Saving lives must take priority, Africa advised amid recession

Silos for agricultural produce at Africa Improved Foods at Kigali Special Economic Zone. According to World Bank, despite of the imminent economic recession that is likely to be caused by the Coronavirus outbreak, African economies should first prioritise saving lives from being lost to the deadly virus before they can concentrate on revamping the economy. /Photo: Sam Ngendahimana.

The Sub-Saharan Africa region is projected to have -5.1 per cent growth and consequently its first recession in 25 years according to the latest Africa’s Pulse, the World Bank’s bi-annual analysis.

The economic impact on African countries resulting from COVID-19 and shocks expected in the post-COVID-19 are among other things due to the aspects such as the size of population working informal employment estimated at about 89 per cent for Sub-Saharan Africa.

 

The instability of most jobs, as well as the dominance of small and medium-sized enterprises which constitute 90 per cent of business units – most of them affected –further increases the vulnerability of the continent.

 

Most African countries are also not in a position to roll out effective monetary stimulus.

 

Workers package green beans for export inside the NAEB warehouse in 2019. Photo: File.

The World Bank report noted that some of the effects of the recession include a loss of between $37 billion and $79 billion in terms of output losses for 2020 as well as consequences on household welfare.

Further effects in the Sub-Saharan Africa region include a potential food security crisis in the region, as agricultural production could contract by between 2.6 per cent and 7 per cent in the scenario if regional trade is not effective.

Further aspects that will lead to a recession include disruption in trade and value chains affecting commodity exporters, the reduced foreign financing flows of foreign direct investments, foreign aid, remittances, tourism revenues, and capital flight.

Amidst the challenges, economists say that the best responses to the recession include at the moment should majorly be around saving lives and protecting livelihoods.

With uncertainty on how long the ailment will last in the region and other resultant health effects, experts advised that improving health systems across the continent remains key at the moment.

“The availability and allocation of financing for the health sector is still a major concern in Sub-Saharan Africa. The medical personnel in the region should be protected and properly equipped,” the report read in part.

The report also argued that the priorities should also involve implementing social protection programs to support workers, especially those in the informal sector.

This could be in the form of cash transfers, in-kind transfers (food distribution), social grants to disabled people and the elderly, wage subsidies to prevent massive layoffs, and fee waivers for basic services among others.

Albert Zeufack, Chief Economist for Africa at the World Bank said that as governments set out fiscal and monetary interventions, it is important to ensure that fiscal policy builds in space for social protection interventions, especially targeting workers in the informal sector and sow seeds for future resilience of our economies.

Hafez Ghanem, World Bank Vice President for Africa said that part of the relief for the continent could be in holding official bilateral debt service payments which would free up funds for strengthening health systems to deal with COVID 19 and save lives, social safety nets to save livelihoods and help workers who lose jobs as well as support to small and medium enterprises.

It is estimated that Sub-Saharan Africa (SSA) region paid $35.8 billion in total debt service in 2018, which was about 2.1 per cent of regional gross domestic product (GDP).

Considering that Africa could use an economic stimulus of up $100 billion, experts say a debt moratorium would immediately inject liquidity and enlarge the fiscal space of African governments.

Dr Canisius Bihira, a Rwandan based Economist told The New Times that in light of the recession, focus should be on boosting the capacity of local supply chains in aspects such as agriculture to ensure adequate local value addition.

Boosting local production he said would among other things increase job creation, reduce import values and imports as well as ensure the availability of essential goods.

He said that the challenging times call for support to the local industrial sector to facilitate access of goods for local consumption as well as exports to the region.

cmwai@newtimesrwanda.com

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