Covid-19 has compressed mega trends. The outcome of the pandemic and the ensuing crisis is uncertain for developing countries, especially those with relatively weak institutions and higher risks. Africa may be particularly vulnerable. But this could spark a dramatic turning point for the continent.
Johannesburg Business School (JBS) asked five expert associates for their opinion on Covid-19’s potential impact on Africa, from their respective areas of interest and wealth of experience. Will it be a catalyst for rapid and positive change toward industrialisation and modernisation? Will it prompt authorities to remove the obstacles hampering its development and competitiveness? Or will Africa be left behind once again, due to deep-seated challenges around poor healthcare, defunct institutions and policies, and inadequate technology and connectedness?
Looking at the business environment, Dianna Games, CEO of Africa @ Work and Professor of Practice at the JBS, believes that while dire warnings about the future of Africa are being issued by many economists and analysts, there is another view. Economic decline presumes a process of rebuilding, which is an opportunity for Africa to reset its development trajectory. “Policy makers will miss a trick if they simply deliver incremental improvements in a “business as usual” scenario,” says Games.
But does Africa have the tools to do this? According to Games, “The African Continental Free Trade Area, poised for implementation, provides a framework to build resilience and self-sufficiency. While not a silver bullet, it could be a catalyst for industrial take-off as multinational companies look for ways to reduce supply chain risk. It is a chance to reduce our dependence on imports of food and drugs, and tackle official neglect of sectors that the pandemic has exposed”.
Games notes however, that there are many risks, and high debt is one. Countries’ increasingly inward, national focus at this time is another. “Importantly, visionary political leadership remains in short supply. Recognising the urgency of the need for change by both leaders and citizens is the key to which way the post-pandemic wind will blow for Africa,” Games concludes.
With a focus on e-commerce, Alistair Mokoena, Country Director for Google South Africa and Professor of Practice at the JBS, believes every crisis presents an opportunity for a rethink and a restart. “Take the retail sector for example. With lockdowns severely restricting the movement of shoppers, retailers who are allowed to trade have found themselves wishing they had expedited the implementation of digital transformation capabilities such as e-commerce,” says Mokoena.
“Consumers and shoppers have not disappeared, they’ve simply moved online, thanks to falling data prices and enhanced internet speeds. We have seen a surge in app downloads and online search activity, and this is likely to continue for the foreseeable future. Marketing budgets are being redirected to digital media to take advantage of this migration. The future belongs to retailers that are nimble enough to complement their bricks and mortar infrastructure with a strong online presence. A seamless offline-online consumer experience is the new competitive edge, and at the heart of this is the intersection between data and technology,” Mokoena concludes.
From an economic perspective, and taking a more cautious approach, Glenn Silverman, Director and CEO at GS Investment Services and Professor of Practice at the JBS, believes the economic outcome will largely depend on the choices both made, and implemented.
“The pandemic is almost certain to have a negative impact on the continent, as the ‘countermeasures’ adopted will further aggravate pre-existing challenges. The ‘surer bet’ would be on it being a tripwire rather than a springboard. That, unless better policy choices are made,” he says.
Silverman’s recommendations include sensible lockdown implementation with a balance between safety and the economy; a move away from financial repression – particularly corruption, red tape and maladministration; making Africa more investible so as to attract desperately needed capital; structural policy reform in the areas of tax and legislation in particular; and investment into much needed infrastructure, such as technology.
“Protecting jobs and creating new employment must be an overall policy priority. If the pandemic spurs authorities to act correctly, it could then be a springboard, instead. The jury though, is still out,” concludes Silverman.
According to Dr Greg Mills, Director of the Johannesburg-based Brenthurst Foundation, whether Covid-19 is a catalyst for African development or collapse depends largely on how African governments respond to the emerging trends.
Mills identifies five major post-isolation trends that he believes will shape global commerce and prospects for recovery:
“The first of these centres around geopolitics and the impact on globalisation, the free movement of people and their skills, goods, capital, technology and data. Globalisation will not necessarily be less powerful, or influential, but different. Those forces connecting the world together through communications, will continue to prevail over short-term political upset, given consumer pressure”.
“The second trend thus pivots around technology and data, rising speeds and falling costs. Data, Covid-19 reminds us, is now an imperative development resource.
Mills has also identified the significant impact of governments and their relationship with citizens as a third trend, stating that: “Governments, at least among those which can afford it, are likely to attempt to become bigger and more influential, with fresh economic and social mandates. Societies will be safer but likely less private, with data the new currency of governments,” he says.
The fourth trend, intricately linked to the others, is that of human security, encompassing food and migration along with health. “While the supply of food via global (value) chains has remained open during Covid-19, this is threatened by trade disputes and economic nationalism. These effects could be worsened by low income for African producers, affecting already poor continental food supply chains. Thirty-nine of 49 sub-Saharan African countries are net food importers”.
Mills believes this is likely to push more people into poverty and increase migration pressures, influencing Africa’s politics at home, and abroad. On the plus side, he believes this offers African food exporters fresh opportunities.
The extent to which health, including carbon emission control, becomes the new wealth for people and government is the final trend identified by Mills. “People will likely come to appreciate health more as an economic resource. This creates certain opportunities, as does the move to telemedicine, the stress on recreation and sports as a lifestyle choice, and the development of retirement facilities for Europe and Asia’s burgeoning elderly population, ranging from communities to care-centres”.
“African countries will invariably respond differently to these challenges, reflecting both circumstance and leadership. Expect to see greater differentiation between African states thus as a consequence of Covid-19 as some reform to make progress, and others use the opportunity to lockdown and isolate,” he concludes.
Looking at the impact of COVID-19 on telecoms and the Fintech industries, Herman Singh, CEO of Future Advisory which specialises in digital transformation and start-up acceleration, board director for listed firms and Professor of Practice at the JBS, believes the pandemic has achieved “two dubious distinctions in Africa: the exposing and exploitation of society’s fault lines, and the spring boarding of underlying trends that were already evident”.
Singh notes that widespread lockdowns have led to an increased use of telecom services for work, commerce, communication, and online services such as education. “This has resulted in higher consumption of data and overloaded networks, exposing the need for more access to broadband, such as WiFi hotspots,” he says.
According to Singh, “Faster network extensions and upgrades are inevitable, and as a result, the reduction in the cost of second hand smart device adoption will follow”.
He notes that Fintechs have been hit particularly hard. “Many of their original propositions have evaporated and some have run out of cash, so they are having to make quick pivots to reduce cash burn.
“Valuations of Fintechs have dropped and we are seeing more down-round capital raises. There is a faster elimination of middlemen, with non-value adding activities and propositions leading to a move back to basic functionality with fewer frills. There has been a swing to value and efficiency, through the adoption of a concept called “Costovation”, and Fintechs that pivot to follow this trend will succeed,” he concludes.
While Covid-19 has changed everything, it has also exposed institutional shortfalls and the lack of progress made in areas crucial to basic human development. Africa’s pervasive socio-economic challenges around poverty, rising inequality and poor access to health, alongside a lack of basic infrastructure, power and data connectivity, are indicative of the poor progress made despite unprecedented economic growth. These threaten to hamper development. Policy, institutions and attitudes must change. Long-awaited reforms in business, the economy and society are essential for Covid-19 to be the catalyst for lasting change, and ensure that Africa is part of this next industrial revolution.