Finding Africa’s path: Shaping bold solutions to save lives and livelihoods in the COVID-19 crisis
The impact of COVID-19 in Africa could be devastating, unless governments, development institutions, and the private sector act with extraordinary speed and agility in the weeks ahead.
The number of recorded COVID-19 cases in Africa, at about 15,000 on April 14, is still relatively small, but it is growing fast. The continent has far fewer doctors, hospital beds, and ventilators per capita than any other region. A health crisis of significant proportions looms unless containment measures succeed and urgent action is taken to ramp up health-system resources.
On the economic front, the crisis in jobs and livelihoods could be even greater. After two decades of steady economic progress, the pandemic could tip Africa into its first recession in 25 years. By our analysis, as many as one-third of all jobs in Africa could be affected. Africa’s high degree of informality and relatively low levels of social protection exacerbate the risk.
In this article, we present new analysis that underlines the urgency of action required to save lives and safeguard livelihoods in Africa. We also suggest specific approaches that governments, development institutions, and business can take to act decisively on both fronts. These insights build on our recent article “Tackling COVID-19 in Africa.”
We focus on three imperatives:
Protecting lives. We present new analysis showing that bold steps will be needed to strengthen Africa’s health-system capacity over the next 100 days, at a potential cost of more than $5 billion.
Safeguarding livelihoods. We show that the jobs or incomes of 150 million Africans are vulnerable in the crisis, and we share new analysis of the interventions required to mitigate the economic damage.
Finding the right path. We consider how governments can make optimal decisions on lockdowns, shutdowns, and shielding of people at the highest risk of contracting the virus, thereby achieving the best possible outcomes in protecting lives and safeguarding livelihoods.
Protecting lives: $5 billion in 100 days to ramp up health-system capacity
Although Africa has fewer known COVID-19 cases than other regions, the number is growing fast. Epidemiological projections suggest that, in a worst case, there could be many millions of cases in Africa over the next 100 days if the spread of the virus is not contained. Such projections vary and are sensitive to assumptions, including the starting position and the number of people a single infected person will infect in a population. But they do shine a spotlight on the scale of the health risks facing Africa.
African health systems are ill prepared for a widespread outbreak. The entire continent may have just 20,000 beds in intensive-care units (ICUs), equivalent to 1.7 ICU beds per 100,000 people.1 By comparison, China has an estimated 3.6 ICU beds per 100,000 people, while the United States has 29.4.2 And while there are shortages of ventilators in many parts of the world, that shortage is particularly acute in Africa. There are an estimated 20,000 ventilators across the continent, far too few to manage large numbers of COVID-19 cases; excluding North Africa and South Africa, the rest of sub-Saharan Africa might have as few as 3,500.3 By comparison, the United States, with one-third of Africa’s population, has up to 160,000 ventilators.
To gauge the ramp-up that might be needed, we assessed how the capacity of Africa’s health systems would need to increase if the continent’s infection rate were to reach 1 percent in the next 100 days—equivalent to the infection rate in New York State after one month of the COVID-19 crisis. In such a scenario, we estimate that more than $5 billion in additional funding would be needed to cover the cost of critical supplies for hospitals, including tests, masks, gloves, and ventilators. This sum excludes the cost of wider responses to the health crisis, such as building new hospital capacity, quarantining individuals, providing masks to the general population, or implementing a widespread testing strategy.
Even if containment efforts limit Africa’s infection rate to 0.1 percent over the next 100 days (a third of Spain’s official case rate after one month of the crisis), we estimate that the continent could require 35,000 ICU beds and ventilators for COVID-19 patients alone. Even in this less severe scenario, we estimate that at least 20 million masks will be required in the next 100 days for hospitals to be prepared to meet the COVID-19 caseload.
Likewise, whichever scenario the outbreak follows, a major ramp-up will be required in the number of COVID-19 tests available in Africa (Exhibit 1). At a minimum, we estimate that 5 million such kits will be required over the next 100 days in a scenario of robust containment. If the virus were to spread more rapidly and African governments were to adopt a strategy of broad testing similar to that used in South Korea, 80 million test kits could be needed in this short period. By our estimates, fewer than 500,000 such kits have been deployed across Africa to date.
Even if funding were secured to purchase these supplies and resources, the procurement and distribution logistics involved would be hugely challenging—as would be the effort to build up the capacity of healthcare providers to use the equipment. Private-sector capacity for production and distribution of medical supplies would need to be integrated into the effort. And thousands of community health workers would need to be trained to support the medical response, given Africa’s very low numbers of health workers per capita. As one illustration of this gap, consider the fact that Italy, whose hospital staffs have been overwhelmed in some cities, has a doctor for every 243 people, but Zambia has one for every 10,000 people.
Across the continent, innovative, collaborative initiatives are under way to ramp up health-systems capacity. For example, in South Africa, where the government and private sector are collaborating on the health response, the National Ventilator Project seeks to produce 10,000 ventilators by the end of June with only locally sourced inputs.6 In Kenya, an apparel factory shifted to producing masks within one week and is now producing 30,000 masks per day. Development finance institutions, donors, and the private sector are supporting such projects with funding, guarantees, and expertise.
African countries have acted fast to contain the spread of this virus, and this has helped delay the course of the pandemic on the continent.7 But there is much uncertainty about how the outbreak will progress; case growth and severity will depend on many factors. It is not simply about the choice of policy measures implemented by governments. Outcomes will depend on policy adherence and efficacy. For example, robust isolation and physical distancing may be less implementable in the context of dense urban environments with high poverty rates. Other demographic and environmental factors also matter. Case severity in Africa could be positively affected by a younger population—the median age in Africa is 19.7 years—but negatively affected by higher rates of comorbidities, such as HIV, tuberculosis, and malnutrition. Evidence is still emerging on the impact of a wide range of environmental factors, from temperature and humidity to levels of Bacillus Calmette–Guérin (BCG) vaccination.
