tralac’s Daily News selection
Extraordinary China-Africa Summit on Solidarity against COVID-19: selected highlights
Joint Statement: extract
We fully recognize the positive role of China-Africa investment and financing cooperation in promoting development and improving people’s lives in Africa, and call on the international community to work in solidarity and collaboration, share best practices, and provide more material, technical, financial and humanitarian support to help African countries overcome the impact of COVID-19 and achieve independent and sustainable development. China takes seriously the debt concerns of African countries and will earnestly act on the G20 Debt Service Suspension Initiative, through friendly consultation as equals, and expedite support for the African countries worst hit by COVID-19. The African side expresses appreciation for China’s actions, and calls on the international community, especially developed countries and international financial institutions, to take concrete measures to ease the debt burden of African countries.
President Xi Jinping’s speech: extract
Within the FOCAC framework, China will cancel the debt of relevant African countries in the form of interest-free government loans that are due to mature by the end of 2020. For those African countries that are hardest hit by the coronavirus and are under heavy financial stress, China will work with the global community to give them greater support, by such means as further extending the period of debt suspension, to help them tide over the current difficulty. We encourage Chinese financial institutions to respond to the G20’s Debt Service Suspension Initiative and to hold friendly consultations with African countries according to market principles to work out arrangements for commercial loans with sovereign guarantees. China will work with other members of the G20 to implement the DSSI and, on that basis, urge the G20 to extend debt service suspension still further for countries concerned, including those in Africa.
To help Africa achieve sustainable development is what matters in the long run. China supports Africa in its effort to develop the African Continental Free Trade Area and to enhance connectivity and strengthen industrial and supply chains. China will explore broader cooperation with Africa in such new business forms as digital economy, smart city, clean energy, and 5G to boost Africa’s development and revitalization.
President Cyril Ramaphosa’s speech: extract
As things stand, however, many African countries are having to purchase goods with resources largely obtained from the multilateral agencies. We would like to ask China to consider support for the provision of diagnostic and therapeutic supplies over a period of six months. This support would be managed by AfriExImBank in collaboration with its counterpart in China. This would allow several African countries to procure goods from China.
The AU has been in the forefront of mobilising international support for a comprehensive economic stimulus package for Africa. We have called for debt relief for African countries that are indebted, including a two-year debt standstill and a plan for the restructuring of both private and bilateral debt. To provide additional liquidity to shore up the private sector, Africa has called for the international community to avail some unused Special Drawing Rights of about $100 billion for Africa. We urge China to support and contribute to this call, or to propose alternative options that can be considered on an urgent basis to help support the private sector. Although the COVID-19 pandemic will pass, its consequences for people, economies and our planet will be with us for a long time to come. [President Buhari’s speech]
How has the COVID-19 pandemic impacted Ugandan businesses? Results from a business climate survey (EPRC)
This special issue of the Uganda Business Climate Index examines the effect of the risk presented by COVID-19 pandemic on Uganda’s businesses. In particular, the report: Examines the effects of the COVID-19 pandemic on various indicators of businesses performance; Assesses future expectations of the businesses in the event the pandemic and containment measures persists; Provides possible policy options to revive businesses in Uganda in the post-COVID-19 era.
Large businesses generally reported no effect of COVID-19 on their ability to repay outstanding loans, but the risk associated with COVID-19 has undermined MSMEs’ ability to repay loans. Although, 65% of the businesses reported a decline in their ability to repay loans (Figure 10) as a result of the risk associated with COVID-19 and the subsequent measures taken to contain the disease (42% reporting moderate decline and 24% reporting severe decline), the decline is largely in micro (69% of the businesses), small (72% of the businesses), and medium (88% of the businesses). This could be attributed to the loss of revenue, since most of the MSMEs halted operations as they could not afford to adopt some of the preventive measures such as encampment or provision of accommodation to their employees. A sectoral analysis shows that high percentages of businesses in manufacturing and services reported decline in ability to repay outstanding debts due to the outbreak of COVID-19 compared to those in agriculture. This could probably be due to the fact that fewer businesses in agriculture have loans and even those with loans, the amounts are relatively small.
Reliance on international rather than regional supply for raw materials and intermediates may be adversely affecting businesses in Uganda. This calls for firms, especially the micro and small companies, to explore the East African Community and COMESA market to get their supplies. In addition, the COVID-19 related risk is a clear opportunity for Uganda to develop a critical domestic value chains and supply chains so that businesses, particularly MSMEs, can have a stable source for their inputs, while saving on the scarce foreign exchange.
Coronanomics and the Nigerian economy: Understanding the realities of an impending recession (Proshare Confidential)
Section 1 of the Coronanomics report (pdf) takes a bird’s eye view of global economic responses to the coronavirus pandemic and does a comparison of different approaches to both healthcare interventions and economic policy. The section looks at the impact of the virus on equities, commodities and global fixed income markets. Section 2 of the report delves into the impact of COVID-19 on large and small-sized African economies. It takes a look at Africa’s trade with the world and its trade amongst member nations. The section addresses issues of protectionism and the currency impact of the COVID-19 pandemic and its potential to disrupt world trade and depress African economic growth. Section 3 breaks down the Nigerian economy in the face of COVID-19 and looks at how the economy has responded to the pandemic and identifies key opportunities beyond the threats. The section deconstructs the economy and takes a look at the country’s sub nationals (states) and the opportunities (as well as challenges) open to the subnational entities across the federation with case studies of two states within each of the six geopolitical zones.
