In a personal comment on the effects of Covid-19 on Africa for the Financial Times, Ghanaian minister of finance Ken Ofori-Atta recently wrote: “What does an African finance minister do now? How can we restore 10-15 % of GDP over a two- to three-year period? This is not a passing blizzard, as a friend said; it’s more like a long winter, even a mini ice age.” So, the Ghanaian minister fears an economic and social ice age in the era of global warming. And he asks: ”Where is the leadership and global task force that would mirror the 1944 Breton Woods monetary conference?” For the moment, there is no such global responsible leader.
“Ventilators, masks, even soap: Africa in need”
Such was the title of a recent article in The New York Times. Is it exaggerated? So far, the coronavirus seems not to have hit African countries with the same strength as it did China, the US, or Europe. And it was a European who brought the virus to Africa and not the other way round. But the Covid-19 virus comes in addition to many other critical issues that Africa faces, including other health risks such as Ebola. Just days before the Democratic Republic of the Congo wanted itself to be declared Ebola-free, a new outbreak was detected.
There are different theories about why - until now - Africa has been less affected by the new virus. Its young population, widespread use of medicine against malaria, and other factors are all cited. And African countries are more used to combat pandemics. But the countries are at the same time far, far less equipped with beds - especially emergency beds - doctors, nurses, and other vital infrastructure. Africa is the continent with the lowest density of physicians in the world. And whereas Italy, which is itself not the best0equipped country in Europe, has one doctor for every 243 people, Zambia has one doctor for every 10.000 inhabitants.
Of course, Africa is not a single place, and there are many differences between individual countries. Senegal, Ghana, and South Africa seem to be on the better prepared side, but others such as South Sudan are much worse-off. The New York Times writes: ”South Sudan, a nation of 11 million, has more Vice Presidents (five) than ventilators (four). The Central African Republic has three ventilators for its five million people. In Liberia, which is similar in size, there are six working machines - and one of them sits behind the gates of the United States Embassy.”
It is grotesque to advise people to wash their hands regularly and carefully if there is no running water. In 2015, only 15% of sub-Saharan Africans had access to basic hand-washing facilities, according to the United Nations. In addition, it is very difficult to maintain social distancing when many people live in overcrowded slums. Many people live day-to-day by trading in the informal economy in street markets. In Africa, out of a total workforce of 440 million, there are only 140 million working in the formal sector. And for a third of the people working in the informal sector, strong reductions of their income are expected.
In general, we must acknowledge the enormous gap between the rich and the poor in Africa. But here too we see some shifts in the relative economic position of different countries. Some African countries have important oil and gas resources and are strong exporters of hydrocarbons. But the recent oil glut, which resulted in briefly negative oil prices because of the oversupply, has had very negative effects on poorer countries. While Russia has big reserve funds and both Saudi-Arabia and the US can overcome such situations, this is much more difficult for countries such as Nigeria and Angola. All the resources that they have in their soil - which also in normal times don’t contribute sufficiently to their economic development - are now endangering even their low levels of economic growth and social wellbeing. Thus, because of the widespread decline in international commodity prices - not only for oil - many resource-rich countries have joined African countries with preexisting high debt levels.
What to do with the debt burden?
In recent weeks, the question of how to deal with the high debt burden of low-income countries has been raised by a number of African leaders. It has been taken up in particular by the French President Emmanuel Macron and by Managing Director of the IMF Kristalina Georgieva. The G20 meeting of the strongest economic powers decided only on a repayment moratorium. They agreed to freeze bilateral government loan repayments for low income countries until the end of the year. In addition, the Institute of International Finance urged private creditors to agree on a voluntary standstill of debt repayments. But many of the private creditors have pushed back against this plea. In the meantime, the IMF is looking for additional financial resources for the poorest countries, especially those who are hit hardest by the coronavirus.
The debt moratorium is certainly not enough to overcome the present difficulties. Georgieva made this clear in a blog after the minimum agreement of G20 countries: “The IMF, like our member countries, may need to venture even further outside our comfort zone to consider whether exceptional measures might be needed in this exceptional crisis.” In addition, the potential for African countries to decide on an adequate economic stimulus is much smaller. Indeed, all the economic measures taken by African countries lag behind those in China, the US, and European countries. African countries have decided on a stimulus between 1-1.5 % of their - very low - GDPs, while China spends about 4%, the US about 10%, and European countries - with the exception of Italy - from 10% upward.
The lack of intervention possibilities in Africa has consequences for all of us. Ethiopian Prime Minister Abiy Ahmed said it quite directly: ”We can defeat this invisible and vicious adversary - but only with global leadership. Without that, Africa may suffer worst, yet it will not be the last. We are all in this together, and we must work together to the end.”
Unfortunately, we do not see much of a global leadership. The US under President Donald Trump, who is only interested in his re-election, relies on his America First policy. China tries hard to make the world forget about the time that passed after a doctor made public his findings concerning the new virus. And this doctor had even to withdraw his – correct - statement. Now there are even new rumors about the origin of the coronavirus, possibly coming from a laboratory in Wuhan. Meanwhile in Europe, many leaders are entirely focused on the conditions in their own country. Macron is one of the few leaders who draws attention of the public to the needs of and challenges coming from Africa.
The African century?
Irrespective of how hard the virus will hit African countries, they will be strongly impacted by the global economic recession. The US and Europe will suffer the strongest recession since the twenties of the last century. And some African countries who have redirected their exports towards China will feel the consequences of the economic crisis that is hitting China too. In the last years, Africa showed promising developments. Being rich in resources and having a young energetic population can be assets that could and should be developed and nourished by responsible leadership. And slowly, some such leaders have appeared on the political scene. In a recent special report, The Economist spoke of “The African Century”.
But with a new health crisis and a strong global recession, Africa and especially its poor will suffer enormously. It could create a setback that should be at least somewhat mitigated by coordinated and lasting debt relief and new measures to prevent capital fleeing from Africa. If that is not done, then some crooks and terrorists will understand how to lure the disenfranchised into following them. And terror, just as the virus, does not know or respect borders. As The Economist writes in its report: “Stopping the jihadists will require not just troops, but also schools, economic development and accountable governments.” But with additional strains due to a new health crisis and without global financial support, The Economist is correct when it writes: “part of Africa will remain unstable for decades.” And that is not good news for Europe either.
Dr. Hannes Swoboda, President of the International Institute for Peace (IP), started his career in urban politics in Vienna and was elected member of the European Parliament in 1996. He was Vice President of the Social Democrat Group until 2012 und then President until 2014. He was particularly engaged in foreign, enlargement, and neighborhood policies. Swoboda is also President of the Vienna Institute for International Economics, the Centre of Architecture, the University for Applied Science - Campus Vienna, and the Sir Peter Ustinov Institute.