27 January 2021
Mathilde Gassies & Christopher Coppock
Introduction The story of COVID-19 in Africa is complex and differs in significant ways from the experiences of most other continents. This report will discuss how pre-pandemic expectations of economic growth in Africa have changed, and will provide a look into the process and timeline for vaccination procurement and distribution over the next six months. Based on these judgements, and keeping in mind the heterogeneity of Africa, the report will present a brief economic outlook for the continent as it is expected to remain in the grip of the pandemic through the first half of 2021. Economic Impact In the months preceding the coronavirus outbreak, Africa’s economy was already faltering. With a GDP growth rate of only3.4% for the continent in 2019 and 29 million new citizens reaching working age every year, recent economic growth has been driven by domestic consumption without managing to be inclusive or providing sufficient employment opportunities to accommodate the rapidly growing population. The first case of COVID-19 on the continent was reported on 14 February 2020 in Egypt. Based on an appreciation of their fragile health systems, limited financial resources, and the experience of previous epidemics, most countries decided to implement swift and aggressive lockdowns in early spring. This largely mirrored the example set by China and European nations, despite the exceptionally lower case count in Africa at the time. This preemptive action helped prevent the virus from establishing a notable foothold through the summer of 2020. While incomplete data has undoubtedly led to underreporting of the health impact, Africa’s comparatively young population has been credited with reducing the virus’ impact on the continent. Additionally, mitigating the effect of the pandemic while simultaneously addressing the multitude of other issues these countries face has exasperated resources, further compounding barriers to development. This reality has complicated the continent’s response to the virus’ spread, and will exacerbate the already daunting economic recovery. While most African countries have handled the pandemic better than their Western counterparts, in terms of both COVID-19 caseload and related fatalities through December 2020, the economic damage has nonetheless been severe. According to the IMF, Sub-Saharan Africa economic growth in 2020 dropped from 3.4% of GDP estimated in October 2019 to -3% according to the estimations from October 2020. Africa’s per capita income has reached record lows at -6.1% growth. The recession at the continental level is mainly due to Africa’s trade connections with countries highly impacted by the crisis (the US, EU, and China), leading to a reduced demand for exports. Specifically, contamination measures across the world resulted in a drastic decrease of foreign direct investments, exacerbating the financing gap.
Governments used emergency stimulus packages, often including cuts in interest rates, and some social protection expenditures when possible. However, few African governments have the capacity to unilaterally institute the repeated support packages necessary to support their economies for the duration of the pandemic without significant outside investment. For the moment, this investment seems unlikely to be immediately forthcoming, and will exacerbate the scope of the financial crisis that was already growing at the end of 2020, when 16 countries were at high risk of, or already in debt distress. To bridge the financing gap, multilateral and bilateral donors played a key role in 2020 (for example, the World bank has mobilized US$8,3 billion in East Africa alone) and their role will be as crucial in 2021. Without the ability to spend their way through the pandemic, however, and lacking the social safety nets found in the world’s richest countries, Africa’s economies are exceptionally reliant on an effective vaccination program to create the conditions necessary for economic recovery and revitalization.
Vaccines Unfortunately for the continent’s economy and its global partners, progress on vaccinations in the first half of 2021 looks exceptionally bleak, as the WHO’s target of vaccinating 3% of the continent's population by March 2021 is unachievable. While 70 million vaccinations have been administered globally as of late-January 2021, only one African country, Egypt, at present has individual contracts with vaccine producers, not to mention the absence of concrete distribution plans. Egypt has purchased enough vaccines to cover 61% of its population and expects to begin vaccinations by the end of January. South Africa, the country most heavily affected by COVID-19 on the continent, has announced that their vaccination process will start in February 2021. The country plans to vaccinate 40 million people by the end of 2021with the first AstraZeneca vaccines set to arrive in January and February. COVAX is expected to provide 10 million doses to the country between April and June. However, the criticism of the vaccination plan in South Africa mirrors the more global obstacles to vaccination that Africa is facing both financially and logistically. Instead of governmentally funded vaccination programs, African nations are reliant on multinational efforts, most notably the WHO program COVAX Alliance, to inoculate their populations. While COVAX has received verbal support from major international actors and has options for 700 million vaccine doses, the program and its intended beneficiaries face numerous hurdles. First, only one of ten vaccines that COVAX has purchased has received initial approvals. Among the other nine, half are still at the earliest trial stages. Second, COVAX remains underfunded and even in a best-case scenario, has only committed to facilitating the vaccination of 20% of participant countries’ citizens. As a result, the Alliance’s objective to ship two billion doses to COVAX participants by the end of 2021 looks unachievable, indicating that many African nations are projected to not achieve meaningful vaccination rates until12+ months after developed countries. To make up for the limited number of doses from COVAX and the expected delays, a handful of African countries including Egypt and South Africa are negotiating bilaterally with vaccine producers (Pfizer, Moderna, AstraZeneca) and are considering buying Chinese (especially the BBIBP-CorV, developed by the China National Pharmaceutical Group Sinopharm, although its efficiency is not known at this point in time) and Russian vaccine Sputnik V. Guinea has already administered a handful of Sputnik V vaccines in early 2021, and so far remains the only African country to do so. Building on its “developing world solidarity”, Xi Jinping stated during the Extraordinary China-Africa Summit On Solidarity Against COVID-19 in June 2020 that "We pledge that once the development and deployment of a COVID-19 vaccine is completed in China, African countries will be among the first to benefit." For example, Senegal is currently negotiating with China to get access to 200,000 Sinopharm vaccines. This vaccine diplomacy may reinforce the role of China and Russia on the continent. While the first six months of 2021 will almost certainly see the sanitary situation in Africa worsen, with little alleviation in the way of actual vaccinations, the economic impact of a vaccinated population will only begin to have an effect in late spring at the earliest.