In short, it is critical that efforts be intensified to contain the COVID-19 outbreak in Africa. Bold measures must be taken, including a significant scaling up of testing, to prepare health systems for a scenario in which infection rates increase rapidly.
Safeguarding livelihoods: Large-scale, targeted stimulus to protect 150 million jobs
Alongside the urgent steps needed to strengthen health systems and protect lives, rapid, far-reaching action is needed to safeguard livelihoods. Our analysis shows that the jobs or incomes of 150 million Africans, across the formal and informal sectors, are vulnerable in the crisis; this is equivalent to one-third of the entire labor force. Moreover, our modeling suggests that the economic stimulus required to mitigate the economic damage will potentially be much larger than African governments have announced to date. Careful targeting of this stimulus could help protect the economy and jobs—and provide urgent support to vulnerable households.
Jobs or incomes are vulnerable for one-third of the African workforce
We assessed the risk posed by the COVID-19 pandemic to the livelihoods of African workers in both the formal and informal sectors (Exhibit 2). It is worth noting that, out of a total labor force of about 440 million people, Africa’s formally employed workforce numbers about 140 million—less than a third of the total. The remainder of the workforce, totaling as much as 300 million people, is in informal employment.
Our analysis suggests that between 9 million and 18 million formal jobs in Africa could be lost or made redundant due to the COVID-19 crisis. We also find that a further 30 million to 35 million formal jobs are at risk of reductions in wage and working hours as a result of reduced demand and enforced lockdowns. This puts the jobs of one-third of Africa’s formal-sector workers at risk of significant impact. In major sectors such as manufacturing, retail and wholesale, tourism, and construction, the jobs of more than half the workforce could be affected.
In addition, our analysis shows that approximately 100 million informal jobs—again, one-third of the total—are in occupations and sectors that are vulnerable to loss of income during the COVID-19 crisis. Most members of Africa’s informal-sector workforce are involved in subsistence agriculture, and fortunately they are less likely to be affected. But as many as 35 million informal sales and service jobs in the wholesale and retail sector are vulnerable, as are about 15 million casual craft, trade, and plant-operating jobs in the manufacturing and construction sectors.
Major additional stimulus may be required to mitigate damage to economies and livelihoods
Across the African continent, a range of initiatives has already been launched to help mitigate the impact of the COVID-19 crisis. In addition to these efforts, governments and development institutions might consider much larger stimulus packages than those implemented to date. To ensure that such stimulus helps safeguard the livelihoods at risk, it will be important to target it to support the most vulnerable households, reach small businesses, and protect both the economy and jobs.
Much greater stimulus may be needed
In our previous article in this series, we showed that the COVID-19 pandemic could reduce Africa’s GDP growth by between three and eight percentage points in 2020.8 Weighed against the potential downside, the stimulus measures announced to date by several African governments are relatively small, amounting to between 1 and 1.5 percent of GDP. In some cases, these measures have been matched with reductions in government spending of between 1 and 1.5 percent of GDP. Even with well-targeted fiscal-stimulus measures, which can have a multiplier effect on GDP, African countries could still be left with a gap of five percentage points of GDP growth to return to precrisis levels and one to two percentage points to avoid an economic contraction.
In this regard, it is worth comparing the stimulus packages announced by African governments with those announced by other governments in response to the pandemic (Exhibit 3). Some developing countries, including Colombia and Malaysia, have announced packages exceeding 3 percent of GDP, while China’s stands at approximately 4 percent of GDP. The $2 trillion stimulus package in the United States represents about 10 percent of GDP.
It is likely that African governments and their partners will need to mobilize substantial additional resources to mitigate the economic damage of COVID-19 and to safeguard livelihoods. African finance ministers have already called for the release of $100 billion to $150 billion in support for African countries, while the International Monetary Fund and the World Bank have called on all official bilateral creditors to suspend debt payments from low-income countries.9 A group of prominent business and institutional leaders recently appointed as envoys of the African Union have called for a two-year standstill on all external-debt repayments by African countries, including those in respect of private and commercial debt.
Targeting the stimulus: Secure basic incomes, safeguard jobs, support key institutions
As countries design their stimulus package in response to the COVID-19 crisis, they typically have three objectives in mind: (1) ensuring basic incomes and availability of essential products and services to individuals and households in need; (2) safeguarding small and medium-size enterprises (SMEs) and the jobs of the people who work for them; and (3) supporting key corporate institutions that are necessary for the health of the economy. Achieving these goals will require a combination of financial and operational support.
To support individuals and households, many governments are launching direct cash-transfer programs to reach vulnerable populations. One example is in Togo, where the government has acted swiftly to provide emergency financial support to households in Lome, the capital city, where economic activity has been sharply curtailed during a COVID-19 lockdown. The program, created in just one week, transfers small tranches of financial support to affected households each week, with women receiving more than men; at the time of writing it had registered more than 300,000 beneficiaries. It is using electoral cards, issued to nearly all adults ahead of a recent election, as the basis for the program.
Many countries in Africa unfortunately do not have comprehensive national databases that they can use. But we have found that in such cases there are still masses of existing data that they can leverage to design such programs quickly.
