Africa, Health, COVID-19

The African Development Bank and partners are set to host an online #AfricaVsVirus Challenge from 16 to 19 April 2020. The 72-hour competition is a global hackathon – or “ideathon” – to develop effective solutions to the coronavirus pandemic. 

The Challenge is open to entrepreneurs, companies, civil society organizations and governments with bankable solutions or ventures to address the pandemic. The top pitches will be eligible to win thousands of dollars’ worth of financial, technical and skills-learning support to advance their implementation. Details on competition qualifications and methods of participation can be found here: www.africavsvirus.com.  

“COVID-19’s impact on the global economy is pushing millions of people, especially women and young people, into unemployment, underemployment and working poverty. Part of our response is  the #AfricaVsVirus Challenge,” said Tapera Muzira, Coordinator of the African Development Bank’s Jobs for Youth in Africa Strategy. “This online Challenge will channel youth creativity and innovation to real life solutions that mitigate the impact of the coronavirus on health, the economy, SMEs and jobs,” he added.

The #AfricaVsVirus Challenge opens on Thursday, 16 April at 6:30 pm CET and runs non-stop through to Sunday, 19 April at 6:30 pm CET. Entrants can choose to submit ideas under one of the following sectors: public health and epidemiology; vulnerable populations; businesses and economy; community; education; entertainment; government support; environment and energy; and food security. Alternatively, they may choose their own theme. 

An expert panel will select the twenty best solutions submitted, and these finalists will be invited to take part in a one-month educational program by Seedstars. The top three winning ideas will receive up to $50,000 worth of in-kind prizes. 

#AfricaVsVirus Challenge is part of the Bank’s strategy to support young African entrepreneurs – especially young women entrepreneurs – and their SMEs and startups by providing an enabling environment to innovate appropriate solutions to the COVID-19 crisis. The Bank’s Innovation and Entrepreneurship Lab, working closely with the Youth Entrepreneurship & Innovation Multi-Donor Trust Fund is hosting the ideathon, with partners Seedstars, digital agency WAAT and development consultants Luvent Consulting.

Rollout of the Challenge follows the African Development Bank’s launch on 8 April of a $10 billion COVID-19 response facility, and the sale of a record $3 billion debt issue last month to raise financing to help African countries confront the pandemic, which is already wreaking havoc on their economies.

Interested parties can follow the global conversation about the competition by following #AfricaVsVirus on social media, or by logging on to www.africavsvirus.com.

Source: The African Development Bank and its partners want your ideas for beating the COVID-19 pandemic

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Africa, Nigeria, Health, COVID-19, Cameroon, Microentrepreneurs
African countries have joined the rest of the world in imposing severe restrictions on human mobility in a bid to contain the COVID-19 pandemic. With the rapid rise of infection rates—which approached 1.3 million globally and 8,000 in Africa as of this writing—social distancing and other public health measures are crucial for reducing further contagion. The immediate focus of policymakers on improving the capacity of health care systems to test, isolate, and treat patients has been appropriate considering the millions of lives at risk.

At the same time though, social distancing restrictions have disrupted the livelihoods of tens of millions, exposing vast populations to an acute financial shock. Many countries, such as Nigeria and Cameroon, have introduced strict lockdown measures that closed business without sufficient mitigation measures to assist the affected individuals and households. For the poor without the luxury of bank savings or a resort to credit cards, public health measures that cut their lifeline of daily income could appear to offer a cure that is as bad as the sickness. Such measures, then, will also be highly ineffective, as people are more likely to disobey the law rather than stay at home and go hungry. Given these devastating potential consequences, it is ethically questionable to bar people from working without offering a means to support their basic needs.

Thankfully, Africa’s agrarian households—which make up more than half of the total population—will be comparatively insulated from potential food shortages as they produce most of their own consumption needs. A disadvantage in normal times due to its low productivity, subsistence farming offers the benefit of self-reliance, shielding farmers from the immediate costs of trade restrictions induced by COVID-19. Likewise, paid urban workers, most of whom work for the government or state enterprises, will face limited financial crises unless the provision of food supplies becomes severely strained or inflation skyrockets.

