDP is projected to fall by more than 4 percent in 2020, owing to contractions in Angola and Nigeria.

In contrast, the statement said, for non-resource-intensive countries, the decline in growth in 2020 is expected to be moderate, on average. In several non-resource-intensive countries, including Côte d’Ivoire, Ethiopia, and Kenya, growth is expected to slow substantially, but remain positive, owing to their more diversified economies. Meanwhile, the tourism-dependent economies, especially those of Cabo Verde, Mauritius and Seychelles, experienced a sharp contraction as exceptionally weak international tourism severely impacted the service sector.

The substantial downturn in economic activity will cost the region at least $115 billion in output losses this year. Gross domestic product per capita growth is expected to contract by nearly 6.0 percent, in part caused by lower domestic consumption and investment brought on by containment measures to slow the spread of the coronavirus.

“The road to recovery may be long, and it may be steep, but prioritizing policy actions and investments that address the challenge of creating more, better and inclusive jobs will pave the way for a faster, stronger and inclusive recovery for African countries,” said Albert Zeufack, World Bank Chief Economist for the Africa regions. 

The Africa Development Bank in January also predicted that the coronavirus could push nearly 50 million into extreme poverty. The bank said efforts to reduce extreme poverty could be “wiped out” in the absence of adequate measures to mitigate the pandemic’s impacts. This will push many countries away from the U.N. Sustainable Development Goal targets of eradicating extreme poverty by 2030, it added.

Africa has been praised for responding better to the coronavirus pandemic than richer countries. The continent has recorded a little over 1.4 million cases and just over 34,000 deaths, defying horror predictions. “Overall, I really commend the response in African countries. We are making progress thanks to the concerted efforts of governments, communities, and partners,” Matshidiso Moeti, WHO Africa region director, said.

However, according to the World Bank‘s vice president for eastern and southern Africa, Hafez Ghanem, the behavior of the virus on the continent is still uncertain adding that some countries are putting in place measures to ensure inclusive growth in the future.

“Although the pandemic is not over and the persistence and spread of the virus is uncertain, African governments have started putting in place policies and programs to support an inclusive and sustainable post-pandemic recovery,” he said. “Countries are putting in place policies and programs that help create jobs and accelerate economic transformation to reduce the economic impact of the pandemic now, and build the capabilities needed to ensure inclusive economic growth in the future.”

In Nigeria, President Muhammadu Buhari has presented a budget of $34 billion for next year to help the economy recover after it was battered by the Covid-19 pandemic. The budget plan includes borrowing from domestic and foreign markets to plug the shortfall.

Zambia this month temporarily suspended interest payments to private creditors totalling $3 billion as it struggles to contain the economic effect of COVID-19, making it the first African country to default on its loan payment due to the coronavirus pandemic.

The Finance Ministry added that a combination of declining revenues and increased unbudgeted costs caused by the Covid-19 has affected its available resources to make timely payments on its indebtedness leading to increasing debt-servicing difficulties.

South Africa is also expected to unveil a draft policy aimed at boosting economic growth as a result of the economic wreckage wrought by the coronavirus pandemic. The plan includes inclusive growth, breaking the cycle of low economic performance, localisation, re-industrialisation among others.

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