The South African economy and the pandemic: 8-14 June (pdf, TIPS)
The available data show an initial rebound in the economy following the move to Level 3 flattened out last week. A survey of business by TIPS, BUSA and the Manufacturing Circle found that, when UIF funds run out next month, many companies anticipate retrenchments due to low demand. The government plans a R500bn stimulus package centred on guaranteed loans for small and medium business; the UIF COVID-19 TERS fund; and investment in infrastructure. As of 6 June, however, only around R500m had been lent under the R200bn loan guarantee scheme, which accounts for the lion’s share of the proposed stimulus package. Virtually any effort to mobilise funding on the scale proposed for the stimulus package will affect the power as well as profits of different social groups, and consequently run into heated debates and intense lobbying. In the past week, debates swirled around the reprioritisation of the national budget, the use of UIF funding, the role of impact investments, and borrowing from the IMF and the World Bank. The government approached the IMF for a loan of $4,2bn, or R70bn. [Note: Previous editions of the TIPS Tracker can be accessed here]
Willemien Viljoen: South Africa’s April 2020 trade statistics – reduced exports lead to a significant trade deficit (tralacBlog)
World Investment Report 2020: Investment flows in Africa set to drop 25% to 40% in 2020 (UNCTAD)
All industries on the continent are reeling from the double blow of the coronavirus pandemic and low commodity prices, UNCTAD’s new report says. The trend of declining FDI to Africa is set to exacerbate significantly in 2020 amid the dual shock of the coronavirus pandemic and low prices of commodities, especially oil. FDI flows to the continent are forecast to contract between 25% and 40% based on GDP growth projections as well as a range of investment specific factors, according to UNCTAD’s World Investment Report 2020. “Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said UNCTAD’s director of investment and enterprise, James Zhan.
Manufacturing industries intensive in global value chains are also strongly affected, a sign of concern for efforts to promote economic diversification and industrialization in Africa. Overall, there is a strong downward trend in the first quarter of 2020 for announced greenfield investment projects, although the value of projects (-58%) has dropped more severely than their number (-23%). Similarly, as of April 2020, the number of cross-border merger and acquisition projects targeting Africa had declined 72% from the monthly average of 2019.
North Africa: FDI inflows to North Africa decreased by 11% to $14bn, with reduced inflows in all countries except Egypt, which remained the largest FDI recipient in Africa in 2019, with inflows increasing by 11% to $9bn.
Sub-Saharan and Southern Africa: After a significant increase in 2018, FDI flows to Sub-Saharan Africa decreased by 10% in 2019 to $32bn. Southern Africa was the only sub-region to have received higher inflows in 2019 (22% increase to $4.4bn) but only due to the slowdown in net divestment from Angola. FDI inflows to South Africa decreased by 15% to $4.6bn in 2019, despite key investments in mining, manufacturing (automobiles, consumer goods) and services (finance and banking).
West Africa: FDI to West Africa decreased by 21% to $11bn in 2019. This was largely driven by the steep decline in investment in Nigeria due to new investment regulations for multinational enterprises in the oil and gas industry.
East Africa: FDI flows to East Africa also decreased, by 9% to $7.8bn. Inflows to Ethiopia contracted by a fourth to $2.5bn caused to some degree by political tensions in parts of the country. Similarly, inflows to Kenya dropped by 18% to $1.3bn despite several new projects in IT and healthcare.
Central Africa: Central Africa received $8.7bn in FDI, marking a decline of 7%. The key highlight in the sub-region was the decrease in flows to the Democratic Republic of the Congo (9% to $1.5bn).
In the latest analytical chapter for the Regional Economic Outlook for sub-Saharan Africa, the IMF’s African department examines how digitalization can transform economies and people’s lives. The COVID‑19 pandemic has amplified those hopes. The pandemic illustrates the value of digitalization, but is also a stark reminder of the remaining digital divide. [Dr Ngozi Okonjo-Iweala: Nigeria and other African countries should go digital to boost trade]
COVID-19 in African Cities: Impacts, responses and policies (ECA)
Produced by the ECA, UN Habitat, UN Capital Development Fund, United Cities and Local Governments of Africa, African Development Bank, and Shelter Afrique, the report (pdf), which was virtually launched Tuesday, proposes responses for short, medium and long-term interventions to be led by national and local governments with the support of international and regional development institutions. To adequately address the challenges of COVID-19, five key recommendations have been identified in the report.
Applying local communication and community engagement strategies
Supporting SMEs and the informal economy
Deepening decentralized responses to COVID-19 through strengthened local government capacities
Targeting informal settlements through tailored measures
Establishing mechanisms to promote rapid access to housing and prevent forced evictions
Integrating urban planning and management as key priorities for recovery and rebuilding strategies towards long-term resilience.