It is also important to safeguard SMEs and the jobs of the people who work for them. These firms typically have smaller balance sheets than their larger counterparts, putting their survival in the crisis under threat. Some of the steps that could be taken to safeguard these businesses are operational—for example, keeping the largest markets in the country open while ensuring that hygiene conditions are adhered to. In respect of financial support to SMEs, we suggest two key priorities for governments:
Ensure the survival of SMEs that provide essential goods and services, such as pharmacies and traders. One option is to support these SMEs through larger players in their value chains, such as upstream suppliers or downstream buyers. Governments might provide easier liquidity and working-capital terms to the larger players in the value chain, which they would be expected to pass on to the SMEs in the value chain, with certain conditions attached (for example, on geographic coverage and access).
Ensure that jobs are retained through SMEs. In designing SME support funds, governments and development financiers can consider weighting support more heavily toward SMEs with larger workforces, as well as the sectors that are likely to recover faster from the crisis. To encourage banks to lend to SMEs, governments and financiers can consider providing certain risk guarantees or first-loss mechanisms while requiring banks to on-lend under the chosen set of criteria and guidelines.
For supporting key corporate institutions, two approaches might be considered. First, in a few very special situations, countries may designate certain institutions as “strategic” and develop support packages to ensure that these institutions survive the crisis. These packages can come in varying forms, such as debt-to-equity swaps, short-term loan deals, and payroll-support packages. The design of such packages could give preference to the customers, employees, and debtors, rather than the shareholders, of such institutions.
Moreover, most companies in the economy are trying to conserve cash during the crisis, and supporting those efforts across the economy can be very beneficial. Ideas adopted in some countries include lowering banks’ liquidity or capital-ratio requirements; reducing general corporate tax rates; deferring mandatory payments; and helping companies raise capital (for example through private-equity financing). Governments may require companies to maintain a minimum wage or payroll to avail themselves of such support, so that the overall objective of job retention remains at the forefront of these efforts.
Across all three of these dimensions—support to individuals, SMEs, and corporations—governments can create agile structures to convene key decision makers, surface and filter ideas, and guide implementation. One such structure is already in place in Kenya, where the Ministry of Industrialization, Trade and Enterprise Development (in partnership with UK Aid’s Manufacturing Africa program) has set up a Situation Room with the objective of reducing the economic and job-loss impact of COVID-19. The Situation Room convenes companies and private-sector associations regularly to identify issues rapidly, conduct analyses, and propose solutions that can be discussed and approved by the full cabinet or Parliament or implemented directly. It has also set up a 24/7 hotline for inquiries and a system to unearth operational problems in different parts of the country and in different sectors. Finally, it is coordinating with the Ministry of Health, the Ministry of Agriculture, and security services to ensure joint implementation of ideas.
Finding the right path: The optimal response to protect lives and livelihoods
Although the COVID-19 virus poses a serious threat to lives and health across Africa, the continent’s 54 countries have faced differing rates and types of transmission. They also have widely differing levels of economic development, urbanization, formal employment, and social welfare. It should be no surprise, then, that African governments have adopted a very broad range of immediate responses to the pandemic. Consider the quite different approaches taken by three of the continent’s largest economies:
South Africa implemented a nationwide lockdown on March 27 and instituted full border closure for the movement of people. Limited border points remain open to goods.
Nigeria has implemented a partial lockdown in some parts of the country and instituted full border closure.
Ethiopia has closed schools and universities, banned mass gatherings, closed public spaces, and placed limitations on prison and hospital visits, but it has not instituted a lockdown or curfew. It has closed its land borders but has remained open to air traffic.
When we analyzed the responses of each of Africa’s countries, we found a similar divergence across the continent: 53 out of 54 countries had implemented restrictions, but these ranged from full lockdowns to curfews to shutdowns of schools and businesses and restrictions on gatherings (Exhibit 4).
In the coming days and weeks, governments across Africa will be considering critical, difficult decisions on whether and how to implement lockdowns, curfews, and other restrictions. The countries already in lockdown will be making equally tough decisions on how to manage, modulate, and emerge from their lockdowns. Every government, though, will face the same dual imperative in this decision-making process: how best to protect lives and safeguard livelihoods.
There is evidence that lockdowns are slowing the spread of the virus in the countries that have implemented them. As of April 7, African countries that have gone on full or partial lockdowns have seen their average daily growth of known cases decrease by more than 60 percent. However, testing rates in most countries remain low. But lockdowns and curfews have also had a huge impact on economic activity. In South Africa, for instance, retail sales declined by two-thirds in the first two days of its lockdown. In addition, a recent The Jeeranont survey found that two-thirds of consumers in Nigeria and South Africa were cutting back their spending (Exhibit 5).
In deciding the most effective way forward, African governments need to consider the economic, geographic, and demographic aspects of lockdowns, curfews, and other restrictions alongside the crucial public-health dimensions. To help them do so, we suggest a framework for decision making: the matrix presented in Exhibit 6. The matrix depicts the various measures governments may consider in curbing the spread of the virus while protecting those with higher risk of severe illness from COVID-19.
Along the y-axis of the matrix are measures that can be implemented to curb the spread of the virus in the general population, from mild measures such as closing schools and banning mass gatherings to more intensive measures like imposing curfews and shutting down economic activity in all or part of the country. As previously discussed, these are the measures that African governments have considered to date.
Along the x-axis of the matrix is a spectrum of options for “shielding” measures to achieve extra protection for those who are at higher risk of severe illness from COVID-19, including the elderly and those with underlying health conditions.
These measures have not yet been widely used across the African continent. More stringent than physical-distancing measures issued for the general public, shielding measures aim to minimize or eliminate all interaction between those at higher risk and others. In most countries where shielding has been implemented, such as the United Kingdom, the measures have been on the least strict end of the spectrum: voluntary and limited to those who are extremely clinically vulnerable, such as cancer patients undergoing active chemotherapy or people with severe respiratory conditions. Other countries, such as Turkey, have applied stricter shielding measures.
