UJ CACS tackling the fallout from Covid-19

​The novel coronavirus, Covid-19, hit China at the start of December and outbreaks have since spread widely. The virus is bringing considerable human suffering. It is also resulting in significant economic disruption from quarantines, restrictions on travel, factory closures and a sharp decline in many service sector activities. These disruptions are the direct channels through which the virus is affecting economies.

These were the views shared by the Centre for Africa-China Studies (CACS), and Library on an online webinar on Thursday, 16 April 2020 under the theme of ‘How is Covid-19 affecting Africa,’ highlighting the Economic futures and the role of development finance.

The webinar featured presentations by Ms Hannah Ryder, CEO of Development Reimagined, a ground-breaking international development consultancy, headquartered in Beijing, China; Mr Admassu Tadesse, President and CEO of the Eastern and Southern African Trade and Development Bank (TDB) and Prof Saurabh Sinha, UJ’s Deputy Vice-Chancellor: Research and Internationalisation, served as the chair of the series.

In opening, Prof Sinha emphasised that economic policy choices have an important bearing on cushioning the implications of containment measures and the speed at which the economy can adjust towards more normal conditions after the virus outbreak.

“This discussion is aimed at being solutions driven so that we know how can we minimise impact on poverty”, added Prof Sinha as he welcomed the main speaker.

In her presentation, Hannah Ryder stated that there is ample reason to be cautious when assessing the economic consequences of the epidemic given that the situation is evolving by the day. “The outbreak presents a ‘twin-threat’ to economic growth for all countries, but especially in Africa she said”.

“The first effect is a “demand-side” shock. To explain in simple terms, we all know that several African (and other) economies export goods to China, to be used in factories or sold to Chinese consumers. For instance, Nigeria and Angola export oil to China; South Africa exports precious metals to China. But with lockdowns and other movement restrictions, as factories, restaurants, and shops closed, COVID-19 has slowed down the demand in China for manufacturing and consumer goods, and as a result, imports of such goods into China from Africa may be disrupted or prices may need to be reduced. This might, in turn, lead to production cuts and job losses in African countries.”

“The second type of COVID-19 impact is a “supply-side” shock. Many African (and other) countries import goods that are manufactured in China for use on infrastructure projects, for sales in shops, and much more. With COVID-19, we have seen China slashing its manufacturing, in turn leading to less exports from China to African countries, and/or exports at higher prices. This affects consumer demand in African countries and can lead to the kinds of empty shelves that are being seen in Kenya,” added Ryder.

Ryder concluded saying: “Right now, we at Development Reimagined are still hoping that Africa as a region will prove relatively resilient to COVID-19 in both health and economic terms. But this is not a given, and our initial analysis suggests that effects on poverty may well be exacerbated if governments and development partners only act on the basis of media reports and singular data. Our analysis is just the start to better understanding these effects based on differences between African countries and their relationship with China.”

In response, Mr Admassu Tadesse, pointed out that because of the immense economic fallout, this begs the question of how Covid-19 will impact Africa’s economies and how African governments could prepare and react. “To pick up commodity, trade has to be opened. We currently don’t have stimulus package coming through, we have to work very hard and see if the commercial world can create breathing.”

“Also increasing liquidity buffers to firms in affected sectors is also necessary to continue business and avoid debt default by otherwise sound enterprises. Reducing fixed charges and taxes and credit forbearance would also help to ease the pressure on firms facing an abrupt falloff in demand,” explained Tadesse.

“Beyond health, the priority should be people. Options include using universal basic income (UBI) and providing vulnerable households with temporary cash transfer to tide them over the loss of income from work shutdowns and layoffs,” added Tadesse.

“The G20 should lead a coordinated policy response. In addition, if countries announced coordinated fiscal and monetary support, confidence effects would compound the effect of policies.”

Some would say it is trite to call for international cooperation. However, in this globally connected economy and society, the corona virus and its economic and social outcome is everyone’s problem, even if firms decide in the wake of this virus shock to repatriate production and make it less interdependent.


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