Africa and the twin crises of the coronavirus pandemic

Experts, economists and epidemiologists, at the heart of the novel coronavirus, COVID-19, pandemic which caught the entire world unprepared unleashing a public health and economic crisis in its wake have one thing in common: curves.

Epidemiologists are concerned with containing the rate at which the virus spreads in order not to overwhelm the healthcare system while economists worry about the unusual consequence of the pandemic: a standstill of global economic activity which has led to a downward sloping curve. The pace at which either curve climbs or descends is topmost on the minds of epidemiologists and economists.

Since the outbreak of the novel coronavirus pandemic, these experts have had to collaborate like never before. They are comparing notes and exchanging ideas.

In a virtual meeting recorded during the IMF/World Bank Spring meetings last week Kristalina Georgieva, IMF managing director, Neil Ferguson and Azra Ghani, two epidemiologists from Imperial College, London, discussed how economists and epidemiologists can collaborate to find the best measures for tackling the pandemic.
Economists and epidemiologists estimate the impact of the virus on the healthcare and economies of Africa will be different. The pandemic is playing out differently in densely populated low-income countries with fragile, highly informal economies and a weak healthcare system.

The twin crises the pandemic has caused differs by country, economy, geography and demography. In Africa, it has exposed an already fragile healthcare system and weak economic structure.

Copying measures used in some Asian and Western countries, African countries have tried to buy some time to contain the spread of the virus. In countries where such measures have worked they have been used to increase testing and contact tracing.

African economies can’t afford to shut down for long, it comes at a huge economic cost and assumes the capacity (staff and equipment) to conduct thousands of tests daily and track as many contacts are available.

Testing in African countries has come nowhere near the number conducted in the US, Europe and Asia, but the number of deaths in Africa have not been as staggering.

“Try to do all you can mindful of the capacity of your health system” is the advice Kristalina Georgieva offers countries that lack the healthcare infrastructure to contain the virus.

Without the manpower and infrastructure to contain the virus, African countries will have to resort to a cocktail of low cost public health measures while they go about earning their income daily. Most African central banks can’t risk the burden of debt and inflationary pressure of pumping money (borrowed or printed) into their economies.

After a month of restricting movement within some cities several African countries, including Nigeria, have started to ease their restrictions on movement while keeping social distancing measures.

Protecting the most vulnerable individuals (60 to 70-year-olds) and poor households must be prioritised, followed by raising awareness on precautionary measures like hand washing, wearing face masks and social distancing.

While it’s unclear how many Africans are and will be infected and how many will die, economists at the IMF during a webinar last week were cautiously optimistic the continent may be spared the worst impact of the pandemic.

Still, African economies could see consecutive sharp drops and spurts – what economists call a W-curve growth rate; the result of regular lockdowns due to the possibility of a resurgence in the virus.

African businesses must prepare to operate amid such gyrations. Africa governments must take advantage of the global economic fallout of the pandemic.

Global trade has come to an abrupt stop, though some economies in Europe and Asia are slowly reopening. Keeping households and businesses afloat by pumping trillions of dollars into the economy during the period of the lockdown has been the priority of central banks in these economies. More stimuli is expected to spur recovery.

Not all the money developed countries spend to rebuild their economies will stay at home, some of that capital will look for less battered economies with higher rates of return – as it happened during the 2008 global financial crisis. African economies must thus start thinking of investment projects in healthcare, infrastructure (roads, rails, power etc) and manufacturing to tap into this global capital.

Companies that over-relied on China for producing their goods are looking elsewhere for labour, if they don’t automate the entire process. Those whose supply chain relies on China are rethinking this strategy and working to make more locally or locations other than China. Only companies that are prepared for these opportunities will benefit from them.

Lifestyles and habits have changed drastically in the past months as households adjust to a new reality. To conserve their already stretched incomes, consumers will prioritise spending on health and safety, cheaper products, irrespective of the brand will be sought after, especially those that don’t compromise safety. Digital transformation of shopping, entertainment and education will move faster as social distancing at schools and cinemas limit the number of people that can gather together.

Businesses will scrutinise every naira spent to conserve cash. They will spend less on unnecessary things like furniture and focus on keeping their best employees while letting go of many. Pending bills and debts will have to be renegotiated.

Indebted companies with low margins will find it tough while companies with similar debt profiles but high margins will manage better. Companies with no debt at all and a high margin are in the financial position to make the most of the new normal. Technology unicorns –  companies valued at $1 billion prior to being listed on a stock exchange – will emerge from startups in education, cybersecurity and cloud services.

Big companies with enough reserves will keep paying their employees even though they are closed for business. Those who can’t afford to will look to trim down their workforce.

Thin working capital will be a challenge for owners of small and medium enterprises who have dipped into the surplus capital of their businesses to meet their personal needs.

Safety will become a value proposition to customers and employees, flex-time, remote working, previously unmentionable topics in some organisations will be given serious thought, out of expediency and the new reality the pandemic has thrust upon us.

TAYO FAGBULE