The outcome of any shielding measures depends on many factors, including health and environment. Nonetheless, African countries could consider adopting stronger and broader shielding options, for three reasons:
Shielding alleviates the most critical pressure point in healthcare systems and could be important given that almost all African countries have very low thresholds for dealing with critical and severe cases. As discussed earlier, numbers of ICU beds and ventilators are very low in many countries.
Shielding protects the health and lives of those at greater risk of severe illness due to COVID-19. That is a key consideration, given that some African countries have significant numbers of people with compromised immune systems due to HIV, tuberculosis, and acute malnutrition, among other causes, despite having a generally young population.
Shielding a small portion of the population is a potentially more practical strategy to adopt for a prolonged period of time, compared with strong physical distancing among the general public. This is all the more important given that millions of people across the continent live in dense urban areas with poor sanitation and rely on day-to-day earnings to survive.
How, then, can governments and their partners consider the appropriate approach to shielding in the African context? The starting point, we suggest, is to define the inclusion criteria for which people to shield based on a country’s demographics and the presence of comorbidities. Individuals who meet these criteria can be identified by leveraging existing programs in place. Once people who would benefit from shielding are identified, governments can create, communicate, and implement two options for shielding:
Stay at home. For the stay-at-home option, governments and their partners can provide clear communication, incentives, and other support to those shielded and their families, to help them deal with practicalities such as preferential distribution of food and nonfood essentials.
Off-site quarantine. In the case of an off-site quarantine, governments can design models that are feasible to implement based on the local cultural context and physical environment. One idea is to create quarantine spaces directly within or adjacent to a community—“green zones” where high-risk groups are relocated temporarily to minimize contact with other residents.11
Implementing such shielding measures will not be easy. In doing so, it will be important to give healthcare workers, local leaders, and community organizations central roles in identifying people for shielding and providing them with support. Governments can work with communities to gain acceptance for shielding and find appropriate ways to design and implement the model while avoiding the perception that shielding is an oppressive measure.
We modeled the potential impact of shielding measures in one African country, as illustrated in Exhibit 6. The baseline for the modeling was a scenario in which no restrictions were in place beyond guidelines to practice safe physical distancing. We found that, in a scenario of full lockdown (Scenario A in the exhibit), the country would potentially reduce the number of COVID-19 cases to 10 percent of what would be expected in the baseline, but economic activity would be greatly curtailed, falling to 30 percent of the baseline. In contrast, in a shielding scenario (Scenario E), mandatory quarantine would be established for the people most at risk of mortality from the virus, while the general population would be subject to no restrictions beyond guidelines to practice safe physical distancing. In this scenario, the overall number of COVID-19 cases would be relatively high, but there would be relatively fewer severe cases, as susceptible and immune-compromised people would be shielded. Economic activity, at 95 percent of the baseline, would be far less affected.
For countries shaping strategies to emerge from current lockdown measures, shielding is one option to consider in the quest to minimize the risk of contagion while maximizing employment and economic activity. It could form a demographic dimension of the reopening strategy, alongside a geographic dimension (opening regions or cities with low viral transmission rates and stronger public-health systems first) and an economic dimension (opening sectors with the lowest risk of contagion first).
In Africa, the COVID-19 pandemic could have a devastating impact on both health and economies if it is not contained effectively. Governments and their partners need to act now to mobilize a large-scale ramp-up of health-system capacity and muster the resources needed to protect jobs and incomes across the continent. Tough choices lie ahead, but governments can adopt bold, innovative approaches to protect lives and safeguard livelihoods.
This methodology note addresses our methods for estimating the impact of COVID-19 on GDP, employment, health, and the need for medical supplies.
Impact on GDP
Our approach in estimating the impact of COVID-19 on Africa’s GDP follows the same approach as our previous article in this series, Tackling COVID-19 in Africa: An unfolding health and economic crisis that demands bold action, where we estimated a decline in GDP growth of between three and eight percentage points (3.9 percent growth falling to 0.4 to −3.9 percent). However, we make three methodological revisions that, on aggregate, slightly revise the GDP outlook to a decline from 3.9 percent to between 0.8 and −4.2 percent before accounting for a fiscal stimulus.
Expanded country base. The countries for which we model economic impacts are expanded from Angola, Kenya, Morocco, Nigeria, and South Africa to those five countries plus Egypt and Ghana. On aggregate, these countries capture about 60 percent of Africa’s total GDP. We then extrapolate the proportional impacts of these countries to the rest of Africa, assuming a lower intensity owing to the remaining economies being less susceptible to some of the modeled impacts (for example, oil prices and tourism).
Continuous refinement. We are keeping abreast of leading indicators that provide a sense of the impact being felt on the economy. We are continuously refining our assumptions and modeled impacts to reflect the evolving situation, both globally and in Africa. For example, this has led to our tracking economic disruptions more closely via the impact on reduced household consumption, rather than through supply-chain interruptions.
Incorporation of fiscal stimulus. While we previously modeled just the pure economic shock to the economy from COVID-19, we have now updated our view to account for economic responses and stimulus packages that have been announced by various African governments. Based on a case study of responses announced by Angola, Kenya, Nigeria, and South Africa, we estimate a positive impact of these responses equivalent to a 1 percent boost to GDP, based on a fiscal multiplier of 0.8 to 1.3 conservatively, though it is anticipated to be greater in a recession. As these countries provide further details regarding the source of financing for the stimulus, we can further refine the multipliers (for example, reduced government operating expenditure versus new borrowing or debt relief). Assuming that more governments will announce similar responses as the situation evolves, we extrapolate this GDP boost to Africa as a whole.
