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

Arab Africa Trade Bridges initiates program for developing countries amid COVID-19 - The International Islamic Trade Finance Corporation (ITFC) (ITFC-IDB.org), and its partners have approved an AATB Program Action Plan to support African and Arab countries to strengthen their socio-economic resilience in light of the COVID-19 pandemic, according to April 14th statement. In addition to ITFC, the 4th Executive Committee meeting of the AATB Program, held virtually, was attended by heads of member institutions including Arab Bank for Economic Development in Africa (BADEA) and ICIEC as well as senior officials from other members such as from Afreximbank and Islamic Development Bank (IsDB). AATB has the mandate of driving regional economic integration between the African and Arab regions and strengthening SME export development across key sectors. With the present crisis, member organizations will realign all existing financing engagements towards a range of interim and medium-term measures that respond directly to the needs of both regions. With the healthcare and pharmaceutical sectors prioritized, immediate measures include supporting the Network of Laboratories in West Africa with the supply of COVID-19 testing kits, lab equipment and personal -protection equipment (PPE) for medical and para medical staff. In tandem with material and financial aid, African laboratories will be able to access critical knowhow through a range of capacity building and knowledge sharing programs including online trainings, protocols and standard operating procedure (SOP) to diagnose and manage the coronavirus. (ZAWAYA)

Key Words: Arab Africa Trade Relations, Developing Countries, COVID-19

COVID-19 and food security in vulnerable countries – It is now feared that the COVID-19 pandemic could have a devastating effect on food security if major cereal exporters adopt trade barriers or export bans, as experienced during the 2007-2008 food crisis, or if coronavirus’ effects on the labour force and logistics become important. In addition, for countries that strongly rely on food imports, food security is vulnerable to revenues lost as a result of slowing economic activity caused by COVID-19. Developing countries, particularly small island development states (SIDS), dependent on tourism have already experienced a precipitous collapse in their revenues given that international travel has come to a halt. These losses make it more difficult to pay for the imported food required for survival in these countries. How likely will COVID-19 cause shocks to food markets? As the pandemic worsens and countries across the world impose lockdowns and close their borders, there is growing fear that food markets are going to be affected by logistical constraints and labour shortages, thereby putting pressure on prices. Cereals imports are spread across a very large number of countries in all regions - China alone accounts for more than 5% of total imports - whereas only a handful of countries account for the bulk of cereals exports. We have already seen that as a result of fear of potential logistical disruptions in supply markets in China, the biggest importer of soybeans, soybean futures prices increased by 5% between 27 March and 30 March. Soymeal, soyoil, palm oil and other food commodities also saw price increases. The United States and the Russian Federation alone represent a quarter of cereals exports. Adding exports by India, Argentina, Australia and Ukraine, a total of six countries where COVID-19 is in its expansion phase account for more than half of total cereals exports. (UNCTAD)

Key Words: COVID-19, UNCTAD, Food Security

Economic Impact of COVID-19 Outbreak on ASEAN - In ASEAN, the pandemic has so far brought immediate disruptions in economic activities across the region, as evident in the decline in tourism flows, disruption in air travels, and weakening in consumer and business confidence, as several countries imposed lockdowns, community quarantines, stay-at-home orders, temporary business closures, and travel restrictions or prohibitions to contain the virus. At the onset of the COVID-19 outbreak in Wuhan, the primary concern among AMS was the possible impact on supply chains because of the temporary closure of factories in the Hubei province due to lockdowns. Hubei is a major industrial hub, particularly for machineries and electronics5. When production there went on a standstill, it created shortages in supply of parts, which caused operations along the supply chains including those abroad, to reduce operations. This affected those integrated in the supply chains, including the AMS.  As virus spread rapidly in China, most AMS restricted travel from/to China, which was then expanded to other affected countries such as Japan and Korea, by cancelling flight connections and tightening or even closing border crossings. The immediate and direct impact was thus on travel and tourism. These East Asian economies were among the largest sources of tourists to ASEAN, and as travel restrictions further expanded they led to mass cancellation of bookings within the tourism industry, affecting businesses and workers. Early cases in the AMS also surfaced, further affecting tourism in the region as fear of contagion turned away tourists. Accordingly, initial stimulus measures rolled out by the AMS targeted those in the tourism and allied industries. Affected hotels, restaurants, airlines, and also small businesses, were granted tax breaks and/or emergency loans; workers were provided subsidies/cash assistance.   (asean.org)

