Navigating Through Threats Facing African Economies

On 11 March 2020, the World Health Organization (WHO) declared COVID-19 a pandemic. African countries responded by implementing policies geared towards protecting the health of their population and economies. While policies varied across countries, they broadly involved measures stop travel, curtailing economic activity to limit movement of people, and health measures to reduce the disease burden of COVID-19. As of 15 June 2020, the Africa’s Center for Disease Control count shows that the continent now has 242,105 confirmed cases of COVID-19 with 109,977 recoveries and 6,464 deaths. The number of confirmed cases has risen sharply since the WHO characterized COVID-19 as a pandemic with Africans governments committing to focus their efforts on containing the virus.

Policies limiting travel continue to be in force in varying degrees, across Africa. Such policies have slowed down the rate of the spread of the virus especially from international travellers. However, these policies also negatively affected the tourism and travel industries that employ a significant percentage of Africans. Most African national airlines are now facing a cash crunch caused by a significant drop in air travel. While some have attempted to mitigate this by shifting to cargo transport, most national airlines are still relying on government bailouts, further straining national budgets.

Many African governments have adopted mitigation measures, such as wearing masks, as part of their efforts to contain the virus. Nevertheless, misinformation and conspiracy theories about the pandemic remains a challenge and poverty is exacerbating the spread of the virus since social distancing, hand washing and having access to masks are unattainable for many.

National budgets also face additional strain, as curtailing economic activity to reduce spread of the virus is likely to lead to a drop in the tax revenues collected by governments. Some aspects of economic activity have moved online after an increase in the use of social media sites and apps, a trend that will boost ecommerce in the end. Furthermore, the current situation has increased the use of mobile money services such as MPESA. African governments will likely have to update their tax codes to enable the collection of revenues from the growing ecommerce activity.

The success of the health measures adopted remains mixed across the various regions of Africa. North African countries and South Africa seem to have a higher prevalence of COVID-19 cases compared to the rest of Africa. This could be because these countries have a higher testing capability providing them with a clearer picture of the burden of the disease in their population. Testing capabilities of countries in East Africa, such as Kenya have also increased, with the Kenyan government embarking on amass testing for the virus. The implementation of further health measures is needed since returning to a sense of normality depends on reducing further spread of the virus.

These challenges require the African Legal Support Facility (ALSF) to continue supporting its beneficiary governments especially on legal and economic aspects. The significant drop in commodity prices, weakening of local currencies in most countries especially those that are dependent on commodities and the increased burden of dollar denominated debt requires urgent measures. As the world is projected to enter into its first global economic depression of our lifetimes due to the COVID-19 pandemic, proving legal and technical expertise to African governments is increasingly necessary to enable them navigate through these uncertain times.

About ALSF
Created by the African Development Bank in 2010, the ALSF supports governments in negotiating complex commercial transactions, providing legal and technical assistance in public-private partnership projects across the oil and gas, mining and energy sectors, and covering sovereign debt issues and creditor litigation.

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