The first to feel the brunt of stay-at-home restrictions will be informal business owners and daily wage workers in the urban centers of Africa. Self-employing and family-owned small enterprises in sectors such as retail trade, sewing, handiwork manufacturing, and taxi/motorcycle ride services, make up more than two-thirds of urban employment in Africa. Tens of millions of Africans and their dependents rely on income from these businesses and will be unlikely to endure a lockdown for more than a few days.

Without robust government support, microentrepreneurs are unlikely to abide by the stay-at-home measures, creating risk for themselves and their communities. In addition, since microenterprises use cash for businesses exchanges and deal with several customers daily, their return to business will undercut ongoing efforts to contain COVID-19. In some cases, violations of these stay-at-home orders—caused by hunger and desperation—might lead to confrontations with the police, as happened in Lagos recently.

While microentrepreneurs are known for their resilience, they are also highly vulnerable to the economic shocks induced by COVID-19. Because they are so often unregistered and unorganized, they are unlikely to get immediate government support in the form of financial compensation or tax benefits. Even in normal times, these businesses fly under the radar of government programs for policy support, which puts them at a disadvantage relative to medium-sized or large businesses. African countries also have a history of cracking down on informal businesses during times of crisis. At the same time, most microentrepreneurs come from disadvantaged social segments, including women and ethnic and religious minorities. Their powerlessness and fragmentation perhaps explain why they have received so little attention in the current debate on the economic costs of COVID-19.

The ability to sustain social distancing, thus, crucially hinges on the presence of policies that help these businesses and individuals cope with the costs of the lockdown. Unlike in the West, where the focus is on a broad economic stimulus, the immediate focus in Africa is on disaster relief. Where there have been economy-focused policies, unfortunately, many of the responses have been generally lacking in detail and ambition. The sizes of the financial packages are also generally minuscule. In Ethiopia, the planned aid package is just 0.15 percent of GDP, while Rwanda’s relatively robust package amounts to 1.5 percent of GDP. (By contrast, the size of the U.S. stimulus package is equivalent to 10 percent of GDP.) In oil-producing countries such as Nigeria, Angola and Gabon, governments’ ability to introduce a sufficient relief package is constrained by large budget deficits caused by the unprecedented oil price crash. International funders are also preoccupied with the urgent issue of supporting health systems and have not yet started to address the humanitarian costs of economic lockdown.

African governments need to rapidly put together or further bolster social safety net programs that target informal businesses and other vulnerable economic groups such as day-wage laborers. Wherever possible, they should facilitate (micro) credit and tax exemptions to increase the ability of micro-entrepreneurs to fulfill their financial obligations. Unfortunately, since so many of these firms are informal, most are not in government registries, and so the status of their activities is unknown, limiting the feasibility of specific, targeted interventions like these.

Instead, policymakers should introduce policy measures that will have a beneficial effect for microentrepreneurs and the urban poor at large. Examples of helpful programs include subsidies for (or direct distribution of) key commodities such as food (bread or other staples), energy (fuel and electricity), and a reduction in fees for key services like phone, internet, and banking. Imposing moratoria on real estate or rental income taxes can also have beneficial effects for many of these small-scale enterprises that occupy rented spaces. For individuals and families in dire financial conditions or facing health emergencies, policymakers should consider measures such as free provision of health insurance or direct financial transfers. Given the large number of affected people, however, African governments will be unable to make direct financial transfers for a sustained period of lockdown without the aid of international development financing.

Governments can also take this crisis as an opportunity to bring greater organization to the informal economy. The crisis offers a unique chance to start systematic efforts to digitize, register, and organize microentrepreneurs, and to avail essential services to help them thrive. One example is promoting the opening of standard or mobile-based bank accounts, which will reduce the logistical challenge of making rescue fund transfers at the last mile. In a positive development, Ethiopia has just recently passed a law opening up its mobile banking sector to nonfinancial firms in response to the COVID-19 outbreak. Similar initiatives that strengthen the capacity of microbusinesses can improve their preparedness to cope with potential future crises of a similar nature.

Without effective support for informal businesses and the urban poor, it is only a matter of time before social distancing restrictions created to combat COVID-19 will start to crumble. For these public health measures to hold up, African governments need to act quickly to devise emergency social safety net programs that offer a lifeline to those severely affected by the economic lockdown.

