Reviews & Outlooks | |
Reviews & Outlooks | |
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Wednesday,
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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