 Key Words: COVID-19, Economic Impact, ASEAN

PAN AFRICA

Coronavirus: 19 poor African countries benefit from IMF debt service relief – The International Monetary Fund on Monday April 13 announced debt relief for a number of countries across the world citing the impact of COVID-19 on economies and livelihoods.A statement issued by Kristalina Georgieva, IMF Managing Director said the package applied to the poorest and most vulnerable members to cover their debt obligations. The list of comprised 25 countries out of which 19 were African nations. They included: Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, D.R., The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, and Togo. The non-African bloc are: Afghanistan, Haiti, Nepal, Solomon Islands, Tajikistan and Yemen. In Georgieva’s words: “Today, I am pleased to say that our Executive Board approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the COVID-19 pandemic. “This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts. “The CCRT can currently provide about US$500 million in grant-based debt service relief, including the recent US$185 million pledge by the U.K. and US$100 million provided by Japan as immediately available resources. “Others, including China and the Netherlands, are also stepping forward with important contributions. I urge other donors to help us replenish the Trust’s resources and boost further our ability to provide additional debt service relief for a full two years to our poorest member countries.” Meanwhile reports from Ghana indicate that the IMF has approved a $1 bn facility to help the West African country combat the coronavirus pandemic. When President Akufo-Addo weeks back announced a $100m COVID-19 war chest, Finance Minister Ken Ofori-Atta told parliament the amount needed to be raised with support of international lenders. (africanews.)

Key Words: Africa, COVID-19, IMF

Coronavirus: together we can come out stronger and united –It should be recalled that Africa is, for the moment, the least impacted continent, with its first case confirmed in February 2020 in Egypt. Fears about the impatc of the virus on Africa so far, lack concrete and documented justifications. Yes, local ecosystems, demographic factors, the mutated nature of the virus, the intensity of international traffic and other elements will limit the spread of the pandemic. Though it remains hypothetical, it is also necessary to note the impact of several drastic measures decided by governments: closures of borders, schools, businesses and worship places. Notwithstanding the stressful nature of the pandemic, local political contexts more generally lead to an eager social demand in search of efficiency. The observation of uneven public responses around the world and the relative unpredictability of the pandemic may explain a process of trial and error. While the responsiveness of African countries remains varied, we must quite rightly acknowledge and remember the catastrophic effect of decades of structural adjustment on public health and health provision in African countries. In spite of everything, many health systems have substantially evolved, driven by the determination to achieve the Sustainable Development Goals (SDGs) by 2030, notwithstanding the gaps to be filled and the obvious failures. Depending on the country, the state of African health equipment is certainly unsatisfactory and health services are ill-equipped overall, but it would be wrong to portray non-existent health systems, paving the way for an inevitable decline.  Moreover, health care is often social and community-based, relying also on cultural ties that require solidarity and family management of disease.  (The Africa Report)

Key Words: Africa, AU, COVID-19, Economic Response

An Unprecedented Threat to Development in Africa - Sub-Saharan Africa is facing an unprecedented health and economic crisis, the International Monetary Fund (IMF) said yesterday in its latest Regional Economic Outlook for Sub-Saharan Africa. The crisis threatens to reverse recent development progress across the region and may weigh on growth for years to come. “The world is facing a serious challenge, and sub-Saharan Africa will not be spared,” said Abebe Aemro Selassie, Director of the IMF’s African Department. “All indications are that the Covid-19 pandemic will exact a heavy human toll and cause an acute economic crisis. The region is facing plummeting global growth, tighter financial conditions, a sharp decline in key export prices, and severe disruptions to economic activity from the measures that have had to be adopted to limit the viral outbreak.  Consequently, we now project the region will shrink by 1.6 percent this year—the worst outcome on record. “Shrinking incomes will worsen existing vulnerabilities, while containment measures and social distancing will inevitably jeopardize the livelihoods of countless people. Also, the pandemic is reaching the continent at a time when many countries have little room for maneuver in their budgets, making it more difficult for policymakers to respond.” Against this backdrop, Mr. Selassie called for decisive measures to limit the human and economic costs of the crisis.  “First and foremost, the immediate priority is to do whatever it takes to ramp up public health spending to contain the outbreak, regardless of a country’s budget. “Second, substantial and timely support is crucial. Policies could include cash transfers or in-kind support to vulnerable households, including to informal workers. They could also include targeted and temporary support to hard-hit sectors. The ability of countries to mount an adequate response will depend in large part on their access to concessional funding from the international community. (IMF)