Source: Social distancing unlikely to hold up in Africa without a safety net for microentrepreneurs

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Africa, COVID-19

McKinsey offers four scenarios of Covid-19’s economic impact on Africa

This article is an excerpt of a McKinsey report titled, Tackling COVID-19 in Africa


By Kartik Jayaram, Acha Leke, Amandla Ooko-Ombaka, and Ying Sunny Sun

As of March 31st, more than 770,000 cases of COVID-19 had been recorded worldwide, with nearly 40,000 deaths. The number of cases, and deaths, has been growing exponentially.

Compared to other regions, the number of recorded cases in Africa is still relatively small, totaling about 5,300 cases across 47 African countries as of March 31st (Exhibit 1). Even though the rate of transmission in Africa to date appears to be slower than that in Europe, the pandemic could take a heavy toll across the continent if containment measures do not prove effective.

Exhibit 1

Against the backdrop of this worrying public health situation, African countries will have to address three major economic challenges in the coming weeks and months:

The impact of the global pandemic on African economies. This includes disruption in global supply chains exposed to inputs from Asia, Europe and the Middle East, as well as lower demand in global markets for a wide range of African exports. Moreover, Africa is likely to experience delayed or reduced foreign direct investment (FDI) as partners from other continents redirect capital locally.

The economic impact of the spread of the virus within Africa, and of the measures that governments are taking to stem the pandemic. Travel bans and lockdowns are not only limiting the movement of people across borders and within countries, but also disrupting ways of working for many individuals, businesses and government agencies.

The collapse of the oil price, driven by geopolitics as well as reduced demand in light of the pandemic. In the month of March 2020, oil prices fell by approximately 50 percent. For net oil-exporting countries, this will result in increased liquidity issues, lost tax revenues, and currency pressure. (We should note, however, that lower oil prices will potentially have a positive economic impact for oil importing countries and consumers.)

For Africa’s economies, the implications of these challenges are far-reaching. A slowdown in overall economic growth is already being felt, and this is acute in hard-hit sectors such as tourism. Many businesses, particularly SMEs, are under significant cost pressure and face potential closure and bankruptcy. That is likely to lead to widespread job losses. At the same time, the pandemic will impact productivity across many sectors. Closures of schools and universities could create longer-term human capital issues for African economies and could disproportionately affect girls, many of whom may not return to school. Not least, the crisis is likely to reduce household expenditure and consumption significantly.

The knock-on effects for the African public sector could be severe, in terms of reduced tax revenues and limitations on access to hard currency. African governments will face rising deficits and increased pressure on currencies. In the absence of significant fiscal stimulus packages, the combined impact of these economic, fiscal, and monetary challenges could greatly reduce Africa’s GDP growth in 2020.

Four scenarios of economic impact: Africa’s GDP growth reduced by 3–8 percentage points


To gauge the possible extent of this impact, we modelled four scenarios for how differing rates of COVID-19 transmission – both globally and within Africa – would affect Africa’s economic growth.

Even in the most optimistic scenario, we project that Africa’s GDP growth would be cut to just 0.4 percent in 2020 – and this scenario is looking less and less likely by the day. In all other scenarios, we project that Africa will experience an economic contraction in 2020, with its GDP growth rate falling by between five and eight percentage points (Exhibits 2 and 3).

Exhibit 2

The four scenarios are as follows:

Scenario 1: Contained global and Africa outbreak. In this least-worst case, Africa’s average GDP growth in 2020 would be cut from 3.9 percent (the forecast prior to the crisis) to 0.4 percent. This scenario assumes that Asia experiences a continued recovery from the pandemic, and a gradual economic restart. In Africa, we assume that most countries experience isolated cases or small cluster outbreaks – but with carefully managed restrictions and a strong response, there is no widespread outbreak.

Scenario 2: Resurgent global outbreak, Africa contained. Under this scenario, Africa’s average GDP growth in 2020 would be cut by about five percentage points, resulting in a negative growth rate of -1.4 percent. Here we assume that Europe and the United States continue to face significant outbreaks, while Asian countries face a surge of re-infection as they attempt to restart economic activity. In Africa, we assume that most countries experience small cluster outbreaks that are carefully managed.

