Up to 20 million jobs in the formal and informal sectors in Africa could be lost because of COVID-19, according to a new study by the African Union.
Released in early April, the study found that foreign direct investment (FDI), tourism receipts, and remittance flows will also suffer significant declines as the continent tackles the pandemic. Titled The Impact of Coronavirus on the African Economy, the study modelled two scenarios, each with an equal chance of being realized. Under scenario one (realistic), the pandemic will be contained within five months, inflicting minimal damage; under scenario two, the pandemic will last for eight months and countries will be severely affected.
The more optimistic scenario one projects a 2020 GDP growth of -08% while the pessimistic scenario two will result in -1.1% growth. Given that the continent’s 2020 GDP growth had been projected at 3.4%, even the optimistic scenario is a significant decline of 4.18% while the pessimistic scenario projects a decline of 4.51%.
The negative growth would be due to a “disruption of the world economy through global value chains, the abrupt fall in commodity prices and fiscal revenues and the enforcement of travel and social restrictions.”
Furthermore, a 35% dip in exports and imports would be worth $270 billion. Yet, Africa will require $130 billion to “fight against the spread of the virus and medical treatment,” stated the African Union.
Drop in oil prices
Africa will lose between 20% and 30% of its fiscal revenue, which was 500 billion in 2019, forcing governments to resort to borrowing to meet the shortfall. Commodity-dependent countries such as Algeria, Angola, Cameroon, Gabon, Ghana, Nigeria, and the Republic of the Congo will be most affected.
The slump in oil price to below $30 a barrel, and a nosedive of the tourism and air transport sectors, will upend countries’ development agendas.
The tourism and oil sectors represent 25% of the GDPs of Africa’s top five economies–Nigeria, South Africa, Egypt, Algeria and Morocco. The study emphasized that, “The level of the impact of COVID-19 on these five economies will be representative for the whole of the African economy.”
Oil constitutes 90% of Nigeria’s exports and 70% of its national budget, meaning that any dip in price will have an impact on earnings. Both Nigeria and Angola, Africa’s top two oil producers, could lose up to $65 billion in income.
Effects on tourism
In South Africa, the COVID-19 pandemic threatens the countries’ main sources of income–mining and tourism. With 10.47 million arrivals in 2018, the country was second only to Egypt in tourism receipts, according to the World Travel and Tourism Council. Overall, tourism contributed $194.2 billion or 8.5% to Africa’s GDP in 2018.
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