IMPORTANT NOTICE

Survey to receive feedback on the COVID-19 pandemic and its economic impact on African countries - As we all know, the coronavirus is spreading across the world at a remarkable pace. This situation has caused many countries to lockdown their borders and even close many of their economic activities, in order to be able to contain the virus. The African Trade Policy Centre (ATPC) of the United Nations Economic Commission for Africa (ECA) and International Economics Consulting Ltd have teamed up, to carry out this joint survey and provide insights into the economic effects of the pandemic on economic activity and trade for businesses across Africa, intending to shed light on the policy responses and breakthroughs for businesses. The results, together with in-depth analysis, will be published by both organisations. All responses will remain strictly confidential. Results will be provided in aggregate form only, and individual response will not be shared. We thank you for your kind cooperation in filling out the questions on this online survey which should take between 5 and 15 minutes of your time. The deadline for completing the questionnaire is Friday 17 April. Please feel free to send to any of your contacts to widen the results. Link to Survey: https://www.surveymonkey.com/r/COVID-19AfricaImpact

INTERNATIONAL

Coronavirus deals severe blow to services sectors – The COVID-19 pandemic has dealt a heavier blow to personal services sectors compared with other recent economic crises, an UNCTAD analysis shows. The pandemic has massively disrupted key services sectors, especially tourism, hospitality and retail. This contrasts with the resilience witnessed during the 2008 great recession and the 2011-2013 eurozone sovereign debt crisis, particularly in comparison to trade in goods. An UNCTAD survey found that in the eurozone, the purchasing managers index (PMI) indicator, a measure of prevailing economic trends, in services and the composite PMI both contracted from above 50 points in January to minus 28.4 and minus 31.4 respectively by mid-March. “The situation is expected to worsen due to the drastic but necessary social distancing and lockdown measures adopted in the eurozone in the last month,” said Pamela Coke-Hamilton, director of UNCTAD’s international trade division. The strict measures deployed to combat the pandemic have nearly destroyed personal service sectors such as tourism, hospitality and transport. Millions of economically vulnerable people in developing countries are reeling under the crushing weight of the measures, as these sectors absorb a large share of low-wage, low-skilled and part-time workers, many of whom are women. “If the crisis persists, the whole tourism industry as we know it in developing countries may collapse,” Ms. Coke-Hamilton warned. Women represent more than half of the workers (54% in 2019) in the industry worldwide. Restrictions on flights and on ships entering ports, have also affected remittances, a lifeline for millions in developing countries. According to the World Bank, remittances were set to surpass foreign direct investment in 2019 to reach $550 billion, but both are likely to drop significantly in 2020 due to the pandemic. (UNCTAD)

Key Words: COVID-19, UNCTAD, Services Sectors

To fight Covid-19, we must fight intellectual property, trade and investment rules – Intellectual property rights, investment agreements and trade rules stand in the way of the urgently needed expansion in production of inexpensive ventilators. These rules and regulations act only to protect the profitability of entrenched industries. They cannot be allowed to supersede the basic human right to health. Generic versions of these machines can be built if the firms that own intellectual property are required to give them up. The World Trade Organisation’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) lays out a global baseline of intellectual property standards. Most of the technology involved in ventilator production would fall under the Trips definition of patents, requiring a minimum of 20 years of intellectual property protection. But 20-year patents are no longer conscionable, because they increase the cost of equipment and the length of time before it reaches patients. The Trips agreement does contain an article allowing for exceptions in the case of a “national emergency or other circumstances of extreme urgency” (Article 31b). The Covid-19 pandemic is undoubtedly a “circumstance of extreme urgency”.  It is often argued that pharmaceuticals and medical supplies should be produced through compulsory licensing, use without permission from the rights holder. But this exception contains restrictive conditions, including paying the rights holder “adequate remuneration” (Article 31h) and use “predominantly for the supply of the domestic market” (Article 31f).  The global shortage of ventilators speaks to larger issues of ownership and production. A single ventilator can cost more than $50 000. A plan in the US to use a General Motors factory to produce ventilators was overturned when the price tag for 80 000 units came to more than $1 billion.  (Mail Guardian)