Scenario 3: Contained global outbreak, Africa widespread. In this scenario, Africa’s average GDP growth in 2020 would be cut by about six percentage points, resulting in a negative growth rate of -2.1 percent. This assumes that significant outbreaks occur in most major African economies, leading to a substantial economic downturn. Globally, we assume that Asia experiences a continued recovery and a gradual economic restart, while large-scale quarantines and disruptions continue in Europe and the United States.

Scenario 4: Resurgent global outbreak, Africa widespread. In this case, Africa’s average GDP growth in 2020 would be cut by about eight percentage points, resulting in a negative growth rate of -3.9 percent. Globally, we assume that Europe and the United States continue to face significant outbreaks as China and East Asian countries face a surge of re-infection. In addition, significant outbreaks occur in most major African economies, leading to a serious economic downturn.

Exhibit 3

These scenarios do not take into account the potential effects of any fiscal stimulus packages that may be announced by African governments; these should improve the economic outlook. However, we should also note that the scenarios do not take into account currency devaluations, inflationary pressure, or recent credit ratings from Moody’s and similar bodies – which could worsen the outlook. There is no room for complacency.

Depending on the scenario, Africa’s economies could experience a loss of between $90 billion and $200 billion in 2020. Each of the three economic challenges outlined above is likely to cause large-scale disruption. The pandemic’s spread within Africa could account for just over half of this loss, driven by reduced household and business spending and travel bans. The global pandemic could account for about one third of the total loss, driven by supply-chain disruptions, a fall-off in demand for Africa’s non-oil exports, and delay or cancellation of investments from Africa’s FDI partners. Finally, oil-price effects could account for about 15 percent of the losses.

Differing impact on major African economies

While the pandemic’s economic impact – alongside the oil-price shock – will be serious right across the continent, it will be felt differently in different countries. For example, our analysis suggests that the following impacts would occur in Nigeria, South Africa, and Kenya:

  • Nigeria. Across all scenarios, Nigeria is facing a likely economic contraction. In the least worst-case scenario (contained outbreak), Nigeria’s GDP growth could decline from 2.5 percent to -3.4 percent in 2020 – in other words, a decline of nearly six percentage points. That would represent a reduction in GDP of approximately $20 billion, with more than two thirds of the direct impact coming from oil-price effects, given Nigeria’s status as a major oil exporter. In scenarios in which the outbreak is not contained, Nigeria’s GDP growth rate could fall to -8.8 percent, representing a reduction in GDP of some $40 billion. The biggest driver of this loss would be a reduction in consumer spending in food and beverages, clothing, and transport.
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  • South Africa. Across all scenarios, South Africa is facing a likely economic contraction. Under the contained-outbreak scenario, GDP growth could decline from 0.8 percent to -2.1 percent. This would represent a reduction in GDP of some $10 billion, with about 40 percent of that stemming from supply-chain import disruptions, which will impact manufacturing, metals and mining in particular. There will also be major impact on tourism and consumption. However, as South Africa is an oil importer, this impact will be cushioned by lower oil prices. In scenarios in which the outbreak is not contained, South Africa’s GDP growth could fall to -8.3 percent, representing a loss to GDP of some $35 billion. This impact would be driven by disruptions in household and business spending on transport, food and beverages, and entertainment, as well as prolonged pressure on exports. South Africa’s recent sovereign-credit downgrade is likely to exacerbate this outlook.
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  • Kenya. In two out of four scenarios, Kenya is facing a likely economic contraction. Under the contained-outbreak scenario, GDP growth could decline from 5.2 percent (after accounting for the 2020 locust invasion) to 1.9 percent – representing a reduction in GDP of $3 billion. The biggest impacts in terms of loss to GDP are reductions in household and business spending (about 50 percent), disruption to supply chain for key inputs in machinery and chemicals (about 30 percent) and tourism (about 20 percent). In scenarios in which the outbreak is not contained, Kenya’s GDP growth rate could fall to -5 percent, representing a loss to GDP of $10 billion. As in Nigeria, disruption of consumer spend would be the biggest driver of this loss.
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  • Kartik Jayaram and Acha Leke are senior partners of McKinsey & Company, based in Nairobi and Johannesburg respectively. Amandla Ooko-Ombaka is an engagement manager and Ying Sunny Sun is a partner at McKinsey; both are based in Nairobi.

Source: McKinsey offers four scenarios of Covid-19’s economic impact on Africa

 

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