Africa should use this opportunity to prepare for the next pandemic 

How is Coronavirus impacting countries across Africa? Elias Papaioannou, Professor of Economics at London Business School and Academic Director of the Wheeler Institute for Business and Development was joined in conversation with Leonard Wantchekon, Professor of Politics and International Affairs at Princeton University, as well as Associated Faculty in Economics, to discuss the impact of COVID-19 on the African continent, and considers the steps policymakers need to take as a result of the pandemic.

  • The African continent’s age demographics, with younger populations, means that the health risks from COVID-19 are lower; 
  • The economic slowdown has also not been of the same order of magnitude as in Europe and America, as shutdown measures have not been as severe; 
  • Even the slump in commodity prices is not going to bring around a significant political crisis, as the impact from the plummeting price of oil should only be transitory; 
  • While resources should be used to support industries that have been impacted, there should also be an effort to use the emergency funding place to prepare for future outbreaks; 
  • The international community and African governments need to support small businesses take advantage of an opportunity to develop innovations in IT infrastructure and logistics that can result from the pandemic. 

Benefitting from a young population, Africa seemingly has the virus under control 

Wantchekon strikes a note of optimism at the health situation in Africa currently, with less than 3,000 deaths the virus is seemingly under control. Contributing factors to this include the lateness of transmission into the continent, as well as the fact the virus may have different characteristics in Africa than elsewhere. Moreover, the population demographics, with 70% of the population being under 30, means they are less at risk. This has meant the economic impact has also not been as drastic as predicted earlier, meaning the situation is encouraging.  

The economic slowdown has been driven by the loss of revenue from tourism and agricultural exports, as well as significant capital flight because of initial estimates of the dire situation that would engulf the continent. In cities, it is estimated that income has dropped by 25%-40%, but given the lockdown was less severe than elsewhere, there has still been ongoing economic activity and transactions. Wantchekon believes it is good that the international economic community is expecting the worst and working towards debt relief, but the impact of COVID-19 to date is not of the order of magnitude that it has impacted Europe and America.  

We are not yet in a situation where we face a major political crisis 

Even commodity price declines are predicted to be transitory, limiting the impact on countries that are dependent on natural resources, such as Nigeria, Angola, Cameroon and Congo. Wantchekon thinks that if oil prices increase slightly, while other commodity prices such as cocoa and coffee from Cote d’Ivoire also move up, a major political crisis can be averted. Resentment against the Government’s measures tackling coronavirus is limited because the death toll has been smaller than expected, meaning support for government policies has been maintained. 

Governments and international bodies should use this opportunity to prepare for similar events in the future 

Major action from the G7 and G20 has to be seen as a positive, with several initiatives underway for emergency aid for African countries. These resources should, according to Wantchekon, be directed towards supporting industries and sectors that have been heavily hit by the crisis, notably the tourism industry and also commodity exports sectors. However, he also thinks that we need to take the opportunity to prepare for another outbreak in the future. Investments need to be made in research and prevention, as well as mitigating strategies, such as digitisation. Wantchekon asks how open markets can be moved online and how transport and logistics can be streamlined to cope with a future lockdown. Since the crisis has not hit the continent to the same extent as anticipated, Wantchekon considers this to be the right time to make investments so that if something similar happens again, Africa is ready.  

The pandemic could fuel the development of many small Amazon and Alibabas across Africa  

The situation creates risks for businesses because they have limited credit and their opportunity to export has been curtailed which has restricted businesses investments on innovation. However, Wantchekon believes there is an opportunity for businesses to develop IT technology and invest in logistics, which will help the growth of the private sector. The international community and African Governments need to support private enterprise to develop innovations that result from the pandemic.  

African countries also need to invest in prevention through research and development  

Wantchekon also thinks that Africa needs to focus efforts on medical research and development. He believes that currently, research is considered a luxury rather than a survival strategy or necessity. Research should not be concentrated in England or the US; scientific research, microbiology, and epidemiology needs to be developed so African countries have the knowledge to deal with these situations. Capacity needs to be built across Africa so they can be part of the rapid response to a crisis like COVID-19.  

Elias Papaioannou’s conversation with Leonard Wantchekon is part of the Wheeler Institute’s COVID-19 series – bringing together the expertise and experience of our extended community to understand, illuminate and offer solutions to the challenges created by COVID-19. Our differentiating factor is the role of business in addressing these challenges, with a focus on the implications and actions for those in developing countries.   

If you’re interested in following the Wheeler Institute COVID-19 series, check out our previous episode below.

Elias Papaioannou is academic director of the Wheeler Institute for Business and Development and professor of economics at London Business School, focusing on international finance, political economy, applied econometrics and growth and development. 

Leonard Wantchekon is Professor of Politics and International Affairs at Princeton University, as well as Associated Faculty in Economics. He is a Fellow of the American Academy of Arts and Sciences, a Fellow of the Econometric Society and a member of the Executive Committee of the International Economic Association. He has served as Secretary of the American Political Science Association and on the Executive Committee of the Afrobarometer Network. He is the Founder and President of the African School of Economics, which opened in Benin in 2014.  

Leave Comment

Your email address will not be published. Required fields are marked *