News

Tackling COVID-19 in Sub-Saharan Africa

Tackling COVID-19 in Sub-Saharan Africa
Photo credit: Nikada via iStock Photo

12 Jun 2020

The pandemic-induced crisis will have severe impacts on household incomes and industries in the region and requires swift policy actions. 

The COVID-19 infection rates in Sub-Saharan Africa (SSA) have remained modest so far.[1] But with notoriously underfunded health systems[2] and the prevalence of other endemic diseases such as HIV and malaria, many analysts believe that the worst is yet to come. Virtually all countries in SSA have already introduced containment measures. In fact, the region – hosting 33 of the world’s 47 LDCs – responded promptly.[3]

The extent to which COVID-19 containment measures are and can be enforced in the region remains to be seen as they are not likely to prove effective due to higher dependence by households on daily income, insufficient government resources to compensate those affected by the containment measures, and the difficulty of implementing social distancing in societies where social interaction is a matter of daily survival.

The response in the region in terms of healthcare measures includes increased healthcare budgets and accelerated efforts to source medical supplies and health services with outside – mostly WHO – aid. Countries have also responded to rising food security risks. For example, Niger has introduced the “distribution of food from the strategic reserve”. Rwanda has begun “door-to-door provision of rice, beans, and flour every three days”, and in the Gambia, the prices of essential goods have been frozen for food commodities.

On the economic side, the focus has been on a mix of monetary and fiscal measures to solve the need for cash by companies and households in need.[4] However, the scope of such packages remains limited at 0.6 per cent to 1.1 per cent of GDP for some developing countries compared to above 10 per cent in OECD countries.[5]

Impacts on industry and households

Due to lower global demand, SSA will experience a drop in domestic sales and exports, supplies, investments and labour. At the same time, households are restricted in their movements and receive less income from employers, businesses and remittances, and consequently consume less.

Impact of COVID 19 in SSA Industries and households June 2020

While these circular effects may hold true for all countries affected by COVID-19, the distinctiveness of SSA lies in its dependence on the below three aspects.

Dependency on exports and imports

Many of the region’s countries share the common characteristics of low levels of income and resources and relatively low engagement in world trade.[6] The share of both imports and exports in GDP of most SSA countries hovers around 30 per cent, with one group of countries being even less integrated, and a small group with imports and exports above 50 per cent. However, the limited trade SSA countries engage in is crucial to their economies; if it decreases, the trickle-down effects will seriously affect them.

SSA dependence on international trade June 2020

LDCs’ industries are additionally suffering because of their dependence on exports of primary commodities, which constitute the largest share of LDC exports in (unequal) exchange for imports of consumer, capital and intermediate goods from their trading partners, with resultant widening trade deficits and debt dependence.

SSA exports and imports by product group June 2020

Dependency on foreign direct investment (FDI), debt and aid

FDI flows to SSA countries are low by global standards, but high in terms of their ratio to domestic GDP[7], signalling the importance of FDI for the region’s economic growth, where local investment capacities are usually limited. According to the United Nations, the tendency of SSA LDCs’ FDI share is declining.[8] In view of COVID-19, it can be expected that FDI will drop even further. LDCs receive less than 10 per cent of total aid available for developing countries and dependence on aid is on the rise, accounting for a significant share of LDCs’ state budgets. Furthermore, a larger share of outstanding debt is owed to private lenders at higher interest rates.[9]

Household dependence on informal sector and remittances

The labour participation rate in the informal sector in many LDCs in SSA is up to 90 per cent, with a slightly larger share of women than men.[10] People working in the informal sector are severely affected by COVID-19 containment measures prohibiting free movement. Households in SSA also substantially depend on remittances. In countries like Nigeria, for example, remittances dwarf the income from FDI and oil revenues. Due to COVID-19, the incomes of SSA households are likely to decrease because less money is being sent home by migrants, who themselves are facing reduced incomes in their host countries.[11] Migrants are often the first to be laid off, and in some cases may even have to return to their home countries.

Policy options

What are the implications of COVID-19 containment measures for SSA industries? Many informal businesses and smaller companies may have to drop out of production and file for bankruptcy while households face reduced income and poverty. Such events will hit SSA’s economies hard, likely leading to a downward spiral with intensifying impoverishing effects, and the first recession in SSA in the last 25 years.[12]

Consequently, accelerated structural change could result in larger and international companies taking over those parts of production normally carried out by local businesses. This bears the risk that countries will deindustrialize too soon, thereby losing important incomes and employment in industry. Meanwhile, there may be a tendency by global players and companies in industrialized countries to move parts of their production closer to “home”, causing SSA industries to become even more marginalized, thus capturing even less value in global production and trade.

Vulnerable groups, including women, youth, refugees, workers, ex-combatants, etc., will be particularly affected as they find themselves losing their jobs[13], income and food security.

The above calls for clear policy actions:

Manufacturers can be supported in the repurposing of production, i.e. in the manufacturing of medical equipment and devices such as masks, gloves, sanitizers, hospital wear, beds and ventilators.[14] Other measures to consider are improving the ease of doing business in times of social distancing. Appropriate technology should be promoted that allows remote working, e-commerce and online networking. For that purpose, digital infrastructure and online connectivity need to be improved and extended. As important as such measures are, they only constitute a small fraction of the relief required for SSA’s industrial sector as a whole.