Key Words: COVID-19, Trade, Investment Rules

Blog: Tourism at stake: Challenges and measures for small businesses – Travel and tourism are among the most affected sectors in the global pandemic. Lockdowns around the globe put millions of small businesses in travel and tourism to an existential test. After 21 January, 105 countries have imposed global travel bans, with no end in sight. The World Tourism Organization (UNWTO) estimates international tourism receipts could decline by 20% to 30% in 2020 compared to 2019, which would mean a reduction four to six times larger than during the 2009 global financial crisis. Travel and tourism are key industries in many developing countries – and international tourist arrivals constitute a major source of their services export. Out of the ten countries most dependent on travel exports, nine are small island developing states. In six Caribbean states, travel exports account for about half of gross domestic product (GDP) – Antigua and Barbuda (50%), Grenada (48%), Saint Lucia (47%) – or roughly one-third of GDP with Saint Kitts and Nevis (36%), Saint Vincent and the Grenadines (29%), and Belize (26%) – (see figure). In Asia, Macao SAR and the Maldives are subject of severe hits, with travel exports-to-GDP ratios of 73% and 56%, respectively and in Africa, the Seychelles with a ratio of 35%. As of 9 April, three out of the top ten countries most reliant on travel exports have imposed travel bans themselves. The impact of global travel bans is likely to vary depending on the peak season for tourism in different countries. In the Caribbean, where the travel exports-to-GDP ratio is highest, the beginning of the year (Q1 and Q2) is the time with the largest revenues from tourism. These countries already strongly feel the effects. (ITC)

Key Words: COVID-19, Trade, Small Businesses

Chapter 1: Global Financial Stability Overview: Markets in the Time of COVID-19 – The coronavirus (COVID-19) pandemic poses unprecedented health, economic, and financial stability challenges. Following the COVID-19 outbreak, the prices of risk assets collapsed and market volatility spiked, while expectations of widespread defaults led to a surge in borrowing costs. Several factors amplified asset price moves: previously overstretched asset valuations, pressures to unwind leveraged trades, dealers’ balance-sheet constraints, and a deterioration in market liquidity. Emerging market economies experienced the sharpest reversal of portfolio flows on record. As a result, financial conditions tightened at an unprecedented speed. Decisive monetary, financial, and fiscal policy actions—aimed at containing the fallout from the pandemic—managed to stabilize investor sentiment in late March–early April, with markets paring back some of their losses. A further tightening of financial conditions may expose more “cracks” in global financial markets and test the resilience of financial institutions. Asset managers may face further outflows and may be forced to sell assets into falling markets. Distress may rise among leveraged firms and households. Emerging and frontier markets may face challenging external funding conditions, rising rollover risks, and increased incidence of debt restructurings. Although banks have more capital and liquidity than in the past, have been subject to stress tests, and are supported by central bank liquidity provision, their resilience may be tested in some countries in the face of large market and credit losses. Wide-ranging fiscal, monetary, and financial policies, as well as strong international cooperation, remain essential to safeguard economic and financial stability and to prevent the emergence of adverse macro-financial feedback loops. (IMF)

Key Words: COVID-19, Global Financial Stability, Markets

The Great Lockdown: Worst Economic Downturn Since the Great Depression – Flattening the spread of COVID-19 using lockdowns allows health systems to cope with the disease, which then permits a resumption of economic activity. In this sense, there is no trade-off between saving lives and saving livelihoods. Countries should continue to spend generously on their health systems, perform widespread testing, and refrain from trade restrictions on medical supplies. A global effort must ensure that when therapies and vaccines are developed both rich and poor nations alike have immediate access. While the economy is shut down, policymakers will need to ensure that people are able to meet their needs and that businesses can pick up once the acute phases of the pandemic pass. The large, timely, and targeted, fiscal, monetary, and financial policies already taken by many policymakers—including credit guarantees, liquidity facilities, loan forbearance, expanded unemployment insurance, enhanced benefits, and tax relief—have been lifelines to households and businesses. This support should continue throughout the containment phase to minimize persistent scars that could emerge from subdued investment and job losses in this severe downturn. Policymakers must also plan for the recovery. As containment measures come off, policies should shift swiftly to supporting demand, incentivizing firm hiring, and repairing balance sheets in the private and public sector to aid the recovery. Fiscal stimulus that is coordinated across countries with fiscal space will magnify the benefit for all economies. Moratoria on debt repayments and debt restructuring may need to be continued during the recovery phase. Multilateral cooperation is vital to the health of the global recovery. To support needed spending in developing countries, bilateral creditors and international financial institutions should provide concessional financing, grants, and debt relief. The activation and establishment of swap lines between major central banks has helped ease shortages in international liquidity, and may need to be expanded to more economies. Collaborative effort is needed to ensure that the world does not de-globalize, so the recovery is not damaged by further losses to productivity.  (IMFBlog)

