A new report from trade credit insurer Atradius details the impact of Covid-19 on Sub-Saharan Africa.
The report reveals that while a health crisis has so far been averted, the economic cost has been large. The Sub-Saharan Africa (SSA) region is facing a severe recession this year and, for some, economic progress made over the course of an entire decade has been lost.
Entitled Covid-19 aggravates Sub-Saharan African debt problems, the report details how containment measures were quickly implemented to contain the spread of the coronavirus. However, this had a severe negative impact on countries in which many work in the informal sector and live hand-to-mouth. Social distancing and quarantine proved challenging in areas where many live in poor and crowded conditions often with 85% of inhabitants living on less than $5.50 a day. Consequently, in many areas the restrictions were eased prior to the peak of infections.
As global exporters of oil, metals and agricultural goods, SSA markets have suffered from a decline in demand for commodities and a drop in prices. Atradius explains that metal exporters in South Africa, Botswana and Zambia have seen a sharp decline in export revenues while the shock has been felt hardest in oil exporting countries such as the Republic of Congo and Angola. Compounding the situation is the sharp currency depreciation triggered by the pandemic alongside an expected decrease in financial flows.
Atradius economists forecast all but five (Ethiopia, Rwanda, Mali, Burundi and Guinea) of SSA’s economies to fall into recession this year, with particular impacts for countries dependent on tourism and commodity exports, especially oil. Overall, economic contraction of 4.6% is forecast in 2020. The largest economy, Nigeria, is expected to contract by 2.5%, due to low oil prices, declining oil production and the impact of lockdowns on domestic activity. With oil price expected to stay low, a gradual recovery of 1.8% is forecast for 2021. South Africa, which saw one of the strictest lockdowns in the world, is expected to contract by 8.9% this year after a deterioration of domestic activity and impact on the retail, mining and tourism sectors. A recovery of 5.3% is expected in 2021. The third largest SSA economy, Angola, is hit by low oil prices and declining oil production and forecast to see a recession of 9.3% in 2020. Economic growth is expected to recover to only 1.8% as oil prices remain relatively low.
More positively, the more diversified economies are faring better as they are more resilient such as Rwanda, Ethiopia and Uganda as well as Senegal and Cote d’Ivoire These entered the current crisis in a stronger state with high economic growth rates in previous years.
Richard Reynolds, Head of Strategic Accounts at Atradius UK, said: “The domestic and international measures implemented to contain the coronavirus pandemic have had a large impact on economies throughout Sub-Saharan Africa. The region is heading for a challenging year with recovery surrounded by an unusually high level of uncertainty.
“International trade provides a beacon of potential growth within this region as well as globally. Businesses who implement robust trade strategies which identify new opportunities and effectively mitigate risk will be the most likely to succeed. This includes constant monitoring of the potential economic impact on their trading market and a managed response which is flexible and measured according to the ever-changing economic climate, protecting themselves from the risk of non-payment.”
The Sub-Saharan Africa report is part of a programme of free publications designed to inform businesses of the risks and opportunities of trading in overseas markets. For the full report, visit the publication pages of the Atradius website: https://atradius.co.uk. You can also follow @AtradiusUK on Twitter and AtradiusUK on LinkedIn.