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Tuesday, April 14, 2020 / 01:07 AM / By RedPepper Editorial & World
Bank / Header Image Credit:
WatPad
The World Bank Group has applauded Tanzanian unique approaches to
contain the COVID-19 pandemic and also cautioned African states to desist from
copying Western practices and policies to curb its spread.
"Thanks, President John Magufuli for not duplicating
policies implemented in advanced countries and some middle - income as pasted
by some African countries in the region.
The Africa's
Pulse Report titled as "assessing the economic impact of COVID-19
and Policy Responses in Sub-Saharan Africa" released yesterday has commended Tanzania as one of the best examples
for its strategic approaches that considers the best of its political economy
and well-being of the society.
With 32 COVID- 19 confirmed cases, 3 deaths and 5
recoveries, Tanzania unlike other African countries has not locked down
businesses and its citizens. The country has not also closed its borders but
initiated strict testings and 14 days quarantine to all arrivals.
The World
Bank report warns catastrophic
consequences to sub- Saharan countries that have copied and pasted anti COVID-
19 policies.
"Facing a fast-changing situation with great uncertainty and so many
unknowns, most governments around the world have resumed to similar approaches
to contain the COVID-19 pandemic", the report states.
The report mentions South Africa, Ghana, Rwanda,
and Kenya, who have reacted quickly and decisively to curb the potential
influx and spread of the COVID-19 virus very much in line with emerging international
experience.
The report warns these countries that as the situation
evolves, there are more questions about suitability and likely effectiveness of
some of these policies such as strict confinement.
It advises African governments deploy a series of
emergency measures and structural features of African economies that shape the
policy responses that are designed and implemented to fend-off COVID-19.
The World Bank has given multiple reasons why economic
policies implemented in Sub-Saharan Africa should be different from those
adopted in advanced countries and (some) middle-income countries.
First, informal employment is the main source
of employment in Sub-Saharan Africa, accounting for 89.2 percent of all
employment (ILO 2018). Excluding agriculture, informal employment accounts for
76.8 percent of total employment respectively.
Based on the number of entrepreneurs (own-account
workers and employers) who are owners of informal economic units, the vast
majority of economic units in the region are informal (92.4 percent).
Informal workers lack benefits such as health
insurance, unemployment insurance, and paid leave.
Most informal workers, particularly the self-employed,
need to work every day to earn their living and pay for their basic household
necessities.
A prolonged lockdown will put at risk the subsistence
of their households.
Additionally, the majority of workers hired are in a precarious situation, and
most of these jobs are temporary and with low remuneration, do not offer social
security, and put workers at a greater risk of injury and ill health.
Second, small and medium-size
enterprises (SMEs), an important driver of growth in economies across the
region, account for up to 90 percent of all businesses and represent 38 percent
of the region's GDP.
Access to finance is one of the main challenges facing
SMEs in normal times with the majority of these firms lacking the finance
needed to grow.
Prior to COVID-19, the finance gap for SMEs in the
region was estimated at US$331 billion (IFC 2018).
Third, concerns about the
negative economic impact of the COVID-19 outbreak prompted interest rate cuts
in several African countries in line with monetary policy actions around the
world.
However, this type of monetary stimulus may not be
effective for two reasons:
African economies still need to design policy pathways
to achieve sustainable growth, economic diversification, and inclusion.
The economic sustainability of African economies
depends on their ability to transform their depleting stock of natural wealth
into other reproducible capital assets such as physical capital,
infrastructure, and human capital.
The findings on the impact of Covid-19 on African
economies drew on two economywide models: a macro structural model, the World
Bank Macroeconomic and Fiscal Model, "MFMOD", and the World Bank global dynamic
computable general equilibrium (CGE) model, "ENVISAGE".
The analysis built on two scenarios.
Download Full Report Here - Africa's Pulse - An Analysis Of Issues Shaping
Africa's Economic Future
ASSESSING THE ECONOMIC IMPACT OF COVID-19 AND POLICY RESPONSES IN
SUB-SAHARAN AFRICA
AFRICA'S PULSE - April 2020|Volume 21
The Executive Summary
The COVID-19 pandemic has taken a toll on human life and brought major
disruption to economic activity across the world. The impact of this
unprecedented crisis on human life and the global economy reflects the speed
and magnitude of the contagion, greater global integration, and the major role
that China plays in global supply chains, travel, and commodity markets.
Despite a late arrival, the COVID-19 virus has spread rapidly across
Sub-Saharan Africa in recent weeks . As of April 7, 5,425 cases of COVID-19
have been confirmed in 45 of the 48 countries in Sub- Saharan Africa. The
insufficient testing capacity in many countries in the region suggests that
these figures most likely understate the true number of infections.