In the short term, the bulk of government support should be provided in the form of debt relief for businesses that have fallen into negative revenue traps as a result of COVID-19. Such measures – already being widely applied – include guarantee funds and credit programmes as advocated by the IMF, but should also include more fiscal stimulus such as writing off debts and subsidies via standard tax and duty exemptions and cost-cutting initiatives (rents, utilities, etc.) for those companies most affected. Without debt forgiveness (rather than a partial, one-year deferment already agreed with the G20[15]) and urgent support from donors and development agencies, some SSA countries may not be able to implement such measures.

Helping companies write off losses alone may, however, not suffice in promoting economic regeneration. In fact, many analysts emphasize the importance of enabling business continuity and assisting enterprises in laying the foundation for recovery.[16] Substantial efforts are required to re- and further engage companies in different sectors so they can explore different products and markets, and to not leave all the space to global players. This represents an opportunity for the region to diversify and reorient its product mix and introduce new technologies. Moreover, the channels from which these companies source supplies could become less import-dependent and more resilient to disruptions in global value chains.

To achieve such a reorientation of industries, SSA countries need to mobilize innovations and investments and integrate them into new business models. Training, technology exchange and investment promotion are important policy measures that can reinforce this process. Engaging youth – 60 per cent of SSA’s population is below the age of 25 – and women will allow to further exploit the continent’s entrepreneurial potential.

Governments could use the opportunity to lead industry into this new direction. In line with recommendations from the Africa Union[17], the development of a regional agenda for industrial revival in response to COVID-19 would build on opportunities to diversify the economy, help anticipate changes in the global structure of trade and industry and promote efforts to accelerate regional integration, exploiting the momentum of the African Continental Free Trade Area[18] and the UN’s COVID-19 recovery strategies.[19]

This crisis also represents an opportunity for the region to diversify and reorient its product mix and introduce new technologies.

Frank Hartwich is Research and Industrial Policy Officer at the Department of Policy Research and Statistics (PRS) of UNIDO. Massoud Hedeshi is an independent policy analyst and a former consultant of UNIDO.

This opinion piece is part of a series of articles by UNIDO's Department of Policy Research and Statistics. The article benefited from the support and contributions of the Africa Regional Division and UNIDO Field Offices in the region. The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO.


[1] According to the WHO COVID-19 Situation Report of 29 April, the total number of COVID-19 cases reported in SSA is close to 20,000, with around 500 fatalities. There are concerns about the accuracy of those figures as medical infrastructure for testing and diagnoses is not widely available across the region.

[2] According to a recent not yet confirmed WHO survey including 41 African countries, the average number of ICU beds per 1 million Africans is 5 compared to the OECD’s 3,500.

[3] ICNL. (2020) African Government Responses to COVID-19: An Overview from the COVID-19 Civic Freedom Tracker. International Centre for Not-For-Profit Law. 23 April 2020.

[4] On 26 March 2020, the African Union established the COVID-19 Response Fund, with members pledging USD 12.5 million. The World Bank and IMF have also allocated USD 18 billion each for Africa’s COVID-19 recovery while the African Development Bank announced a USD 19 billion “Response Facility” on 8 April.

[5] Raga, Sherillyn. (2020) Country fiscal and monetary policy responses to coronavirus  – ongoing tracker. Overseas Development Institute. 2 April 2020.

[6] According to the UN Financing for Sustainable Development Report 2019, SSA accounts for 12 per cent of the world population but only makes up less than 1 per cent of global trade.

[7] EY. (2019) How can bold action become everyday action? EY Attractiveness Program Africa. September 2019.

[8] UN. (2020) Programme of Action for the Least Developed Countries for the Decade 2011–2020.

[9] World Bank. (2020) International Debt Statistics. Sub-Saharan Africa.

[10] ILO. (2018) Women and men in the informal economy: A statistical picture. Geneva: ILO.

[11] World Bank. (2020) World Bank Predicts Sharpest Decline of Remittances in Recent History. 22 April 2020.

[12] Mahler, Daniel Gerszon; Lakner, Christoph; Castaneda Aguilar, R. Andres and Wu, Haoyu. (2020) The impact of COVID-19 (Coronavirus) on global poverty: Why Sub-Saharan Africa might be the region hardest hit. World Bank Data Blog. 20 April 2020.

[13] ILO. (2020) The impact of the COVID-19 on the informal economy in Africa and the related policy responses. ILO Brief. 14 April 2020.

[14] South Africa, for example, is working on producing 10,000 ventilators by the end of June while Liberia is pursuing an initiative to produce locally-made reusable masks, and in Kenya, a factory has transformed into a surgical mask assembly line.

[15] The Business Times. (2020) Rich nations moving toward virus debt relief for poor countries. 15 April 2020.

[16] ILO. (2020) Interventions to Support Enterprises during the COVID-19 Pandemic and Recovery. ILO Enterprises Brief. 16 April 2020; McKinsey & Company. (2020) COVID-19: Implications for business. Executive Briefing. 13 April 2020.

[17] ECA. (2017) Transforming African Economies through smart trade and industrial policy. Economic Commission of Africa.

[18] According to the WEF, by removing tariffs and other trade barriers, the agreement can foster significant growth in trade, investment and employment across the continent.

[19] UN. (2020) A UN framework for the immediate socio-economic response to COVID-19. April 2020.

Author Frank Hartwich and Massoud Hedeshi
Source UNIDO Industrial Analytics Platform
Website Visit website
Date 12 Jun 2020
 
Share on