Economic outlook At the continental level, growth in 2021 is expected to be 2,7% of GDP and in the major economies of the region, like South Africa or Nigeria, GDP levels of before the crisis won’t be reached before 2023 or 2024. The rebound of private consumption and investment is forecasted to be slower than anticipated. Nonetheless, the continent can expect an increase of exports due to the rebound in economic activity among major trading partners. However, recovery of Sub-Saharan Africa cannot be considered as one uniform process, due to the diversity of its economies. A distinction can be made between economies based on the main drivers of their growth. The most diversified economies like Côte d’Ivoire or Rwanda have had a positive growth rate in 2020 (respectively 1.8% and 2%)and should recover at a faster pace than less diversified economies, with an expected growth of 6.2% and 6.3% in 2021.Moreover, the entry into force on January 1st 2021 of the African Continental Free Trade Agreement is expected to stimulate Africa’s income by $450 billion by 2035. Regarding oil exporting economies (where net oil exports represent at least 30% of total exports, such as Angola, Cameroon, Congo, Nigeria), the outlook is less positive. Oil prices have decreased in 2020 from US$67 per barrel on 1stJanuary 2020 to US$20 in April 2020. Despite an increase since November 2020, the prices remain below 2019levels. Many oil-exporting countries have turned to borrowing to go through the fiscal crisis they are facing. The risks of unsustainable debt is high (several countries including Chad and Angola may have to restructure their debts in 2021),and the crisis makes the urge for diversification of their economies even stronger. Finally, for tourism-dependent countries (such as Mauritius, the Seychelles), the outlook remains highly uncertain and recovery will depend on various interlinked factors, including the availability of the vaccine for both tourists and hosting countries. Despite hopes brought by the vaccine, the pandemic may have long-term effects on regional growth due to a major increase in external debt, the erosion of human capital and the sanitary situation. Moreover, the digitalization rate is low on the continent, and without major investments in digital technologies, labor productivity may weaken. One direct consequence, already visible, is the drastic increase of people in extreme poverty (+73 to 117 million people worldwide according to the World Bank’s last estimations). Low-income countries' recovery needs to tackle both the direct consequences of the crisis and the long-term systemic challenges specific to each African country, aiming, therefore, to build a more inclusive economy.
It seems likely that Africa will benefit from the strong pace of the vaccine roll-out in developed countries, the pace of recovery in China and the expected growth in major economies in 2021. However, due to potential adverse economic effects of the pandemic and a risk of new domestic cases linked to a slow roll-out of the vaccine, the growth of the continent is expected to remain low in 2021.
Regarding the economic recovery in Africa, much depends on the evolution of the pandemic, the impact of vaccines in developed countries, and how delayed meaningful vaccination rates in Africa will be. At present, a trusted and effective roll-out of COVID-19 vaccines seems highly unlikely to vaccinate more than a small fraction of Africa’s 1.2 billion people before summer 2021, delaying any recovery. The first six months of 2021 will most likely bring new waves of the virus to Africa, increasing inequalities on the continent beyond their current state.
Despite the poor outlook, the World Bank underlines three main objectives that could lead to new opportunities for the continent: developing an inclusive growth model, focusing on climate change adaptation, and on trade integration.