Key Words: COVID-19, Global Economy, Markets

PAN AFRICA

Could AfCFTA implementation minimise trade misinvoicing and IFFs? - The phase one of the AfCFTA agreement, which became operational in July, 2019, is to harness trade potentials of the continent through intra-African trading mechanisms to create a single continental market for goods and services, with free movement of businesses, persons and investments, and thus pave the way for accelerating the establishment of the customs union to ease trading. It would also expand trade through better harmonisation and coordination of trade liberalisation including facilitation across Africa by 2030 is anticipated to increase Africa’s trade volumes by 17 per cent to 52 per cent valued at $35Billion by 2022 in countries with a combined population of 1.3 Billion. The other group of thought is optimistic that AfCFTA was working towards tightening laws to curb trade misinvoicing with the hope that the new protocols in the agreement would mitigate under or over-invoicing cascading into IFFs. Mr Stephen N. Karingi, Director, Regional Integration and Trade Division, Economic Commission for Africa, said it would be hard for people and businesses to misprice, under or over invoice in the case of Ghana and the continent at large with the new regime. He said AfCFTA offered utmost transparency and dispute resolution mechanisms as well as rules of origin and uniform custom liberalisation schemes, which could minimise misinvoicing, transfer pricing and profit shifting. “When the next phase delivers all the investment opportunities, rolls-out the intellectual property rights as well as electronic and data commerce, and protection of other protocols, incidences of trade misinvoicing and IFFs would be hugely impeded.” Mr Mickson Opoku, who is in charge of Multilateral, Regional and Bilateral Trade at Ghana’s Ministry of Trade and Industry, said AfCFTA a payment system developed by the Africa Export-Import Bank (Afreximbank) for the new AfCFTA scheme had the capacity to address cross border currency transactions to ward-off trade misinvoicing, He said, “Punitive measures emanating from flouting regulations will serve as disincentive to launder money, shift profits or transfer price goods and services”.  (Ghana Web)

Key Words: AfCFTA, IFFs, Africa

The economic impact of COVID-19 on African cities likely to be acute through a sharp decline in productivity, jobs and revenues, says ECA – As part of its analysis to inform COVID-19 policy responses, the Economic Commission for Africa, is calling for adequate consideration of the vulnerability of city economies as African governments consolidate efforts and define stimulus measures to mitigate national and regional economic impacts. “As engines and drivers of economic growth, cities face considerable risks in light of COVID-19 with implications for the continent’s resilience to the pandemic,” states Thokozile Ruzvidzo Director of the Gender, Poverty and Social Policy Division of the ECA. Africa’s cities are home to 600 million people and account for more than 50% of the region’s GDP. This is even higher at more than 70% for countries such as Botswana, Uganda, Tunisia and Kenya. A third of national GPD (31%) comes on average from the largest city in African countries. As such, the economic contribution of cities in the region is far higher than their share of population. COVID-19 employment effects in are likely to be severe in urban areas. With urban-based sectors of the economy (manufacturing and services) which currently account for 64% of GDP in Africa are expected to be hit hard by COVID-19 related effects, leading to substantial losses in productive jobs. In particular, the approximately 250 million Africans in informal urban employment (excluding North Africa) will be at risk. Firms and businesses in African cities are highly vulnerable to COVID-19 related effects, especially SMEs which account for 80% of employment in Africa. These risks are compounded by a likely hike in the cost of living is expected as shown for example by some initial reports of up to 100% increase in the price of some food items in some African cities. Additionally, urban consumption and expenditure (of food, manufactured goods, utilities, transport, energy and services) is likely to experience a sharp fall in light of COVID-related lockdowns and reduced restrictions. (ECA)

