Africa: A future of bold economic policies
14th February was not just about chocolates and roses; it was also the second anniversary of the COVID-19 pandemic in Africa. The COVID-19 pandemic brought atypical disruptions to Africa—crunching incomes, magnifying poverty and food insecurity, and leading the region into its first recession in 25 years. Faced with the shock of unprecedented proportions, Africa has shown a resilience that many more developed parts of the world lacked.
However, with recovery on track in the global economy, and as the pandemic’s economic effect continues to recede, recovery is turning out to be difficult for Africa as it is already falling behind in terms of growth prospects. A deadly cocktail of vaccine nationalism, restrictive patents, and limited vaccine manufacturing infrastructure has left the continent largely unvaccinated, leading to a two-track recovery – both between African economies and with the rest of the world. While the global economy is projected to grow by 4.4% in 2022 – led by growth in a few heavyweight countries -, the continent’s outlook is not promising.
The African continent will face many challenges in the post-COVID-19 world, as such the IMF expects sub-Saharan Africa to grow by 3.7%. Past strategies focused on transformation as the main outcome, but the COVID-19 pandemic has highlighted the role resilience plays as an equally important economic outcome. Therefore, African countries’ future economic development goals need to incorporate both objectives. Also, new sources of vulnerability (health, political, fiscal, etc.) have been unearthed and the region is likely to face even riskier external and internal environments in the future. Scarring from pandemics could reverse goals, exacerbate frictions, and deepen repression across the continent. The reality is that Africa’s COVID crisis may be yet to come, therefore, African leaders must now adopt strategies for a resilient recovery post-COVID-19.
In a resilient economy, fewer assets are lost when shocks occur, thus more sustained improvements in economic welfare occur for the same amount of investment. The pandemic presents a unique opportunity for Africa to re-think its development policies. The pandemic has been a major destabilizing force and achieving resilient, sustainable growth will not be easy, and will require food value chains to become more internationally competitive; increase on-farm productivity; reduce production and distribution costs to cities and small towns; facilitate private investments in logistics and processing; reducing intra-African nontariff trade barriers, and successfully implementing the right adaptation policies for climate-vulnerable regions.
While the pandemic has intensified Africa’s need for more international support within the framework of a more modern form of multilateralism, the region needs to re-build its own future by forming a new kind of partnership with the private sector – both at the national and international level – so as to plug financing gaps in the course of its economic recovery and mitigate the medium and long-term impact of the crisis. At a time like this, rating agencies should not be considered as a part of the problem but as part of the solution because they are necessary to have a measured voice to bring about some stability.
However, African countries will have to invest in investor confidence in order to gain the trust of capital markets – which account for 40% of the region’s external debt – to close the financing gap that weighed on Africa’s development pre-COVID and now threatens its post-COVID-19 economic recovery. Attracting stable foreign investment will require African governments to de-risk their economies by strengthening the quality of their national institutions and taking measures such as stepping up good governance, improving transparency, improving the ease of doing business, intensifying the fight against corruption, and investing in infrastructure, technology, and human capital.
The aim for Sub-Saharan Africa should not be to bounce back to the unsustainable forms of development it pursued pre-pandemic but chart a new development course – that is digital and green – for the region. It also needs to incorporate transparency, fairness, and realism to tackle the scale and depth of endemic development challenges. The list of efforts African countries will have to make over the next few years to mitigate the impact of the ongoing economic crisis may seem to be very long. But the path to the post-COVID transformation is a marathon and not a sprint. A marathon that is being run at a time when it is being changed by global circumstances.