We project that economic growth in Sub-Saharan Africa will decline from
2 .4 percent in 2019 to -2 .1 to -5 .1 percent in 2020, the first recession in
the region in 25 years . It will cost the region between US$37 billion and
US$79 billion in terms of output losses for 2020. The downward growth revision
in 2020 reflects macroeconomic risks arising from the sharp decline in output
growth among the region's key trading partners, including China and the euro
area, the fall in commodity prices, reduced tourism activity in several
countries, as well as the effects of measures to contain the COVID-19 global
pandemic.
The COVID-19 shock is hitting the region's three largest
economies-Nigeria, South Africa, and Angola-in a context of persistently weak
growth and investment, and declining commodity prices. The prices of crude oil
and industrial metals have fallen sharply (by 50 and 11 percent, respectively,
between December 2019 and March 2020). Model simulations suggest that, compared
with a no- COVID base case, average real gross domestic product (GDP) growth in
these countries could be reduced by up to 6.9 percentage points in 2020 in the
baseline scenario, and by up to 8 percentage points in the downside scenario.
South Africa has the largest number of confirmed cases in the region, and
strict measures to contain and mitigate the spread of the virus are weighing on
the economy.
More generally, countries that depend on oil exports and mining would be
hit the hardest. Growth could fall by up to 7 percentage points in
oil-exporting countries and by more than 8 percentage points in metals
exporters compared with the no-COVID base case.
In non-resource-intensive countries, growth is expected to slow but
remain positive. Growth will weaken substantially in the two fastest growing
areas-the West African Economic and Monetary Union where outbreaks are
spreading rapidly and the East African Community-due to weak external demand
and disruptions to supply chains and domestic production. Activity in tourist-
dependent countries is expected to contract sharply in response to severe
disruption to travel and tourism activities.
In the baseline and downside scenarios, growth will fall well below the
regional average population growth rate of 2 .7 percent, indicating that, in
the absence of appropriate measures to mitigate its effects, the COVID-19
outbreak will severely impact the welfare of large numbers of individuals in
the region.
The negative impact of the COVID-19 crisis on household welfare would be
equally dramatic.
In the optimistic scenario, welfare losses amount to 7 percent relative
to the no-COVID scenario in 2020. The welfare loss would be 10 percent greater
than in the no-COVID case in the event of a lengthy crisis. The lower terms of
trade (as a result of the plunge in commodity prices) coupled with lower
employment result in a pronounced welfare loss for households.
Policy responses that result in sub-regional trade blockages will
increase transaction costs and lead to even larger welfare losses. In Africa, a
region dependent on agricultural products, these policies will
disproportionately impact household welfare as a result of price increases and
supply shortages. u Welfare losses amount to 14 percent relative to the
no-COVID scenario if countries were to close their borders to trade. Border
closings would disproportionally affect the poor, particularly agricultural
workers and unskilled workers in the informal sector. In this context, African
countries need to take this opportunity to strengthen regional value chains in
the context of the African Continental Free Trade Area.
The COVID-19 crisis is also contributing to increased food insecurity as
currencies are weakening and prices of staple foods are rising in many parts of
Africa . This is compounded by other existing crises in many countries,
including the desert locust emergency, drought, climate change, fragility,
conflict, violence and underdeveloped food markets. While global food stocks
are plentiful and many commodity prices are stable, the prices of other staples
(such as wheat and rice) are rising when many countries’ currencies are
weakening. These two factors lead to spikes in consumer prices and contribute
to increased food insecurity, particularly for food importers. Household
incomes are also falling, reducing demand and contributing to food insecurity
for the near poor, poor and vulnerable, such as refugees and internally
displaced persons (IDPs).
Local agri-food supply chains are already experiencing disruptions,
including reduced access to inputs and services, labor movements, transport and
roadblocks, and credit or liquidity. This comes on top of the global supply
chain disruptions such as export bans that affect local African food security
in importing countries. There is an urgent need for coordinated, evidence-based
policy responses and financing to prevent a major food crisis in Africa
resulting from COVID-19.
The COVID-19 crisis has the potential to create a severe food security
crisis in Africa. Agricultural production is likely to contract between 2.6
percent in the optimistic scenario and 7 percent in the scenario with trade
blockages. Food imports also decline substantially (from 13 to 25 percent) due
to a combination of higher transaction costs and reduced domestic demand.
These findings reflect the multiple channels of transmission of COVID-19
on economic activity in Sub- Saharan Africa.
Download Full Report Here - Africa's Pulse - An Analysis Of Issues Shaping Africa's Economic Future
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