Key Words: COVID-19, ECA, Economic Impact

COVID-19 and impact on businesses – What Can African businesses do? – The impact of the widespread lockdowns will be felt by all classes of businesses, Micro, Small, Medium Enterprises, Individuals and Bigger corporates, including Household Enterprises. Across Africa, Government’s must re-examine macroeconomic stimulus packages to reflect the structure of the African economy with varied mismatches such as lack of structured ID systems, untargeted, unstructured, unidentified rural and urban poor or vulnerable, the increasing risk for Government’s to offer social reliefs and safety nets means increased budget/revenue gaps for African Government’s. The socio-economic cultural nuances demand regarding the provision of tax penalty reliefs and extensions, revision of base points and interest rates on loan facilities and a corresponding low draw down in an economic shutdown, increased KYC requirements post COVID-19 regardless of banking relationships may cause increased investments/businesses to some sectors at the expense of others. Businesses with no contingency, dwindling revenues for direct contact businesses (given the fact that most African economies are brick and mortar) yet must meet employee obligations (Salaries et al), increasing weight of overheads albeit reduced but affected by revenue gaps, disruption in credit cycles, funding cycles, debt recoveries, inventory, project timelines, construction targets, procurement delays and changes, will certainly mean that some businesses may not survive. Ghana’s macro-economic environment was stabilizing; an economic restructuring program being pursued by Government under its short to medium term program touted as yielding positive economic returns, reducing interest rates, reduction in tariffs, aggressive digitization, favorable balance of payment, positive external reserves, a stabilizing banking sector after a purge, decreasing non-performing loans amid limited revenue inflows and a fairly managed debt-GDP ratio. Regardless, Ghana’s Business environment is on a reset, restart button demanding a review of Strategy, Cost, Operations Management, Finance and Improvement in Service delivery. (Ghana Web)

Key Words: COVID-19, Africa, AfCFTA

The Africa Centres for Disease Control and Prevention (Africa CDC) Partners with the United Nations Development Programme (UNDP) to Strengthen Africa’s Response to COVID-19 –  As part of the efforts to strengthen Africa’s response and preparedness in combating the COVID-19 pandemic, the African Union Commission through the Africa Centres for Disease Control and Prevention (Africa CDC) and the United Nations Development Programme (UNDP) have jointly designed a program to support on-going efforts in Africa. The joint program aims to coordinate COVID-19 response to recovery efforts along with Member States, Regional Economic Communities and Regional Mechanisms (RECs/RMs) as well as Civil Society Organisations (CSOs) and Faith-based Organizations (FBOs) to ensure coordinated cooperation and communication and to adopt a holistic approach. The four joint interventions areas are:  Regional coordination and building of synergies; Socio-economic, health, governance and political impact assessments; Capacity building and knowledge sharing and risk communication strategies and sensitization campaigns. These areas are aligned with both the Africa CDC’s mandate and the continental strategy on COVID-19 preparedness and response as well as the UNDP’s regional approach on response to recovery.    Specific focus on surveillance; laboratory; counter-measures guidance; healthcare preparedness; risk communications and social engagement; supply-chain management continues to be led by the Africa CDC. “Africa CDC is delighted to work with UNDP to implement the joint continental strategy for COVID-19 outbreak. Our strategy is clear: we want to capacitate the Member States so they can quickly detect and mitigate the effects of the disease in Africa, and, if widespread transmission occurs, prevent severe illness and death,” said Africa CDC Deputy Director, Dr. Ahmed E. Ogwell Ouma. (AU)