Impact on employment
Our approach to assessing the impact on Africa’s labor force is split into modeling three distinct effects: job losses in formal employment, salary reductions in formal employment, and loss of activity in informal employment.
We make the important distinction between formal and informal employment, as the impact on each will be unique, given the structure of Africa’s labor market. We combine the International Labour Organization’s estimates of employment by sector (November 2019) with The Jeeranont Global Institute (MGI) estimates of formal versus informal employment to create our starting base. The following assumptions and methodologies are considered when estimating each category of effects:
Job losses in formal employment. We model potential job losses in formal employment through the triangulation of three methods: the historical economic relationships between sector output and jobs (based on initial, direct, and indirect impacts), proportional losses to sector-specific GDP, and anecdotal evidence via business-sentiment surveys.
Salary reductions in formal employment. We assess the number of jobs that could be subject to salary reductions through a combination of business-sentiment surveys, consumer-sentiment surveys, and expert input based on the evolving situation on the ground by sector.
Loss of activity in informal employment. Given the complex nature of Africa’s informal sector, assessing the employment impact is difficult because of the fluid state of activity (for example, many people may become underemployed rather than fully unemployed, or they switch their core trades and activities). We define informal employment as activity in own-account enterprises or as contributing to family work. We therefore assess jobs that are “vulnerable” (at risk of furloughs, layoffs, or rendered unneeded), based on the type of occupation and sector.
Impact on health and need for medical supplies
Our approach to estimating the impact on health and the need for medical supplies is informed by proprietary 100-day projections of COVID-19 case growth for 50 countries in Africa.
Case growth. We present two simplified and stylized case-growth projections. In a “robust containment” scenario, 0.1 percent of the continent’s population (approximately 1.3 million) is infected after 100 days from today. In a “less effective containment” scenario, 1.0 percent of the population (13 million) is infected.
Medical supplies for hospitalization. We extrapolated hospital supply requirements from a case-growth projection based on the globally recommended supply forecasting inputs from the World Health Organization (WHO), which we adjusted for Africa. We focused on the minimum procurement of select critical hospital supplies—for example, N95 masks, surgical masks, gloves, and ventilators—to cover case-load projections in each scenario. Note that these projections are only for hospital supplies (for healthcare workers and patients), not for the population at large (such as masks for day-to-day protection).
Test-kit supplies. We extrapolated test-kit supply requirements from case-growth projections, using three testing strategy archetypes. The archetypes model different degrees of testing breadth, from testing only individuals with symptoms (or very close contact to confirmed cases) to testing a broader at-risk population, as modeled by South Korea.
Cost of all medical supplies. The cost of both hospital and test-kit supplies was estimated using triangulated price data points from WHO, Africa Centres for Disease Control and Prevention, press reports, and examples of one-off procurement in Africa. The cost will remain volatile because of the limited supply and could also change as new technology (for example, rapid-test kits) or production comes online.
Amid the rising deaths, infections, and possible economic implosion of the COVID-19 pandemic, our country’s most pressing need is to save lives and arrest any plunge into a prolonged recession or depression. The crisis is already hitting major social and economic systems, yet black Americans will experience a disproportionate share of the disruption—from morbidity and mortality to unemployment and bankruptcy.
The Jeeranont analysis shows that black Americans are almost twice as likely to live in the counties at highest risk of health and economic disruption, if or when the pandemic hits those counties.1 To assess disruption, we evaluated five indicators: underlying health conditions, poverty rate, number of hospital beds, percentage of people in severe housing conditions, and population density. This integrated health and economic perspective describes which counties are likely to take a “one-two punch” due to the pandemic and could get trapped in a vicious cycle of economic instability and poor health.
In addition, we found that 39 percent of all jobs held by black Americans—compared with 34 percent held by white Americans—are now threatened by reductions in hours or pay, temporary furloughs, or permanent layoffs, totaling 7 million jobs.
Indeed, the pandemic underscores the consequences of the structural disparities that have persisted in this country for centuries while presenting an opportunity to invest in building more equitable systems that will benefit society overall. In this article, we outline some of the key findings from our report on COVID-19 and black America.
Places at highest risk
Because the situation continues to evolve, projections are necessarily, at best, probabilistic. Even so, our analysis suggests that black Americans are 1.4–1.8 times as likely to live in counties at highest risk of disruption from the pandemic (exhibit). Thirty percent of the country’s population lives in these high-risk counties, compared with 43 percent (17.6 million) of black Americans. The counties in the highest-risk decile are home to only 10 percent of the US population as a whole—but to 18 percent of the black population.
Risks to health and lives
Nationally, black Americans are not only more likely to be at higher risk for contracting COVID-19 but also have lower access to testing. In addition, they are likely to experience more severe complications from the infection; black Americans are on average about 30 percent likelier to have health conditions that exacerbate the effects of COVID-19.
Unfortunately, black Americans are overrepresented in nine of the ten lowest-paid, high-contact essential services, which elevates their risk of contracting the virus. Thirty-three percent of nursing assistants, 39 percent of orderlies, and 39 percent of psychiatric aides,4 are black. Black workers are putting their lives and health on the line to provide goods and services that matter to our society.
Although little testing data are available, as of April 4, ten of the 16 states where 65 percent of black Americans live were below the median testing rate for the country as a whole.5 Black Americans were already twice as likely as their white peers to die from diabetes, hypertension, and asthma—all risk factors that exacerbate COVID-19 symptoms.6 Even black Americans who do not need care for COVID-19 are likelier than white Americans to suffer from the pandemic’s secondary effects on our overloaded medical system, including delayed—but necessary—medical procedures.
