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Coronavirus threatening severe economic slowdown in African countries

However, the African continent has not reported any confirmed case of Coronavirus, the economy is hard hit due to complete lockdown on Chinese ports. The export has hardly hit due to the cancellation of previous orders. If the situation continues for long, several African countries are likely to submerge in financial crises which will further weaken their capability to handle the imminent epidemic of Coronavirus. 

Rajender  KumarRajender Kumar | Updated: 18-02-2020 18:51 IST | Created: 13-02-2020 15:19 IST
Coronavirus threatening severe economic slowdown in African countries
Representative image Image Credit: ANI

Rwandan coffee, Kenyan tea, South African wine and citrus fruits, Namibian beef are part of china's daily life. Besides, wood, oil, minerals, and metals from African countries like Nigeria, DRC Congo, Angola, Sierra Leone, Lesotho, and Zambia play a key role in China's economy but now everything is at standstill due to Coronavirus epidemic in China.

So far, there is not even a single confirmed case of Coronavirus in the African continent, but the African economies are facing one of the most difficult times in recent years. Thus, besides being a health hazard in the form of an epidemic in China, the virus has now become an economic disaster in several African countries.

African Export to China almost Paralyzed

Kenya has recently chalked out a three years plan with a target to export US$ 70 million tea to China. Similarly, Namibia had started exporting beef to china. It had exported about 3000 tons of beef to China before the spread of Coronavirus. As the previous orders canceled or deferred and new orders are not issued, the industry is hard hit. If it persists for long, the cascading effect would reach onto the lower ranks of producers and farmers.

The impact is already visible in the domestic market. As the exporters are forced to sell commodities in the domestic market, the commodity prices have fallen significantly. This sharp fall in commodity prices is going to cause a massive economic slowdown in the near future as the producers will be forced to minimize cost, production, and job cuts. These trends will be seen throughout the African continent, according to an estimate of Capital Economics. According to media reports, the impact is already being witnessed in Southern African nation Angola.

Angola is a major oil-producing country and OPEC member with an output of around 1.37 million barrels per day, making it the second-largest producer in Sub-Saharan Africa. After the outbreak of Coronavirus, China stopped oil import from Angola. Angola's state-owned company Sonangol had to call back a shipment and is now selling the product on concessional price in the domestic market.

"While the price effect will hit all of Africa's commodity exporters, these trade disruptions will mostly affect West African oil exporters,' According to media reports, crude prices have been in steep decline since the outbreak hit the headlines, down 16.96 percent since the turn of the year, and was trading at just over $54 a barrel on Monday afternoon," said John Ashbourne, of Capital Economics. Besides oil, the base metals export of Africa such as iron ore and copper have also seen a sharp decline in recent weeks.

Weaker Countries are Vulnerable

The weaker countries in Africa are more vulnerable to the adverse economic impact of Coronavirus as well as its spread. Those countries having poor health infrastructure are likely to suffer more if the virus spreads. According to the Overseas Development Report (ODI) vulnerability index, the top countries at risk are Sri Lanka, Viet Nam, Philippines, Sub-Saharan African countries. These countries could lose up to $US 4 billion worth of exports as the outbreak dampens Chinese and global demand. Besides, the report has estimated that the most vulnerable African countries are Angola, Congo, Sierra Leone, Lesotho, and Zambia. The studies suggest that about 60 percent of total exports from Angola, primarily in oil, is headed to China, while 10 percent of Angola's tourists come from there. This will lower the value of exports of much of Africa, as countries such as Angola, Nigeria and Zambia are major trade exporters, said the ODI report.

Fear Prevails before the arrival of Coronavirus

Though some countries have started making healthcare preparations for Coronavirus, the politicians are skeptical about the spread of the virus on the continent. In a recent statement, Kenya President Uhuru Kenyatta asked Ethiopia to discontinue airline services to China to prevent the spread of the virus. 'Our worry as a country is not that China cannot manage the disease. Our biggest worry is disease coming into the area with weaker health systems like ours,' President Kenyatta said.

As part of preparations, the CDC Center located in African Union's headquarter at Addis Ababa in Ethiopia has been activated. However, the prevention and handling of the disease will also be an economic burden. According to the estimate of the World Health Organization (WHO), about USD 675 million will be required just to execute the global preparedness and response plan from now through April 2020. The media reports suggest that thousands of people in China have been isolated due to Coronavirus and the cost of treatment is very high. This will further hit the purchasing power of consumes, after their recovery.

This is a high time for international organizations to fight against the Coronavirus unitedly. The spread of the virus is dangerous, but the isolation of economies is also seeming equally dangerous. In such a situation, adequate protocols need to develop to prevent further spreading of the virus besides ensuring sustainable economic activities.

(Disclaimer: The opinions expressed are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)


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