Key Words: Africa, AU, COVID-19

NORTH AFRICA

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Egypt – Trade and production effects are most evident in the tourism sector. According to hoteliers and tour guides, the number of visits has dropped to 10% of its normal level, with some hotels reporting a zero occupancy rate. A full 80% of future reservations have been cancelled in the past few days. Egypt’s economy is highly reliant on tourism revenue (12% of GDP), which rose to a record high in the financial year ending in July 2019. This means even a 50% decrease between March and June would equate to around a 2% drop in GDP growth across the year. The prime minister said aviation firms alone would lose EGP 2.25 billion ($143 million) owing to airport closures. The sector also accounts for 9.5% of employment in Egypt, meaning the income of 2.48 million people is at risk. Concerns that a slowdown in global trade may hurt Suez Canal revenues, which account for around 10% of Egyptian GDP, have, as yet, been unfounded, with the chief of the Suez Canal Authority reporting a 4.6% yearon-year increase in the number of ships passing through, on 1 April. The effect on Egypt’s major gas exports is predicted to be fairly neutral, since its revenues are almost exactly balanced by its imports of oil. Gold exports have fallen precipitously, in particular to the US market. However, parts of the citrus industry have reported strong sales, driven mainly by domestic demand. On 26 March, Egypt’s planning minister announced a reduction in the country’s GDP growth target from 5.6% to 5.1% for the financial year that ends in July. She also said that GDP growth for the following financial year could be as low as 3% if the crisis continues until December. This seems a very modest downgrade given that the International Food Policy Research Institute (IFPRI) estimates that, for each month that the COVID -19 crisis persists, Egyptian GDP could fall by between 0.7% and 0.8%. (ODI)

Key Words: Egypt, COVID-19, Policy Response

EAST AFRICA

EAC Secretariat urges Partner States to prepare economic recovery plans for the time after COVID-19 – The COVID-19 global pandemic is not only a major health crisis that challenges health systems across the globe. It has far reaching ramifications on economies worldwide. The medium- and long-term effects resulting from the measures taken to slow down and contain the spread of the disease remain unforeseeable. The East African Community region is no exception. On a positive note, the free movement of goods and services in the EAC has been maintained and the supply situation for staple food and basic necessities is currently secured. However, on the negative side, enterprises across sectors including the agro-industry and particularly the informal sector are suffering. Value chains have been disrupted and tourism, a major source of income in the region, has come to a complete stand-still. Against this backdrop, the East African Community Secretariat calls upon Partner States to immediately commence developing National Economic Recovery Plans. The East African Community Secretariat has finalised an EAC COVID-19 Response Plan and is developing the EAC Recovery Strategy based on a regional approach. “While many people have already lost their jobs and are struggling to feed their families, there is a window of opportunity to prepare for the time after COVID-19 and to prevent another catastrophe”, says Honourable Christophe Bazivamo, Deputy Secretary General in charge of Productive and Social Sectors, EAC Secretariat. He especially urged Partner States to strengthen their food production systems by allowing farming activities to continue. He further emphasized that Partner States should more than ever before promote the use of technology and digital solutions to improve agriculture production and trade in agriculture products. The EAC has received good rains since September 2019 in most of its parts and the meteorological forecast up to May 2020 shows near normal to above normal rainfall. As a result, livestock and wildlife are striving and farmers are expecting good harvests. (EAC)

Key Words: EAC, COVID-19, Economic Recovery Plans

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Djibouti – As of 6 April, the Ministry of Health in Djibouti has announced a total of 90 cases (higher than the figure of 59 reported by Johns Hopkins University). Nine of these have recovered. All commercial flights were suspended from 18 March, and surveillance has been increased at all points of entry into the territory. The president announced a lockdown on 27 March. Schools are shut until at least 9 April. Non-essential businesses are expected to transition to remote working or to close, while nonessential public service workers were given a week of leave (resuming work on 5 April). Essential businesses (including the food industry, essential public services and the port) remain open. Trade has been maintained at this point but transportation of passengers by train has been disrupted. It is unclear how long the lockdown will last. Djibouti’s economy, with GDP of approximately $2 billion, is highly interconnected with Ethiopia’s. An arid country with no natural resources, it is a net importer of energy, food and water. Most economic activity is dependent on the country’s state-of-the art port and its main trade partner Ethiopia. The economy has been growing at a high rate – 8.4% in 2018 and an estimated 7.7% in 2019 according to public authorities (though the IMF reports growth rates of 5.5% and 6%, respectively) – driven by public investments in infrastructure and external trade. At around 70%, the debt to GDP ratio is high for a lower-middle-income country, with nearly 100% of this external. Half of the debt is owned by Exim Bank of China, which financed the Djibouti–Addis Ababa railway project. The IMF concluded last year that Djibouti was at a high risk of debt distress. Despite Djibouti having one of the highest GDP rates per capita in Africa (approximately $2,000), an estimated 40% of its population is still considered poor, and around 20% extremely poor (national data). (ODI)

