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How Africa’s Economy is Frozen by Covid-19 Pandemic

Since the advent of globalization, every country  depends on other nations to manufacture products at a lower cost. It is inefficient to produce everything in-house. Now, that the world’s economy is taking casualties due to the spread of the coronavirus, which has taken its toll on supply chains around the world. 

China plays an important role in the supply of low- to mid-end products worldwide. Approximately, 30-40% of goods in the apparel industry comes from China. But the Covid-19 has disrupted these supply chains. Moreover, a large percentage of Chinese factories have started to resume work since the situation stabilized in mid-February, but it is a slow start due to existing restrictions around the globe that prevent it from kicking off completely.

The plunge in oil prices has certainly placed Africa’s largest economy on a perilous path filled with uncertainty and danger. Oil prices fell by approximately 50 percent in March 2020 which will result in increased liquidity issues, lost tax revenues, and currency pressure for net oil-exporting countries especially in the developing world. The combined drop in petroleum consumption in these countries is lowering global demand for crude oil.

More than half of Africa’s 54 countries have imposed lockdowns, curfews, travel bans or other measures in a bid to prevent local transmission of the new virus named Covid-19. Many businesses, particularly SMEs, are under significant cost pressure and face potential closure and bankruptcy. That is likely to lead to widespread job losses.

The restrictions are also disrupting ways of working for many individuals, businesses and government agencies which will have great impact productivity across many sectors. For instance, the streets of the commercial hubs of Lagos in Nigeria and Johannesburg in South Africa are being deserted. The continent is likely to experience delayed or reduced foreign direct investment (FDI) as partners from other continents redirect capital locally.

Most countries are suspending exports to try and maintain domestic food supplies. While the concentration of exportable supply of some food commodities in a small number of countries and export restrictions by the big suppliers concerned, they have enough supply at home can make world supply more fragile than the headline figures suggest.

Conversely, large numbers of planes grounded and ship containers, hard to find after the initial coronavirus crisis in China, shipments of vegetables from Africa to Europe or fruit from South America to the United States are being disrupted. A labour shortage could also cause crops to rot in the fields.

The continent’s youthful population – with a third of all Africans under 30 years – should be a boon in the fight against a virus shown to affect older people disproportionately more. In order to limit disruption of economic activity, policymakers must act now by providing an economic stimulus package to help families maintain their income and their connections to employment in Africa.

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