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COVID-19 Delta variant raises new risks for African countries

A new wave of Covid-19 infections in a number of African countries, exacerbated by the Delta variant, has increased the risk of pandemic-related setbacks for rated sovereigns in Africa. Slow progress on vaccination suggests that pandemic risks will persist until at least 2022.

Among Fitch-rated sovereigns in Sub-Saharan Africa (SSA), the number of confirmed infections relative to populations has risen in Lesotho, Mozambique, Namibia, Rwanda, Seychelles, South Africa, Uganda and Zambia since May, with the Delta strain already becoming dominant in some of these countries.

The region’s generally young populations do not appear to have prevented a rise in pandemic-related morbidity. However, differences are large even within sub-regions, and western Africa’s infections are gradually gaining momentum.

In a research note, Oxford Economics said that “while global Covid cases remain relatively low, the number of economies reporting sequences of the delta variant had climbed to 89, with a growing number now identifying it as the dominant strain. It has been detected in more than 100 countries”.

Last week, the Oyo State Coronavirus Task Force revealed that it had uncovered the Delta variant of the virus in the state. This came a few days after the Federal Government announced the discovery of the SARS-CoV-2 Delta Covid-19 variant, also known as lineage B.1.617.2 in a passenger during a routine mandatory test for international travellers and genomic sequencing at NCDC Laboratory in Abuja.

This disclosure was contained in a statement issued by the Chief Press Secretary to Oyo State Governor, Taiwo Adisa, on behalf of the task force last week in Ibadan, saying that the general public should be informed of the Delta variant of the virus in the state, according to the News agency of Nigeria.

Read Also: COVID-19: Oyo warns residents as Delta variant detected in state

While pointing out that the State’s incident manager and coordinator of the Emergency Operations Centre, Olabode Ladipo, had confirmed the development, Adisa said the general public should take extra caution and consistently apply all precautionary measures earlier released by the task force.

The statement from Adisa stated that this strain has been associated with high transmission, increase the severity of infection and outcomes. As such, this is to warn that the virus is still very much within society. All inbound travellers should always isolate themselves for seven days and submit themselves for tests.

The ‘Own Your Action’ (OYA) initiative of the state government should be seriously considered by adhering to the guidelines of wearing nose masks in public gatherings, washing of hands with soap and water and use of hand sanitisers, among others.

The State COVID-19 Task-Force hereby appeals to the good people of Oyo State to comply with these and other advisories as they apply to individuals and organizations.

It would be appreciated if all in-bound travellers from abroad maintain the mandatory seven-day isolation and subsequent testing before mingling with the populace.

In addition, residents are enjoined to seek medical care and seize the opportunity of free testing whenever they feel unwell.

Vigilance on the parts of both the Government and the people will surely go a long way in stemming the transmission of this disease within the state.

On Wednesday, the authorities of the University of Lagos had revealed that the institution is being affected by a potential third wave of coronavirus. This was contained in a ‘COVID-19 pandemic update’ issued by the university.

Though the university was silent on the suspected case of Delta variant reportedly recorded on the university campus, it confirmed that the medical centre has recorded an increase in the number of patients with COVID-19 symptoms.

The statement read, “The University of Lagos Medical Centre wishes to inform all members of the University of Lagos Community about what appears to be the start of a potential 3rd wave of the COVID-19 Pandemic in Lagos State.

On Thursday, the 14th July 2021, the management of the University of Lagos, UNILAG, announced the indefinite closure of the campus.

“The Executive Governor of Lagos State, Babajide Sanwo-olu, in his press statement issued on July 11, 2021, stated that since the beginning of July there has been a steep increase in the number of daily confirmed cases, with the test positivity rate going from 1.1% at the end of June 2021, to its current rate of 6.6% as at the 8th of July 2021. This is with a concurrent increase in the occupancy rate at Lagos State isolation centres.

Analysts are of the assumption that governments in the continent will seek to avoid strict generalized lockdowns that ban people from moving to workplaces, although more contained measures, such as the closure of bars and restaurants in place since 28 June in South Africa, may be seen in some countries.

The capacity to enforce tougher restrictions is weak in the region, and restrictions can be unpopular. Moreover, structural factors, including low levels of technology penetration and formal employment, would impede trends that have helped to mitigate the economic impact of tough lockdowns in other regions, such as shifts to online retail and working-from-home practices.

Ben May, Oxford Economics’ director of Global Macro Research, said market concerns about the impact of the variant on the global economy were “warranted,” warning that vaccines alone would not ensure a smooth path to economic normalcy.

May said the sharp rise seen in the U.K., where the pace of the vaccine rollout has been a renowned success, could indicate that the new strain will “wreak havoc” on emerging market economies with less advanced inoculation programs.

However, he suggested that given the relatively low hospitalization rate, “exit waves” may be a “necessary evil” for economies planning to reopen without the majority of the population having full vaccine protection.

“Nonetheless if economies reopen and allow cases to surge, the economic gains could prove illusory if Covid-related absences trigger major disruption to businesses and higher cases prompt greater voluntary social distancing,” May added.

Analysts believe there is little likelihood of large fiscal stimulus packages in SSA, even where Covid-19 outbreaks become severe. This should cushion the impact of new infection waves from a rating perspective, but partly reflects the strained starting point of public finances in many countries.

There will nonetheless be some effects, even if the stimulus is limited. Weaker levels of economic activity may depress fiscal revenues, and expenditure may rise. There may also be some upward pressure on healthcare spending, though this is likely to be modest, not least because sectoral capacity constraints mean that there will be limits to how effectively additional funds can be spent.

The pandemic continues to pose downside risks to regional sovereign ratings, but its effects may also make external financing from bilateral and multilateral sources easier to obtain than in more normal times. Notably, the IMF’s distribution of new special drawing rights (SDR) could ease financing for some sovereigns in the region in 2H21, and the Fund has adjusted lending conditions for countries facing pandemic-related strains. An unusually high number of sovereigns are in IMF programmes or conducting negotiations to obtain one.

Vaccination levels in Africa remain generally very low despite some recent progress. The median number of doses administered among Fitch-rated SSA sovereigns stood at around 2.6 per 100 population as of 1 July (full vaccination generally requires two doses).

The pace of vaccination may pick up from 4Q21 as vaccination programmes wind down in developed countries – assuming no boosters are required – freeing supply for elsewhere, although the low starting point in Africa suggests populations in the continent will remain vulnerable to further outbreaks well into 2022.

African sovereigns that have managed to avoid Covid-19 infection waves have still faced pandemic-related strains, notably through its earlier depressing effect on oil prices and demand in developed countries and China. However, these effects have receded. More recently, stronger commodity prices have proved a boon for external positions in commodity exporters. For Nigeria, the associated decline in government revenues would likely be overwhelmed by the incumbent fiscal hit from the new Covid-19 infections in 2021/2022.

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