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Delta variant, first detected in India, is sweeping the world/COURTESY


COVID-19: The scale of virus disruptions on fragile African economies

NAIROBI, Kenya, Jul 30 – The economic fallout from COVID-19 is crippling even the most resilient markets, stifling growth, decimating entire industries, and is resulting in mass unemployment and loss of revenue.

In a survey conducted by FiveThirtyEight, an opinion poll analysis publication, 32 per cent of leading economic experts believe the GDP of African economies will not return to pre-pandemic levels until at least before 2023. 

The African business world is also struggling, with firms of all sizes laying off staff, declaring bankruptcy, and facing an uncertain future. COVID-19 has crept into every facet of the continent’s economy.

The Devastating Effect on Tourism 

COVID-19 has had a potential irreparable effect on tourism. The UN estimates that from January to May of this year, the industry has lost upwards of $320 billion. And that’s a conservative estimate. 

Africa’s tourism industry has not escaped this malady. Once lockdown measures started being enacted, hotel bookings and flights were canceled overnight. Safaris were postponed or refunds requested. Buzzing tourist hotspots morphed into quiet ghost towns. 

For countries such as Ghana, where tourism is worth over 5 per cent of GDP, the effects are catastrophic. Companies are being forced to lay off workers, and conservation efforts that rely on tourism dollars are also hard hit. The reverberations felt by the slowing of the crowds are yet to be fully understood. 

There is a silver lining, with some arguing that the pandemic is giving us a chance to ‘reset’ the sector, potentially ending issues of over-tourism. For overcrowded cities like Barcelona and Venice, deserted piazzas and a quiet Las Ramblas may be good news. But for African businesses and individuals who rely on tourism, it is a bitter pill to swallow. 

Death of Land-Based Casinos? 

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Perhaps unbeknownst to the average person, casinos represent a sizable chunk of the economy. In South Africa, for example, land-based casinos account for 1 per cent of GDP. To put this into perspective, the agricultural sector is roughly equivalent to 2 per cent. 

Following 3 months of lockdown, the South African Minister of Tourism announced a reopening of casinos. However, visitor capacity must be halved to ensure social distancing can be enforced. Guests will also have to answer a questionnaire, be screened, and wear masks always. Considering these limitations, will casinos even reach 50 per cent footfall? 

But perhaps COVID-19 is simply a catalyst for the land-based casino’s demise, with many consumers opting for offshore virtual establishments pre-crisis. Many online casinos in South Africa, for instance, had already started to cut into the industry’s traditional leaders. The pandemic is simply accelerating (albeit rapidly) a process that had already begun throughout the continent. Can we expect governments to mitigate the effects by legalizing local online gambling operators, especially with the tax revenues it can bring? 

Uncertain Trade and Volatile Markets 

Economic growth is being stifled by the effects of the pandemic. In sub-Saharan Africa, for example, economies will contract by an average of between 2.1-5.1%. This will be the first time in a quarter of a century that the region will experience an economic recession. 

Several central banks are attempting to stifle the economic fallout. Uganda, for example, is cutting interest rates by 1 per cent. Nigeria is looking to stimulate the economy through cash injections, requesting almost $7 billion from lenders such as the IMF and the World Bank. Ghana has called China to assist, citing the Asian country’s role as Africa’s leading bilateral lender. 

While these efforts will certainly help limit economic effects, it is unlikely that the continent will be able to fully stop a recession. We are already seeing significant supply-demand shocks, mass shutdowns of production centers, and increased geopolitical instability. 

Food Security and Supply 

Perhaps most worryingly of all, Covid-19 is resulting in a food crisis in Africa. Supply systems are quickly crumbling, while climate change-led droughts and flooding, regional conflict, and locust swarms are destabilizing production by smallholder farmers. It is not just leading to a widespread economic recession, but an immediate inability for many families to put food on the table. 

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But perhaps it is what is happening outside of Africa that is most concerning. Prices are rapidly increasing, which for Africa, as a net food importer, is a potentially devastating development. Considering 50 per cent of Africans grappled with food insecurity before Covid-19, governments are scrambling to counteract the problem. 

The sudden price rise following the initial lockdown was not surprising, with panic buying and transport restrictions driving costs upwards. However, enduring restrictions will eventually also have an effect on next year’s planting season. Farmers are struggling to obtain seeds, equipment, animal feed, and fertilizers, products that are crucial for the agricultural sector. 

Hope for a Vaccine 

It is clear that COVID-19 will have enduring effects on our lives. Suspected second waves are already starting in Europe, with Spain, in particular, being forced to reintroduce restrictions. Until scientists develop a vaccine or an effective treatment, we are at the mercy of the R number. 

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