January 20, 2021 / 10:16 AM / By FBNQuest Research / Header Image Credit: WebTV
Today we highlight the high-level discussion on Africa's outlook hosted by the Africa Investment Roundtable (AiR) on Monday. This was a virtual event. For its maiden edition, the speakers covered lessons from 2020, the outlook for 2021 and ways to turn the current crisis into an opportunity. Indeed, last year was unprecedented in the worst sense and unfortunately the crisis appears still to be unfolding. 'Unprecedented crisis', the 'great lockdown' and the 'hunger virus' were among the phrases used to describe the impact of the Covid-19 pandemic across the globe. One key message that was reiterated by the three speakers on the panel was that Africa must not waste this crisis.
While discussing Africa's pandemic experience in comparison with that of other parts of the world, Toyin Sanni, CEO of Emerging Africa Capital, opined that a key difference between the experience of Africa and those of many other parts of the world (Europe and the US) is that the economic crisis has been more severe than the health crisis. The reasons for the relatively lower impact on Africa health-wise are still debated: explanations include the climate, demographics, herd immunity and learning experience/established protocols from fighting Ebola in some parts of the continent.
Additionally, most African countries do not have the fiscal space that would have enabled them to deploy a comparable proportion of resources to those deployed by advanced nations. Arunma Oteh of the Said Business School, University of Oxford, noted that while many advanced nations had stimulus packages of around 10% of GDP, most African countries were unable to provide more than 1% of GDP.
Regarding the outlook, Oteh argued that the risks are more on the downside due to the surge in infections and mutations of the virus.
The World Bank's Global Economic Prospects estimates that sub-Saharan Africa's GDP shrunk by 3.7% in 2020, equivalent to a per capita income decline of 6.1%. GDP is forecast to grow at only 2.7% in 2021 and 3.3% in 2022, a far cry from pre-Covid levels when seven of the fast growing economies in the world were in Africa. The downturn in economic activity is estimated to cost sub-Saharan Africa at least USD$115bn in output losses.
Another AiR panelist noted that industrial commodity exporters as well as countries that depend on the tourism sector were the worst hit. Global tourism and travel make up 10% of global GDP. These sectors provide more than 320 million jobs worldwide, many of them with SMEs. The IMF estimates that tourism receipts fell by 65% during the first half of 2020.
As for turning the crisis into an opportunity, the Africa Continental Free Trade Agree (AfCFTA), operational since 01 January, has been described as Africa's economic recovery plan. It has the potential to raise intra-Africa trade from the current paltry 16% of GDP to 25% in the near future. Africa is the region with the lowest intra-regional trade. Development of such trade should boost value addition and the diversification of many African economies from their dependence on commodities.
During the webinar, a poll was taken of the participants that logged in from 50 countries (African and non-African). We understand that 70% of participants believed that one of the possible fallouts of the AfCFTA was increased competition for local producers from products from other African markets. Among other challenges cited were the dumping of inferior products entering the bloc from other parts of the world but repackaged as African products, and labour competition from nationals of other countries.
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