Africa, South Africa, Manufacturing, Health, COVID-19

South African company ready to roll out low-cost ventilators for the African market

EPCM is an engineering, procurement and construction company specialising in oil and gas projects in Africa and beyond.

EPCM’s co-founder and CEO, Tom Cowan, came up with the idea for the ventilator following a visit to his sister, a medical doctor, just before South Africa went into lockdown. She voiced her concern regarding the shortage of ventilators, both in South Africa and the rest of the continent.

“At that stage I wasn’t even 100% sure what a ventilator does. We talked about it and she explained it to me, and it sounded like something very similar to a gas system that we usually design,” he says.

After some internet research, Cowan came to the conclusion that designing a ventilator wasn’t “too complex”.

“About two hours after that, the first concept of a ventilator was born, and maybe two hours after that we started with some more detailed design … And it took about two, three days for us to completely understand what we wanted to build and do a few prototypes.”

The company deliberately kept the design very basic to reduce costs and ensure that it can be made from materials and machines currently available in most African countries. “The whole ventilator can be cut from a perspex plate … and then you basically have to add the electronic component to that and then it will work,” he says.

“We’ve specifically designed it to be easy to manufacture … Our design can be made from perspex, it can be made from stainless steel. If you have nothing else, you can even make it from wood.”

“The whole idea behind this was to get it rapidly manufactured. We’ve partnered with a laser cutting company in South Africa which is able to cut many of the sheets in a day, and we can just assemble,” Cowan adds.

A ventilator is a machine that provides mechanical ventilation by moving breathable air into and out of the lungs, to deliver breaths to a patient who is physically unable to breathe, or breathing insufficiently. Modern ventilators are computerised microprocessor-controlled machines.

Cowan says the Covid-19 outbreak has prompted many people to design simple mechanical ventilators, but these often lack the ability to precisely control the flow of gas. “Our system is designed so that you can physically set the breaths per minute, volume per breath, maximum pressure and flow for the machine,” he explains

Whereas modern ventilators used in top hospitals cost anything from $20,000 and upwards, EPCM’s model will go for less than $2,000.

The company will this week start with the production of 50 units for delivery to Zimbabwe, Mozambique and Ghana. Cowan says these countries have less stringent regulations around the approval of medical devices than South Africa, where EPCM is yet to receive the go-ahead for its ventilator.

“If you want to get a ventilator approved in South Africa, you need European Union approval … The regulations and the hurdles that you have to jump over to get these ventilators certified is actually the biggest concern and probably the reason why there is not a lot of innovation or new companies starting to focus on the ventilator industry.”

According to Cowan, the South African authorities are however relaxing some of their regulations in response to the Coronavirus crisis. “They have to. It is either, relax some of the regulations or have a lot of people die.”

Commenting on the effects of Covid-19 on EPCM’s core business, Cowan said while most of the company’s construction projects are currently standing still, its consulting, engineering and procurement work continues.

The company is, however, seeing an impact from the dramatic weakening of the South African rand against major currencies. The currency has weakened from R14.76/$1 on 5 February to R19.05/$1 today. “Once you have a crisis, emerging [market] currencies are all going down. I think it is important that you have US dollar-based income, which we do have. But we also have procurement with fixed-price contracts in the European, Asian and American markets, which definitely provides challenges when you have our currency fluctuating like it is now,” he explains.

Further reading

[March 2020] Kenya-based investor sees opportunity in Covid-19 crisis
[March 2020] Africa: crisis a once in a decade opportunity
[March 2020] Coronavirus will hit African economies hard

Source: South African company ready to roll out low-cost ventilators for the African market


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.
  • 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.
  • 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.
  • 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




Coronavirus will hit
African economies hard

By Richard Li While the number of COVID-19 cases in China is on the decline, there has been a drastic increase globally and various governments are scrambling to put together contingency plans to contain the coronavirus spread within their respective territories. The immediate fallout of this viral outbreak is the slowing down of global economic activities. To make matters worse, failing to control and contain this coronavirus can potentially lead to a global recession.

As for Africa, there are now at least 99 confirmed cases in nine countries with Egypt having the most cases, according the World Health Organisation (WHO) data, as of March 10th. While some African countries have suspended flights from China and blocked/put in quarantine travellers from there, most of the imported cases seem to be coming from elsewhere. Unfortunately, with this outbreak, the African continent is being hit by a double whammy with demand and supply shocks, that will definitely impede the recovery of the larger economies in the short term. Even if the number of COVID-19 cases in Africa is still relatively low, the impact on African economies should already be felt by now.

