COVID-19: African unity and the opportunity for a paradigm shift

Beyond its impact as an unprecedented global health crisis, which to date has in health terms impacted Europe and the USA far more than other regions, COVID-19 constitutes a major global economic crisis which the IMF has called “the Great Lockdown”; and described as the worst recession since the Great Depression, and far worse than the Global Financial Crisis.

Although we do not know exactly what will be the extent of the impact of COVID-19 on African nations and their economies, what we can assume is that it is very unlikely that the 3.4% growth rate forecast by the African Development Bank (AfDB) for 2020²  will be achieved.

The AfDB estimates that, depending on the scenario, COVID-19 (which impact is further exacerbated by the oil price shock) could cost Africa a GDP loss between US$22.1 billion and US$88.3 billion this year³. The level of the impact of the virus on the top five African economies (Nigeria, South Africa, Egypt, Algeria and Morocco), which together represent over 60% of Africa’s GDP, will be representative for the whole of the African economy.⁴

This unprecedented disruption catalysed by this health and economic crisis nonetheless provides potentially an unprecedented opportunity for African nations to unite and for what the African Union is describing as a paradigm shift⁵. You cannot, however, “eat potential” as President Adesine of the AfDB has said, and there is a long road to success.

A time for unity

A spirit of unity is paramount, though challenging to achieve, in addressing this crisis and can already be noticed in a number of recent events and (pan-) African responses to COVID-19 on the Continent, and this is to be welcome. We set out a few examples below.

Very early on in this crisis, the African Union (AU) saw the importance of continental synergy and provided platforms to strengthen partnerships and coordination between African nations to respond to COVID-19 with the help of the Africa Centres for Disease Control and Prevention (Africa CDC).

In late March 2020, African Finance Ministers spoke in one voice and shared their consensus, in a letter addressed to the World Bank, the IMF and the ECB, that Africa needs huge and immediate additional resources of US$100 billion for an immediate response to help the continent combat coronavirus⁶.

Finally, we have also seen the emergence of a number of African private and public financial support initiatives.

The AU and Africa CDC launched early in April 2020 the Africa COVID-19 Response Fund, a public-private partnership with the AfroChampions Initiative which aims to mobilise and manage primarily African, but also international, funds to respond to COVID-19. Regarding the COVID-19 Response Fund, H.E. Cyril Ramaphosa, Chairperson of the AU and President of the Republic of South Africa, commented saying that “African money and African expertise must be mobilised“⁷. The Board of the Fund held their first meeting on 27 April 2020 and announced that US$61.5 million had so far been raised.

The AfDB launched a record US$3 billion “Fight COVID-19 Social Bond”, with a three-year maturity, the world’s largest US dollar-denominated social bond ever on the international capital market and a US$10 billion COVID-19 Response Facility to assist governments and the private sector in their response to the pandemic.

With more than 3 million cases worldwide, COVID-19 has not spared any continent. As of 14 May 2020, almost 50,000 cases of COVID-19 had been recorded across 52 countries in Africa, with over 2,000 deaths.

The above does not constitute a comprehensive list of the African responses that the Continent has seen since the beginning of the crisis; it does, however, give us excellent examples of the birth of what H.E. Cyril Ramaphosa called an African “autonomous strike force“⁸. Of course, in a time when global borders are closing and nations are calling for their own interests to be put “first”, the challenges in delivering and then maintaining unity across multiple diverse states cannot be overstated and it is critical not to view these matters through rose-tinted utopian spectacles.

A time for a paradigm shift

COVID-19 has put into the spotlight how African countries are extremely exposed to external shocks because of:

• the overreliance on the rest of the world (in particular China, Europe, the USA) to satisfy the internal demand for pharmaceutical products and basic foods (e.g. wheat and rice – Africa is dependent on imports for approximately 29%of its cereals⁹);

• the reliance on China as a key part of the supply chain;

• the lack of “value-add” on the continent which translates into many African countries being exporters of raw materials (to which value is added outside the continent) and then importers of processed/finished products;

• the dependency of some of the major economies on raw commodity exports as main source of income( eg oil revenues represent 90% of exports and more than 70% of the national budgets of some of Africa’s major oil producers¹⁰; those economies will be heavily affected by the oil demand shock caused by COVID-19 and the oil price collapse which has led to the price of the barrel dropping to less than $20); and

• the still underdeveloped intra-Africa trade which, according to UNTACD, for the period 2015-2019 accounted only for only 17% of total trade of African countries.

The overreliance on foreign trade partners, including the dominant global role that China plays in the supply chain was highlighted by the AU in their report on the impact of COVID-19 on the African economy.

The AU demanded a paradigm shift, saying that Africa should turn the COVID-19 crisis into an opportunity to, among other things: boost Africa’s own productive capacity to transform raw materials locally; produce and trade medical/pharmaceutical products; increase agricultural production in order to enhance the food value chains to meet domestic and continental consumption; and accelerate the implementation of the Continental Free Trade Zone and financial institutions to achieve industrialization as quickly as possible.

With the implementation of the African Continental Free Trade Agreement (AfCFTA), a critical part of achieving the new paradigm now postponed due to COVID-19, it is a key moment to see if and how African nations can keep the momentum and work towards the objectives of the AfCFTA to make that paradigm shift for increased intra-African regional value chain.

Commenting on the postponement, Wamkele Mene, Secretary-General of the AfCFTA, reassured that the political commitment and will to integrate Africa’s market and to implement the AfCFTA as intended remains. He went on to say that because African countries do not have the firepower to launch economic and fiscal stimuli similar to those of the West, the AfCFTA and Intra-Africa trade will be the continent’s own stimulus package; in his words “That’s how we are going to get back on track as Africa“¹¹.

It is still early days and only time will tell if and how African nations will take on this opportunity for a paradigm shift and further unity.

Today, more than ever, unity is paramount; this can only remind us of the iconic words of H.E. Kwame Nkrumah:

“It is clear that we must find an African solution to our problems, and that this can only be found in African unity. Divided we are weak; united, Africa could become one of the greatest forces for good in the world.”

1. WHO (2020), Africa Dashboard, available at link
2. AfDB (2019), African Economic Outlook, Abidjan, Côte d´Ivoire
3. AfDB (2020), the African Development Bank group’s COVID-19 rapid response facility, Abidjan, Côte d’Ivoire
4. African Union (2020), Impact of COVID-19 on the African Economy, Addis Ababa, Ethiopia
5. Ibid., p.32
6. Reuters (2020), African Finance Ministers call for US$100 billion stimulus, debt holiday, available at link
7. H.E. Cyril Ramaphosa: “While we continue to welcome expertise and feedback from regions already engaged in the fight against the coronavirus, we must also establish an autonomous strike force. Other regions in the world are already paying a heavy tribute to COVID-19 and their support will be limited. Therefore African money and African expertise must be mobilized” reported in Africa News (7 April 2020) available at link
8. Ibid.
9. United Nations Economic Commission for Africa (2020), COVID-19 in Africa – Protecting lives and economies, Addis Ababa, Ethiopia
10. African Union (2020), op. cit.
11. Reuters, Launch of African Free Trade deal postponed due to coronavirus – official, headline of 29 April 2020 available at link

 

 Andrew Skipper

 Andrew Skipper, Partner and Head of Africa Practice, Hogan Lovells