Africa’s Pulse and Navigating a Long Pandemic
Understanding prospects for recovery from the COVID-19 pandemic is a consistent theme among economic reports concerning Africa. The International Monetary Fund’s (IMF) regional economic outlook report, Navigating a Long Pandemic, and the World Bank’s Africa's Pulse, two key reports published last month, are no exceptions.
Both reports distinguish the diverse recovery prospects for Sub-Saharan African economies. As the developed world recovers from the COVID-19 public health crisis faster than Sub-Saharan Africa, oil-exporting countries in the region are enjoying a rebound in demand and increased prices. Similarly, metal-producing countries, such as Ghana, South Africa and Tanzania, have benefitted from the increasing demand for inputs from manufacturing countries. Furthermore, countries who depend on remittances, namely The Gambia and Kenya, have experienced some recovery due to increased economic activity in developed countries which host their diaspora.
However, tourism-dependent countries, such as Cabo Verde, Comoros, Mauritius, the Seychelles, and São Tomé and Príncipe, suffered extreme blows in 2020 and are yet to recover much of the ground lost. The ongoing security challenges in West Africa, specifically terrorist activity in Nigeria, Mali, Niger and Burkina Faso, are predicted to offset the economic benefit from consumer confidence. The IMF report also cautions the long-term sustainability of revenue for oil-exporting countries, as the world shifts towards green energy solutions.
Both reports observe the absence of fiscal space to enact stimulus will hinder the region’s capacity to recover. The IMF report highlights the need of G20 countries to fortify their Debt Service Suspension Initiative and engage in debt rescheduling and restructuring frameworks in Sub-Saharan Africa, depending on the severity of debt sustainability in each country.
The World Bank report platforms the nascent benefits of digitization in boosting productivity, and ultimately recovery, in the region. As demonstrated in Nigeria and Kenya, financial technologies have led to new pathways in which to mobilize and empower consumers – from microfinance to investment opportunities. As many businesses in developed nations have turned to digital solutions to smooth disruptions to employment, African firms too are poised to increase their integration into technology. The health sector is already ground zero for digital innovation, with both reports hoping that such technology can remain a feature of public administration.
As recovering Sub-Saharan states are faced with pressure to commence fiscal consolidation, as noted in the IMF report, digital technology will again play an important role. The World Bank report illuminates the capacity for digital ID numbers to expand the tax base and reduce evasion, as well as formalize some sectors of the economy. Such efforts will assist governments in maintaining revenue (without reducing public spending) whilst improving their trustworthiness as borrowers.
Both reports, whilst highlighting the immense and diverse challenges plaguing Sub-Saharan Africa due to the pandemic, note the unique benefits of digitization in the region. As digital technology has some of the lowest rates of usage in Africa, it’s potential to revolutionize recovery is indisputably alluring.
Click here to view the IMF’s regional economic outlook, Navigating a Long Pandemic.
Click here to view the World Bank’s report, Africa's Pulse.