Recovery from the Economic Impacts of the COVID-19 Pandemic in Africa: What Role for Trade?

By Beatrice Chaytor and Ify Ogo

The economic impacts of the COVID-19 pandemic on African countries will be known only after the situation is brought under control.

There will be immediate shocks to livelihoods, as well as severe disruptions to value chains, industries and government revenue for the foreseeable future. As an illustration, the United Nations Economic Commission for Africa (UNECA) estimates that the GDP growth in Africa will decline from 3.2 per cent to 1.8 per cent in 2020. It is also important to look beyond macro-analyses, because, as the current President of the African Development Bank has noted, ‘Nobody eats GDP’. Also, a significant proportion of the working population is engaged in the informal sector, where activities are not captured by formal accounting systems, and so GDP calculations may not present the economic picture. Economic contractions will be experienced by individuals, families and businesses. The bulk of Africa’s workforce operate in the informal sector, within micro, small and medium sized enterprises. Take for instance, the transport service operator unable to work as a result of lockdowns and prohibitions on movement within and between cities. Similarly, border closures translate to loss of income for those small-scale traders operating between countries. Many salaried workers will also be in a precarious situation, as businesses grapple with the loss of income associated with the lockdowns.

The World Bank Group announced a US$14billion emergency response facility for developing countries. By early April 2020, some African countries had accessed this facility, as shown in announcements of a US$2.5 million grant for Sao Tome & Principle, a US$10 million grant for Gambia and a $82.6 million ($41.3 million grant and $41.3 million credit) for Ethiopia. These funds notwithstanding, economic recovery will depend to a significant extent on countries’ deftness with policy manoeuvres, as well as the coordinated continental response to the crisis. It seems that trading under the terms set by the Agreement to establish the African Continental Free Trade Area (AfCFTA), which was slated to commence on 1 July 2020, will have to be postponed. In light of the pressures currently faced by African countries, it becomes pertinent to anticipate the impact of disrupted trade patterns on economic performance, and reflect the new realities of African economies in the negotiations for, and liberalisation of intra-African trade. Accordingly, it is important that trade-related considerations are accounted for in the measures for palliation, recovery and resilience at national and regional levels. These considerations include repositioning African countries in regional and global value chains, prioritising health services in the first round of AfCFTA services negotiations, promoting cross-border digital trade in services, and leveraging the AfCFTA for economic recovery and resilience.

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