Reviving the African Economy Post COVID-19
The COVID-19 pandemic has dealt a great blow to the African economy worsening current weak economic conditions across the continent. The onset of lockdown restrictions from March 2020 led to adverse effects such as reduced gross domestic product in African economies, increased unemployment and food insecurity, decreased formal and informal economic activity and higher levels of extreme poverty.
Considering the impact of the pandemic on the economy and the livelihood of many across the continent it is important to examine how the economy of Africa can be revitalized and sustained in the years to come. We will explore the previous actions implemented in various countries and the pathways for a sustained recovery in the future.
Previous Actions to Revive the Economy
The pandemic has had far reaching effects over the last two years not only on the health of many people, but also on their lifestyles and livelihood. It has equally changed the trajectory and definition of life as we know it. At every financial level, shocks have been felt by individuals, families, and businesses.
In response to this, there have been several actions by governments, International Donor Organisations (IDOs), the Private sector and other stakeholders. These actions have contributed to slowly restoring hope to the populace. One of such actions is the implementation of a form of Small and Medium-sized Enterprise (SME) support by 22 African governments and the establishment of income support by 18 African governments, absorbing some of the economic shocks caused by the pandemic. One of these support programmes was the establishment of the MSME Survival Fund (total amount of 50 billion naira) by the Nigerian government for the self-employed MSMEs and employees of MSMEs through grant provision, payroll support and business formalization support. In addition to financial support, African governments have further adopted technology solutions that aid efficiency and operation in spite of distance, such as the increasing use of mobile money especially in East Africa. These measures played a huge role in reducing the pandemic shocks on businesses and individuals.
A similar support action was implemented by a group of IDOs (such as African Development Bank, Development Finance Institute Canada and West-African Development Bank amongst others) who committed to dedicate a minimum of $4 billion to support African MSMEs through various financial instruments and partnerships with local governments and financial intermediaries. This financial support helped many to deal with economic losses and shocks associated with the pandemic and lockdown restrictions. Additionally, a quick increase in cross-border transactions is expected due to the improved trade relations introduced by the African Continental Free Trade Area (AfCTA).
Looking at the private sector, there was an acceleration of the use of digital technology by 25% of the private sector and increased investment in digital solutions. This step helped with continued business operation in spite of the distancing measures, while adjusting to the rapid digital evolution going on in the world. The African tech ecosystem played a huge role in supporting the continent’s economy post pandemic. The range of support provided ranges from the provision of solutions that meet the needs of the citizens as they leverage existing technologies to support business operations and drive economic recovery and growth.
Recommendations for Sustained Recovery
Going forward, there is a need for continued efforts to grow the economy of the continent with particular emphasis on the growth that will improve the livelihoods of the citizens. Supporting the growth of Micro, Small and Medium-sized Enterprises (MSMEs) is one way to achieve this. MSMEs account for 83% of private sector employment in Africa and were the most affected by the loss of personal contact during the COVID-19 pandemic. Support in the form of funding, training, mentoring and skills development will aid the recovery process of these enterprises with such a major positive impact on the African economy. Specifically, targeted support for women and youth entrepreneurs is needed as their participation in economic recovery is crucial with women contributing to employment in the formal and informal sectors and youth (under age 25) constituting almost 60% of the African population.
Without gainsaying, a focus on the highest-contributing sectors within the continent will also aid the betterment of the African economy. One of such sectors is the creative sector with major contributions to the continent such as the employment of 2.4 million people in Africa and Middle East in 2013, $100 million generated by digital music streaming in the continent and Nigeria’s film industry being the second largest employer in Nigeria and second largest film producer in the world. Additionally, the African tourism sector contributes over 5% of GDP (in Gambia, Morocco, Lesotho, Tunisia), over 10% of GDP (in Seychelles, Cape Verde, and São Tomé and Príncipe) and employs over a million people in Ethiopia, Kenya, Nigeria and South Africa. With an ease of lockdown restrictions across the world, these top destinations can be properly marketed for tourist visits and vacations that will provide opportunities for profit generation and increased foreign direct investment into African countries.
Another major contributing sector is the agricultural sector, being the major source of employment (two-thirds of the continent’s population) and exports’ value (30%) in the continent. However, issues such as poor agricultural infrastructure, insecurity, insufficient water supply, poor knowledge of farming practices and high cost of scale have limited the growth of this sector. With a high availability of arable land, the agricultural sector can be maximized to produce greater gains across the value chain. Some activities that need to be done to encourage growth in this sector include the funding and training for farmers, improved water supply and irrigation systems in farms, subsidized cost for processing of agricultural produce and support in regional and foreign exports of products.
Lastly, infrastructure development is needed for rapid economic recovery. Proper infrastructure across the countries and in relevant sectors will aid the rebuilding process of many businesses and effective growth and development of new ventures. Specifically, digital infrastructure needs to be improved across the continent to ensure ease of economic activities across nations and within global value chains. This includes investment in internet access, digital financial inclusion, e-learning/training and e-trade. Intentional actions for development by the government and private sector coupled with support from IDOs will aid in the rebuilding of the African economy.
This article was edited by Omotayo Abraham and Damilola Bode-Harrison.