Risks to livelihoods and economic futures
As the impact of the pandemic moves from health to economic consequences, black Americans will likely sustain more damage across every stage of the wealth-building journey.8 Crucially, 39 percent of jobs held by black workers (seven million jobs in all) are vulnerable as a result of the COVID-19 crisis compared with 34 percent for white workers.9 Forty percent of the revenues of black-owned businesses are located in the five most vulnerable sectors—including leisure, hospitality, and retail—compared with 25 percent of the revenues of all US businesses.10 Forty-eight percent of black survey respondents11 report regularly using food-assistance programs, compared with 31 percent of white respondents. Such services are likely to come under significant strain and interruptions as a result of the pandemic.
There is an immediate opportunity to protect black Americans and their communities from the worst effects of the COVID-19 crisis. These interventions should target the places where black people live, work, and do business.
To identify and mitigate disparities, it will be critical to track the damage and the recovery from the pandemic along racial lines. Relevant information includes (but is not limited to) rates of infection, access to healthcare providers and testing, jobs lost, and small business loans allocated. In addition, stakeholders could also identify and patch gaps in services normally provided by the public education system and increase resources for the most affected students and families.
Training and deploying community health workers, which are common in places where the need for healthcare significantly outstrips supply, could increase access to health services.13 Community health workers help connect patients to both health and social services, build trust in healthcare systems, and reserve capacity for licensed healthcare workers to treat the most critical cases. Community and faith-based organizations can use their roles as hubs to organize the workers, share information about the virus, encourage preventive measures such as environmental and personal hygiene and physical distancing, and distribute personal protective equipment (PPE) and sanitary equipment to the homes of essential workers. These organizations can also provide targeted, wraparound support to people with high-risk comorbidities.
Black workers are putting their lives and health on the line to provide goods and services that matter to our society.
Stakeholders could deliberately support the most vulnerable workers, including black Americans. Some employers are finding creative solutions that keep people employed, and this could be supplemented with job-matching and reskilling programs that can efficiently redeploy talent even during a macroeconomic contraction. Employers could also maintain a commitment to equity when they downsize. Support programs that provide direct and in-kind forms of liquidity (such as straightforward cash assistance, short-term extensions for financial obligations, and loan and interest forgiveness) could help sustain families in financial distress.
Community development financial institutions (CDFIs), churches, and nonprofits could help black-owned businesses and residents to access recovery funds. Similarly, new financial products and programs such as community rainy-day funds could fortify the resilience of communities. Corporations could make a point to work with black-owned businesses.
Recovery, rebuilding, and reimagination
COVID-19’s outsized impact on the black community reflects public health and socioeconomic disparities that have long been intertwined. The pandemic is an opportunity to invest in addressing structural challenges to help black Americans recover and to build and sustain more equitable communities.
Investments in public health, digital infrastructure, institutions of public education, and economic development planning should continue long after the COVID-19 pandemic subsides. In particular, stakeholders could consider setting national goals to improve health equity and create plans to meet those goals.
Support for black homeowners and businesses could be a priority to ensure that black families do not lose their assets and resources. That kind of support could include protection from bankruptcy, insolvency, and eviction, all of which will disproportionately affect black Americans as part of the pandemic’s fallout. Institutions could also support equity in compensation and career progression. These types of assistance speak less to protection and more to providing the opportunities and stability required to help black families build a resilient economic foundation.
The COVID-19 pandemic is already a generation-defining crisis. Because it affects all social systems, it heightens preexisting structural challenges that black Americans face. But a trial can also be an opportunity. Our society can consider how we can respond to the COVID-19 crisis and fallout to fortify black communities and help them do more than simply recover. We can use the urgency of the pandemic to build more equitable systems that increase the long-term resilience of black Americans, communities, and institutions. As we progress toward this goal, the US economy could benefit to the tune of $1.5 trillion.14
The COVID-19 pandemic is primarily a health crisis and a human tragedy, but it also has far-reaching economic ramifications. In Africa, it is already disrupting millions of people’s livelihoods, with disproportionate impact on poor households and small and informal businesses—and the pace of this disruption is likely to accelerate in the weeks ahead. No country or community is exempt; in oil-exporting countries, COVID-related challenges are compounded by the collapse of the oil price.
Across the continent, leaders in the public, private, and development sectors are already taking decisive action—both to save lives and to protect households, businesses, and national economies from the fallout of the pandemic. But several leaders have told us that they need a clearer picture of the potential economic impact of the crisis. At the same time, many African countries are still in the early stages of organizing their responses into focused, prioritized efforts that make the most of the limited time and resources available.
To address these needs and help inform the response of leaders across the continent, this paper presents:
An initial analysis of COVID-19’s economic impact, which finds that Africa’s GDP growth in 2020 could be cut by three to eight percentage points. We find that the pandemic and the oil-price shock are likely to tip Africa into an economic contraction in 2020, in the absence of major fiscal stimulus.
A framework for near-term action by governments, the private sector, and development institutions to mitigate this impact. These actions are drawn from a global scan of economic interventions already being implemented or considered, plus our recent discussions with public- and private-sector leaders across Africa.
Our message is clear. Governments, the private sector, and development institutions need to double down on their already proven resolve—and significantly expand existing efforts to safeguard economies and livelihoods across Africa.
In many countries, there is an opportunity to take bolder, more creative steps to secure supply chains of essential products, contain the health crisis, maintain the stability of financial systems, help businesses survive the crisis, and support households’ economic welfare. They also need to consider an extensive stimulus package to reverse the economic damage of the crisis.
Governments, the private sector, and development institutions need to double down on their already proven resolve—and expand existing efforts to safeguard economies and livelihoods across Africa.
