26 NOVEMBER 2020
Covid-19: Dire consequences for Africa and Latin America
Africa and Latin America could be the most severely affected regions by Covid-19. While the rate of infections and loss of life differ drastically between the two regions, the economic impact with lasting social and political ramifications are of great concern. The pandemic has exposed the fragile economic resilience and slow recovery of Africa and Latin America compared to other regions around the world.
Latin America has been the hardest hit region in terms of infections and lives lost. While it makes up only 8.2% of the world’s population, by the end of October it accounted for 27% of all positive cases and 34% of total deaths. Africa, on the other hand, appears to have defied initial projections. Home to 16.72% of the global population, the infection rate of just under 4%, and death rate of 3.5%, is comparatively low.
But it is the economic implications that appear to be raising serious concerns in both regions.
Recession and stagnation
Latin America and Africa’s economic performance leading into the Covid-19 crisis was disappointing. As 2019 came to a close, growth forecasts for each region in 2020 were 1.8% and 3.6% respectively.
Africa will experience its first recession in 25 years, as growth contracts by over 3%. The Latin American economy will shrink by a staggering 8.1%. Per capita income is expected to take at least five years to recover to pre-Covid levels across both regions, an additional constraint on consumption and local investment.
Oil-producing countries like Venezuela and Ecuador in Latin America, and Nigeria and Angola in Africa, have been severely impacted by the historic drop in oil prices which began in February 2020. And the grounding of flights and near-immediate halting of all travel and tourism as a lockdown measure has had a severe and lasting impact on investment and business in both regions.
Travel and tourism currently contributes over $170 billion or 7.1% to the African economy. The loss in tourism revenues is expected to exceed $100 billion in 2020 alone. Likewise, the Caribbean, which is almost entirely dependent on tourism, faces a deep economic decline of over 10% in 2020, according to the International Monetary Fund (IMF).
Increasing poverty and inequality
Inequality, poverty and food security will worsen throughout both regions. According to the U.N. Economic Commission for Latin America and the Caribbean (ECLAC), Latin America was already the most unequal region in the world, most notably in the region’s largest economies of Brazil, Mexico, and Argentina. And in 2020, poverty is expected to increase by almost 7% in Latin America, totaling 230 million people, 35% of the total population.
Per-capita income is expected to drop to levels last seen in 2010 in Africa, increasing poverty levels and inequality. The World Bank estimates additional events, like the locust infestation in East Africa and the Horn, will not only cost the region over $8.5 billion in 2020, but significantly worsen food insecurity across that sub-region. Half of all Africans already face food insecurity, and the number of people who are hungry is expected to double in 2020. Covid-19 could push up to 40 million people in Africa into extreme poverty.
Apart from the health concerns and economic setbacks, other threats are emerging. Both regions have seen a sharp increase in authoritarian practices, democratic decline, rising corruption, and high levels of crime. Social unrest and violent protests are rising and sweeping across Latin America. In countries like Argentina, Colombia, Chile and Haiti, anti-government protests have intensified in recent weeks, exposing the handling of the pandemic, and leaving citizens deeply frustrated and increasingly angry at the fearful prospect of their economic futures.
In Africa, protests are rising and are quickly becoming an everyday occurrence. South Africa has experienced a record number of daily protests. And in Nigeria tensions are mounting as protests against police brutality in the #EndSARS movement have become fatal, with 69 deaths recorded before the end of October, far exceeding the daily fatality rate of the coronavirus in that country.
Investing in inclusive growth and connectivity
It is clear that Latin America and Africa will face significant challenges once the Covid-19 crisis recedes. Recovery will be protracted by the disruption in global value chains, which both regions rely on for trade and investment, not to mention a decimated local market and widespread institutional collapse. Real growth is only expected to return in both regions in three and four years’ time, according to the IMF.
Covid-19 has exposed deep infrastructure deficits, hampering access and inclusive delivery, and undermining quality and operational efficiencies at a high cost, specifically in basic areas of water and sanitation, energy, transport and communications services. Investments in infrastructure, geared toward improving productivity and efficiency in services, is not only essential for inclusive economic growth, but promotes integration and international trade through real connectivity.
Africa and Latin America have lagged behind the rest of the world in basic infrastructure development and spend. But this needn’t continue. Important services which have shifted online through the pandemic are accessible to all through a subtle but intentional shift toward digital infrastructure. This will facilitate connectivity and access to essentials like healthcare, banking, and tools to grow businesses, quicker and cheaper than before.
Covid-19 has exposed institutional fragility and the lack of government delivery and preparedness across Africa and Latin America. Nine months into the pandemic, the complexity and reality of tradeoffs between measures needed to control the spread of the virus, versus actions required to maintain economic livelihoods, and meet growing social and development imperatives is evident. Governments cannot afford a repeat of errors made or further misinformation. Decisive planning and action based on empirical evidence and expertise must be taken to ensure an effective response specific to country and region, and to recoup past gains as quickly as possible.
By Prof Lyal White, Liezl Rees and Nikitta Hahn – the Research Team at the Centre for African Business (CAB).
Source: With a focus on developing leaders and managers for the future, and innovation with a purpose are at the core of the Johannesburg Business School's (JBS) understanding of Industry 4.0. Part of the University of Johannesburg's College of Business and Economics (CBE), JBS offers programmes that are expertly designed to equip and develop effective, ethical, impactful and enterprising African leaders and managers. Visit our web-site at: https://www.uj.ac.za/faculties/cbe/johannesburg-business-school.