Key Words: Africa, COVID-19, IMF

Risks COVID-19 poses to regional financial sector – With a number of supply chains and businesses having halt their operations, they will be seeking capital to resume and restart operations with banks and other financial sector players being viewed as a way out. However, the financial sector is not untouched by COVID-19, like other sectors, they too will be impacted negatively by the crisis. A position paper by the East African Business Council noted that among effects on the financial sector include banks credit to the private sector is expected to decelerate rapidly due to both supply – and demand-side factors. “On the demand side, there will be lower household demand for credit as many applied austerity measures and weak corporate sector balance sheets as well as cash flow problems facing many companies impacted on credit uptake,” the East African Business Council position paper noted. Local and regional banks are also likely to take precautionary measures and tightened their lending standards to minimise further exposures to risks associated with COVID-19 by increasing their holding of government securities considered to be much risk-free. Further impact and effect is likely to be manifested in the elevated credit risks in the banking sub-sector which could be caused by the deterioration of their asset quality due to increased Non-Performing Loans (NPLs) and provisions. The insurance industry could also see declining margins and falling performance metrics measured by Return on Assets and Return on Equity. This experts attributed to the challenging economic adverse effect of COVID-19. The East African Business Council noted that in the corporate sector, profitability and liquidity problems could be reported in several companies, including those listed on the Stock Markets. There is no expectation of Initial Public Offerings (IPO) or new corporate bond issuances amid of COVID-19.  (The New Times)

Key Words: Africa, COVID-19, Regional Integration

African Development Bank’s SEFA grants $760,000 to develop small-scale renewable energy projects across Sub Saharan Africa – The African Development Bank-managed Sustainable Energy Fund for Africa (SEFA), has approved a $760,000 grant to Empower New Energy AS (EmNEW), to develop at least eight small renewable energy projects with capacity ranging from1-10 MW, towards bankability and construction.  The grant will support a broad range of project preparation and development activities, including technical feasibility studies, legal due diligence, environmental and social impact assessment, quality assurance and risk management. Through its Empower Invest fund, EmNEW invests in small and medium-scale renewable energy projects in Africa, with a focus on solar power, hybrid, and hydro technologies. Welcoming the approval, Terje Osmundsen, EmNEW’s CEO, said, “We are very excited to be entering into a partnership with the African Development Bank and SEFA. There is a large number of strong small or medium scale projects across Africa that remain unrealised because they can’t access competitive financing. Our approach allows us to bridge this gap and working with SEFA, will help us to accelerate this process and support more high-quality projects. Together, we can bring impactful investment to Africa, while helping the continent to meet its electrification, carbon-reduction, and sustainable development targets.”  The Bank’s support to EmNEW through SEFA is fully aligned with SEFA’s strategy to tackle challenges faced by smaller renewable energy projects in many African countries in accessing financing to cover their initial development costs, the Bank’s Acting Director for Renewable Energy & Energy Efficiency Daniel Schroth noted. (AfDB)

Key Words: AfDB, COVID-19, Regional Integration

EAST AFRICAEABC Positon paper on facilitating air cargo operations in the EAC region during COVID-19 outbreak – While the rest of the world has adopted new measures to facilitate air transport, the EAC Partner State airlines are still in the process of adapting and many of their aircrafts remain underutilised. The demand for air cargo imports into the region remains low due to disruptions in Global Supply Chains; however, there is sustained growth in the demand for fresh produce exports anticipated to last till the summer.  With global demand and supply disruptions, the cost of air freight, particularly in East Africa has escalated drastically, making the region’s export produce uncompetitive. Airfreight charges to the European Union and other markets in the last few weeks have ranged from $3-7 per kg up from an average of $1.50-2.50 per kg. The high air freight charges can be attributed to a combination of factors; these include higher operating costs, fewer scheduled/chartered flights and a supply and demand imbalance.  In Kenya, for example, the volume of fresh produce out of Jomo Kenyatta International Airport (JKIA) has reduced from a weekly 5,000 tonnes to 1,300, a 75% decline with similar trends reported across the region. Costs, however, continue to ease with more scheduled capacity provided by KLM, Qatar and Ethiopian Airlines. The return of Rwandair and Kenya Airways to the skies is a welcome relief for exporters; however, it will soon become increasingly difficult for them to compete with airlines that are receiving government subsidies.   Current Aviation industry subsidies in response to the COVID-19 crisis include Government or Central Bank support through direct financing, loan guarantees, corporate bonds and tax reliefs.  However, these measures alone, even if extended to EAC airlines will not sufficiently address the current crisis.   (EABC)