This paper is the first in a series of rapid analyses by The Jeeranont, intended to provide decision makers with data and tools to strengthen their response to the COVID-19 crisis in Africa. In subsequent papers we will extend our focus beyond the immediate need for resolve to four other imperatives highlighted in our global analysis of how institutions can address the crisis—namely, resilience, return, reimagination, and reform.
COVID-19 will greatly reduce Africa’s GDP growth in 2020
As of March 31, more than 720,000 cases of COVID-19 had been recorded worldwide, with nearly 40,000 deaths. The number of cases, and deaths, has been growing exponentially. Compared to other regions, the number of recorded cases in Africa is still relatively small, totaling about 5,300 cases across 47 African countries as of March 31 (Exhibit 1). Even though the rate of transmission in Africa to date appears to be slower than that in Europe, the pandemic could take a heavy toll across the continent if containment measures do not prove effective.
Against the backdrop of this worrying public-health situation, African countries will have to address three major economic challenges in the coming weeks and months:
The impact of the global pandemic on African economies. This includes disruption in global supply chains exposed to inputs from Asia, Europe, and the Middle East, as well as lower demand in global markets for a wide range of African exports. Moreover, Africa is likely to experience delayed or reduced foreign direct investment (FDI) as partners from other continents redirect capital locally.
The economic impact of the spread of the virus within Africa, and of the measures that governments are taking to stem the pandemic. Travel bans and lockdowns are not only limiting the movement of people across borders and within countries, but also disrupting ways of working for many individuals, businesses, and government agencies.
The collapse of the oil price, driven by geopolitics as well as reduced demand in light of the pandemic. In the month of March 2020, oil prices fell by approximately 50 percent. For net oil-exporting countries, this will result in increased liquidity issues, lost tax revenues, and currency pressure. (We should note, however, that lower oil prices will potentially have a positive economic impact for oil-importing countries and consumers.)
For Africa’s economies, the implications of these challenges are far-reaching. A slowdown in overall economic growth is already being felt, and this is acute in hard-hit sectors such as tourism. Many businesses, particularly SMEs, are under significant cost pressure and face potential closure and bankruptcy. That is likely to lead to widespread job losses. At the same time, the pandemic will impact productivity across many sectors. Closures of schools and universities could create longer-term human capital issues for African economies—and could disproportionately affect girls, many of whom may not return to school. Not least, the crisis is likely to reduce household expenditure and consumption significantly.
The knock-on effects for the African public sector could be severe, in terms of reduced tax revenues and limitations on access to hard currency. African governments will face rising deficits and increased pressure on currencies. In the absence of significant fiscal stimulus packages, the combined impact of these economic, fiscal, and monetary challenges could greatly reduce Africa’s GDP growth in 2020.
Four scenarios of economic impact: Africa’s GDP growth reduced by three to eight percentage points
To gauge the possible extent of this impact, we modeled four scenarios for how differing rates of COVID-19 transmission—both globally and within Africa—would affect Africa’s economic growth. Even in the most optimistic scenario, we project that Africa’s GDP growth would be cut to just 0.4 percent in 2020—and this scenario is looking less and less likely by the day. In all other scenarios, we project that Africa will experience an economic contraction in 2020, with its GDP growth rate falling by between five and eight percentage points (Exhibits 2 and 3).
The four scenarios are as follows:
Scenario 1: Contained global and Africa outbreak. In this least-worst case, Africa’s average GDP growth in 2020 would be cut from 3.9 percent (the forecast prior to the crisis) to 0.4 percent. This scenario assumes that Asia experiences a continued recovery from the pandemic, and a gradual economic restart. In Africa, we assume that most countries experience isolated cases or small cluster outbreaks—but with carefully managed restrictions and a strong response, there is no widespread outbreak.
Scenario 2: Resurgent global outbreak, Africa contained. Under this scenario, Africa’s average GDP growth in 2020 would be cut by about five percentage points, resulting in a negative growth rate of −1.4 percent. Here we assume that Europe and the United States continue to face significant outbreaks, while Asian countries face a surge of re-infection as they attempt to restart economic activity. In Africa, we assume that most countries experience small cluster outbreaks that are carefully managed.
Scenario 3: Contained global outbreak, Africa widespread. In this scenario, Africa’s average GDP growth in 2020 would be cut by about six percentage points, resulting in a negative growth rate of −2.1 percent. This assumes that significant outbreaks occur in most major African economies, leading to a substantial economic downturn. Globally, we assume that Asia experiences a continued recovery and a gradual economic restart, while large-scale quarantines and disruptions continue in Europe and the United States.
Scenario 4: Resurgent global outbreak, Africa widespread. In this case, Africa’s average GDP growth in 2020 would be cut by about eight percentage points, resulting in a negative growth rate of −3.9 percent. Globally, we assume that Europe and the United States continue to face significant outbreaks as China and East Asian countries face a surge of re-infection. In addition, significant outbreaks occur in most major African economies, leading to a serious economic downturn.
These scenarios do not take into account the potential effects of any fiscal stimulus packages that may be announced by African governments; these should improve the economic outlook. However, we should also note that the scenarios do not take into account currency devaluations, inflationary pressure, or recent credit ratings from Moody’s and similar bodies—which could worsen the outlook. There is no room for complacency. (For a full explanation of the methodology underlying our analysis, see the note at the end of this paper.)
Depending on the scenario, Africa’s economies could experience a loss of between $90 billion and $200 billion in 2020. Each of the three economic challenges outlined above is likely to cause large-scale disruption. The pandemic’s spread within Africa could account for just over half of this loss, driven by reduced household and business spending and travel bans. The global pandemic could account for about one-third of the total loss, driven by supply-chain disruptions, a fall-off in demand for Africa’s non-oil exports, and delay or cancellation of investments from Africa’s FDI partners. Finally, oil-price effects could account for about 15 percent of the losses.