Key Words: Djibouti, COVID-19, Policy Responses

WEST AFRICA

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Ghana – Ghana’s key exports are crude oil, cocoa and gold. In terms of contribution to GDP, the mining sector constitutes 9%, petroleum 4% and cocoa 1%, respectively. The extractives sector is important for export revenues, with prices extremely important for royalty revenues to the government. The hospitality and tourism sector contributes 3% of GDP. In 2017, GoG spent $147 per capita on health care, while external health expenditure was $21 per capita (PPP international US$). Ghana’s debt-to-GDP ratio was 63% in December 2019, compared with 58% in the previous year. Ghana’s parliamentary and presidential elections are due in November 2020 and Ghana’s decennial census is planned for June 2020. On 30 March, the minister of finance announced a revision of the GDP growth forecast down from 6.8% to 2.6% in the event of an outbreak, or 1.5% if there is a partial lockdown (which has since been announced). These estimates include the impact of lower oil prices. Since the beginning of the year, crude oil prices have fallen by 60%, and cocoa prices by around 10%. However, gold prices have increased by around 6% over the same period. The hospitality and tourism sector has suffered from travel restrictions. Hotel occupancy rates are down from 70% to under 30%, and restaurants were experiencing a 60% reduction in trade even before the lockdown began. The inflation rate for February 2020 was 7.8%, the same as the previous month. The unemployment rate stood at 7.1% in August 2019. 85% of the workforce was employed in the informal sector. Services, agriculture and industry accounted for 49%, 38% and 13% of employment, respectively. (ODI)

Key Words: Ghana, COVID-19, Policy Responses

SOUTH AFRICA

COVID-19 | Private Sector Working Group To Ensure Smooth Flow Of Essential Goods And Services Formed – Zambia and South Africa have formed a private sector working group to create a framework that is targeted at ensuring the smooth flow of essential goods and services during the COVID-19 lockdown of most SADC countries. At the economic sustainability and emergence purpose meeting held in Lusaka on Thursday, the two countries discussed the necessity of ensuring that South African Chain stores operating in Zambia open their doors wider to local producers and suppliers to ensure that there is business continuity and empowerment during the Covid-19 period and beyond. Speaking at the meeting held at the Ministry of National Development Planning, Finance Minister Dr. Bwalya Ng’andu said the Zambian Government has placed sustenance of the value chain and continued empowerment of local businesses at the centre of its economic sustainability and emergence purpose plans for the immediate term and the future. Dr. Ng’andu, who was also the convenor and Chairperson of the meeting, encouraged the Zambian private sector to ramp-up participation in the value-chain and take advantage of the internal market platforms while maintaining quality standards, regular supply and stable prices to the greatest extent possible. Meanwhile, South African High Commissioner George Nkosinati Twala said his office is ready to work with Zambian authorities to facilitate strengthened engagement between private sector players of the two countries and ensure that the value and supply chains are kept in motion. Mr. Twala called for a proactive review of trade and economic affairs that need to be reviewed in the entire value chain to ensure a fast paced programme that will mount a lasting positive impact on the future economic relations between the two countries. (Zambia Reports)

Key Words: COVID-19, Gambia, Zambia

Finance Minister Tito Mboweni: Media briefing on economy and Coronavirus (COVID-19) –The Covid-19 pandemic is expected to deepen South Africa's economic woes, and is expected to push the economy into a deep recession during 2020. At a media briefing today, Finance Minister Tito Mboweni said that Treasury will have to revise the national budget across the board to ensure that the Department of Health has the resources necessary to respond to the outbreak.  Treasury has also been in talks with foreign lenders, including the World Bank, the New Development Bank and the African Development Bank on possible loan facilities – strictly to be used for Covid-19 support. According to Mboweni, a facility of $60 million is being considered from the World Bank. The finance minister said that Treasury is considering all options available and will leave no stone unturned in this regard. While Treasury has also introduced tax relief measures, Mboweni noted that a downturn in tax revenue is also expected due to reduced economic activity. Treasury will brief Cabinet on Wednesday, on a set of proposals to revive the economy. (tralacBlog)

Key Words: SA Economy, COVID-19, Markets