Key Words: EAC, COVID-19, Regional Integration

18th Extraordinary Summit of the East African Community Heads of State in COVID-19 postponed – The 18th Extraordinary Summit of the EAC Heads of State which had been purposely convened to discuss the ongoing novel Coronavirus (COVID-19) pandemic on Wednesday, 15th April, 2020 has been postponed to a later date. The 18th Extraordinary Summit, which was to be held via Video Conferencing, had been called by the Rwandan President and Chairperson of the Summit, H.E. Paul Kagame, specifically to exchange on the regional response against COVID-19, including its fiscal, economic and social consequences on the Community. In a letter dated 14th April, 2020 to the EAC Secretary General, Amb. Liberat Mfumukeko, Rwanda's Minister for Foreign Affairs and International Cooperation, Hon. Vincent Biruta, said that the Extraordinary Summit had been postponed due to a request by the Republic of South Sudan. Hon. Biruta, who is also the Chairperson of the EAC Council of Ministers, said that a new date for the Extraordinary Summit would be communicated in due course. As at 15th April, 2020, all Partner States had confirmed cases of coronavirus with Kenya reporting 216 cases with 9 deaths; Rwanda 134; Uganda 55; Tanzania 53 with 3 deaths; Burundi 5 and one death and South Sudan 4 cases. Rwanda, South Sudan and Uganda have not reported any deaths so far. A Joint Ministerial Meeting of the Ministers Responsible for Health and Ministers Responsible for EAC Affairs on the COVID-19 Pandemic Preparedness and Response held on 25th March, 2020 resolved, among other things, directed all Partner States to continue implementing mandatory quarantine for 14 days for all travellers to the region, and avoid imported cases by implementing strict screening procedures at all border points. The Ministers further resolved to maintain suspension of EAC regional face-to-face meetings and urged EAC Organs and Institutions to utilize Modern Technology such as video-conferences, Webinars and Skype Calls for holding such meetings until such a time when the situation has been contained. (EAC)

Key Words: EAC, COVID-19, Regional Integration

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Kenya - CBK has downgraded economic growth prospects for 2020 by almost half, from 6.2% to 3.4%, as a result of the pandemic. McKinsey has estimated the Kenyan economy will shrink by 5% if the virus is not contained, a fall in output of $10 billion (KSh 1 trillion). Trade and production impacts Domestic production and supply chains have already been disrupted and demand from the country’s main trading partners has fallen: Pakistan (10.8%), Uganda (10.4%), United States (8.0%) and the Netherlands (7.4%), with the US likely to show the largest drop. Kenya’s economy is particularly vulnerable because its main exports, horticulture and tourism, are very elastic in demand. The two largest export products are vegetables including horticulture (50%) and raw materials (19%). Vegetable production employs nearly 10 million people directly and indirectly and, at $1.15 billion, annual, is the country’s third-largest foreign exchange earner (around 19% of goods exports). It has lost $75 million in the past month as a result of lockdowns in Kenya’s main markets in Europe. The Kenya Flower Council estimates it is losing around $300,000, with flower farms already forced to send 1,000 workers home given the slump in demand. Kenya’s positive trade in services offsets its current account deficit and fluctuating agricultural output. This is driven by tourism: transport and travel made up 37% and 19.7% of services exports in 2018. However, the tourism industry, which represents around 10% (nearly $8 billion) of GDP), is being hit hard. Kenya Airlines has applied for a bailout, having recorded an $8 million revenue loss since suspension of the Nairobi– Guangzhou route. WTTC figures show that in 2018 Kenyan tourism grew 5.6%, creating 1.1 million jobs. Most of these jobs will be vulnerable if, as predicted, the industry contracts at a faster rate than the rest of the economy. The largest markets for Kenyan tourism, the US, China and some European countries, are all affected by COVID-19-related travel restrictions. The Stanbic Bank Kenya Purchasing Managers’ Index declined to 49 in February 2020 from 49.7 in the prior month, pointing to the second consecutive contraction in private sector output. (ODI)