COVID-19 impact on the global outlook

The main finance news headlines are currently being monopolised by some of the major consequences of the coronavirus outbreak, like Brent crude prices crashing by about 24% to hit below $35 on March 9th as well as the American stock market index, the Dow Jones Industrial Average, slumping by more than 2,000 points and down by about 20% since its February 12th closing peak. However, since 2017, the global economy was already on a steady decline with major economies like China, Europe and Japan slowly decelerating. Even the American economy is also slowing down, after being boosted by the tax cuts from the Trump administration in 2018. Now with the spread of the coronavirus, the global economic outlook is looking grim and this is indeed not good news for the African continent.

Both the World Bank and the International Monetary Fund (IMF) are revising downward their global growth estimates. As a result, the African continent will not be spared and will definitely be hit hard if the COVID-19 outbreak eventually becomes a pandemic. Besides China, all other major economies that are Africa’s major trade partners, are not in any better shape. In Asia, the Japanese economy shrank by 7.1% in the fourth quarter of 2019 and is on the brink of a recession, whereas South Korea is not only trying to stimulate its economy with nearly $10 billion, but also battling a major outbreak of COVID-19 within its territory. Even growth in India, a major economic partner of Africa, decelerated to stagnate at around 5%.

As for the European Union (EU), its economy is stalling and risks falling into recession with its top three economies – Germany, France and Italy – stagnating and barely growing. In the last quarter of 2019, Germany barely grew while both France and Italy contracted. Adding on to its economic woes, Europe is experiencing a rapid increase of coronavirus cases and Italy is now under lockdown. For the United States (US), the Federal Reserve cut interest rates three times in 2019, 25 basis points each time. In addition, even if the US central bank did an emergency rate cut of 50 basis points at the beginning of this month to prevent an economic slowdown, the financial markets are expecting more drastic cuts. As IMF chief Kristalina Georgieva warned last October, the global economy is experiencing a synchronised slowdown. Making matters worse with COVID-19, a global recession may even happen. With no doubt, African economies will also be sucked into this maelstrom of global events, that will affect them negatively.

African exports affected by global slowdown

China is the largest trade partner of the African continent. The latest economic data from China shows that its purchasing managers’ index (PMI) for manufacturing and services sectors collapsed to 35.7 and 26.5 respectively in February (a PMI reading below 50 indicates contraction). Moreover, due to supply chain disruptions with the coronavirus outbreak, the Chinese exports fell by a significant 17.2% over the first two months of this year. Chinese imports also fell by 4%. In the short term, China is facing a slump in its growth and is also struggling to rev up its economic engine. As a consequence, Africa will face a twin shock of a declining demand for its commodities used in Chinese manufacturing as well as more expensive Chinese products.

With the Chinese government extending the Lunar New Year holidays as well as locking down the Hubei province and many other affected areas, it has created a domino effect within the global value chains. China is now a global manufacturing hub and the repercussions of the extended manufacturing shutdown are estimated to reach a $50 billion drop in global exports in February, according to the analysis by the United Nations Conference on Trade and Development (UNCTAD). The top three most affected economies are the EU, the US and Japan with an estimated output decline of $15.6 billion, $5.8 billion and $5.2 billion respectively. This means that the negative economic spiral affecting global manufacturing and trade will eventually impinge on the overall global growth, business confidence and investment. With the global slowdown, demand for commodities will drop and the financial markets are already re-pricing downward commodity prices. Being mainly a commodities exporter, the African continent will be hard hit. Except for gold, prices for most hard and soft commodities have declined over the last two months.

Ebola economic impact and now COVID-19

Besides the economic costs, Africa will have to incur significant costs in dealing with a potential COVID-19 outbreak within the continent. An important amount of funding will be required to deal directly with a public health crisis in terms of mobilising doctors, healthcare workers as well as needing the necessary medical infrastructure, including lots of medical and safety equipment. Africa is indeed familiar with deadly viral outbreaks with the ebola virus. The biggest ebola outbreak in 2014-2016 affected mainly three west African countries – Guinea, Liberia and Sierra Leone – infecting 28,610 people and causing 11,308 casualties, according to the WHO. Besides the human costs, the direct economic impact on these three countries was estimated to be $2.8 billion by the World Bank. With ebola in the headlines, the whole African continent also suffered from intangible and incalculable losses with Africa being perceived as a high risk investment destination.

As for COVID-19, there is no doubt that the virus will continue on spreading further in Africa and globally. While African countries should remain vigilant and not fall in panic mode, they must already start taking all precautionary measures to detect and isolate suspected cases, especially at border areas. Doing so, Africa will not only be able to avoid major coronavirus outbreaks, but also mitigate any potential economic losses.

Richard Li is a Partner with STEEL Advisory Partners, a management consulting firm that serves clients across industries. Having spent his working career in strategy consulting, he worked with various global clients and covers themes such as corporate strategy, transformation, digital innovation and risk management. He is an avid observer of world affairs and emerging markets, particularly the African continent.

Source: Coronavirus will hit African economies hard