Key Words: Kenya, COVID-19, Policy Responses

WEST AFRICA

2020 cocoa syndication loan will come off despite COVID-19 disruptions – Despite the growing threat of COVID-19 to virtually all aspects of business and the economy, the Ghana Cocoa Board (COCOBOD) has given the strongest assurance that its annual cocoa syndication loan facility will go ahead without any hitches. Joseph Boahen Aidoo, CEO of COCOBOD, assured farmers and other industry stakeholders that the process to secure funds from international lenders for financing cocoa production and purchases for the next season has begun and will be completed. “Although the pandemic had made it impossible for the board to hold physical meetings with its lenders and advisors on the loan syndication exercise, it was doing so through video and telephone conferences,” the CEO told B&FT over the phone. COCOBOD annually raises at least US$1billion for the purchase of cocoa, with 2019 seeing some US$1.3billion raised to that effect. But due to the growing COVID-19 pandemic, some analysts believe it will be difficult for COCOBOD to raise the required amount in the next season. But the CEO is very optimistic about the institution’s capabilities and capacity to attract lenders irrespective of a pandemic. He therefore urged farmers to rest assured that all is going well in the cocoa sector. “The board is working around the clock to make sure this year’s transaction is closed and signed in September to enable it access the funds for its activities,” he added. Giving an update on the process, the CEO said the board has already opened discussions with the relevant institutions toward getting them to participate in the syndication exercise. He said the board is currently in the process of selecting financial institutions that will act as lead arrangers for the syndication of funds from other institutions. This, he said, should give way to a roadshow in August before the final signing-off of the transaction in September, as is done every year. Although Mr. Aidoo did not state the exact amount that the board will be borrowing this year, he said indications are that this year’s loan will be more than what was syndicated last year. (B&FT Online)

Key Words: Ghana, COVID-19, Cocoa Syndication

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Guinea Bissau – Although Guinea-Bissau is relatively closed to trade, with a trade openness index of 45% GDP in 2019, its economy is highly dependent on the export of raw cashew nuts, which accounts for more than 90% of total goods exports. Cashew production generates revenue for over 50% of the population, with important spillovers to general economic activity. COVID-19 has weakened international demand for cashews substantially. The average export price has dropped from $1,300/ton in 2019 to $1,000/ton currently. Trade disruptions such as closures of borders or transformation plants in importing countries provide another layer of uncertainty to the sector. Tourism, transport and other services sectors are also taking a big hit from the crisis. Finance Guinea-Bissau has only limited integration into the international financial system, which reduces its exposure to foreign financial shocks. Additionally, the ECB-supported peg of the CFA franc to the euro reduces its exchange rate risk. However, the country is highly dependent on remittances and official aid and development assistance (ODA). Remittances suffered during the last financial crisis, falling to 4.6% of GDP in 2012. In 2018, they went back to 8.8%, but current global employment losses are likely to reduce them significantly. ODA dropped down to 8.1% in 2012. Since then, it has remained stable, at around 9–10% of GDP. Several factors may lead to further reductions, like the global recession, political instability in Guinea-Bissau and the general trend of less ODA. Social impact Guinea-Bissau is dependent on imports of basic foods such as rice and chicken. The country imports 2,800 tons of chicken yearly and produces only 180,000 tons of rice, while demand is for around 280,000 tons. During the first days of imposed measures, prices rose for basic goods. The government announced measures against price speculation in transport, health supplies and consumption goods, but lower incomes owing to market closures and lower cashew prices are set to increase poverty and food insecurity.   (ODI)

Key Words: Guinea Bissau, COVID-19, Policy Response

SOUTH AFRICA

Economic impacts of and policy responses to the coronavirus pandemic: early evidence from Namibia – Prior to the crisis, the economy was forecast to grow by 1.5% this year, following a three-year recession. There has been no official update to the growth forecast but the economy can expect shocks to major sectors including mining and tourism. Mining operations, which represent 9.3% of GDP and more than 50% of exports, have been halted for at least three weeks. Top commodity exports from Namibia include copper, gems (mostly diamonds), ores and fish. Export prices for these commodities are expected to fall as a result of the global economic slowdown – as is already the case for copper. This could lead to a substantial decrease in export revenues. More than 40,000 jobs are directly at threat from the complete halt of tourism-related activities, arising from the closure of borders and movement restrictions within the country. Tourism was an estimated 10.9% of GDP in 2018, and has been one of the few steadily growing sectors over the past three years. The year-on-year inflation rate has been steadily decreasing over the course of the past year, from 4.65% in January 2019 to 2.45% in February 2020, although up slightly from 2.05% in January 2020. Finance As of 8 April, the US$-NAD exchange rate was 18.36, and the EUR-NAD was 19.93, down from 15.33 and 17.01, respectively, from a month before. Namibian dollars are directly pegged to the South African rand (1:1). Monetary decisions and confidence in South African markets thus have a direct impact on the Namibian economy. On 3 April, South Africa saw its sovereign credit rating downgraded, which caused the rand to fall dramatically. In February 2020, the Bank of Namibia held approximately $2 billion in reserves. Import cover was estimated at 4.3 months in December 2019. The Namibian stock market has been hit hard since the government established its lockdown measures. (ODI)

Key Words: Namibia, COVID-19, Policy Responses