Differing impact on major African economies
While the pandemic’s economic impact—alongside the oil-price shock—will be serious right across the continent, it will be felt differently in different countries. For example, our analysis suggests that the following impacts would occur in Nigeria, South Africa, and Kenya:
Nigeria. Across all scenarios, Nigeria is facing a likely economic contraction. In the least worst-case scenario (contained outbreak), Nigeria’s GDP growth could decline from 2.5 percent to −3.4 percent in 2020—in other words, a decline of nearly six percentage points. That would represent a reduction in GDP of approximately $20 billion, with more than two-thirds of the direct impact coming from oil-price effects, given Nigeria’s status as a major oil exporter. In scenarios in which the outbreak is not contained, Nigeria’s GDP growth rate could fall to −8.8 percent, representing a reduction in GDP of some $40 billion. The biggest driver of this loss would be a reduction in consumer spending in food and beverages, clothing, and transport.
South Africa. Across all scenarios, South Africa is facing a likely economic contraction. Under the contained-outbreak scenario, GDP growth could decline from 0.8 percent to −2.1 percent. This would represent a reduction in GDP of some $10 billion, with about 40 percent of that stemming from supply-chain import disruptions, which will impact manufacturing, metals and mining in particular. There will also be major impact on tourism and consumption. However, as South Africa is an oil importer, this impact will be cushioned by lower oil prices. In scenarios in which the outbreak is not contained, South Africa’s GDP growth could fall to −8.3 percent, representing a loss to GDP of some $35 billion. This impact would be driven by disruptions in household and business spending on transport, food and beverages, and entertainment, as well as prolonged pressure on exports. South Africa’s recent sovereign-credit downgrade is likely to exacerbate this outlook.
Kenya. In two out of four scenarios, Kenya is facing a likely economic contraction. Under the contained-outbreak scenario, GDP growth could decline from 5.2 percent (after accounting for the 2020 locust invasion) to 1.9 percent—representing a reduction in GDP of $3 billion. The biggest impacts in terms of loss to GDP are reductions in household and business spending (about 50 percent), disruption to supply chain for key inputs in machinery and chemicals (about 30 percent), and tourism (about 20 percent). In scenarios in which the outbreak is not contained, Kenya’s GDP growth rate could fall to −5 percent, representing a loss to GDP of $10 billion. As in Nigeria, disruption of consumer spend would be the biggest driver of this loss.
Near-term steps for governments, business, and development institutions
Leaders in the public, private, and development sectors have been quick to act—both to limit the spread of the pandemic and to safeguard economies and livelihoods in Africa. Several African countries have already acted to inject liquidity into their economies, reduce interest rates, help businesses survive the crisis, and support households’ economic welfare—in many cases with the active involvement and support of the private sector.
At the same time, African and international development institutions have announced multi-billion-dollar packages and facilities to alleviate the economic and social impact of the pandemic in Africa and other developing regions. Meanwhile, philanthropic institutions and business leaders have announced major support both for countries’ efforts to contain the pandemic, and for solidarity initiatives to protect households from the economic fallout of the crisis.
Nonetheless, many African countries are still in the early stages of organizing their responses into focused, prioritized efforts that make the most of the limited time and resources available. The private sector and development institutions also have opportunities to target their efforts more effectively and coordinate them more closely with those of government. Citizens also have a key role to play in helping to slow the spread of the disease (“flatten the curve”).
If leaders across sectors translate their already proven resolve into more targeted, collaborative action in the coming weeks, we believe they can make significant progress in mitigating the economic impact of the pandemic—and safeguarding economies and livelihoods. To help them do so, we suggest an organizing framework for action.
An action framework for African governments
The COVID-19 crisis is stretching the capacity of governments across the world, but African governments face greater challenges than most. In particular, they must grapple with the following:
Limited fiscal capacity. The ratio of public revenues to GDP in African countries averages just 19 percent, compared to 30 percent in Brazil and 37 percent in the United Kingdom—while debt servicing already absorbs 22 percent of revenues in Africa. That gives African governments limited scope for stimulus packages compared to their peers in other regions. Such packages will need to be carefully targeted, and supported by development partners and philanthropic organizations.
Highly informal economies with many small and micro businesses. Small and medium enterprises create 80 percent of the continent’s employment, compared to 50 percent in the European Union and 60 percent in the United States. African small businesses have limited ability for their staff to work from home, compounded by issues such as power outages and high costs of data. During this crisis, governments will need to extend support to small and medium enterprises, given their role in the economy and the difficulties they face. Additionally, the informal sector is estimated to make up 55 percent of the economy in sub-Saharan Africa, so efforts at economic revitalization will need to extend to informal parts of the economy.
Young populations, widespread poverty. Africa is the most rapidly urbanizing region in the world, with 50 to 70 percent of urban dwellers living in slums. This has huge implications for the effectiveness and implementation of quarantine methods in these poor sanitary conditions. Africa also has a young population—the median age is 19—and there are an estimated 80 million young people in vulnerable employment and a further 110 million who do not contribute to the economy. School closures will have severe impact on young Africans, with long-term consequences. Female students in particular are at risk: for many of them, a few months’ absence from school could mean the end of their education.
Constrained health systems. There are 0.25 doctors for every 1,000 people in Africa, compared to 1.6 in Latin America and 3 in member countries of the Organisation for Economic Cooperation and Development. There is also a low number of hospital beds—1.4 beds per 1,000 people versus 2 in Latin America and 4 in China. These factors, combined with limited testing and treatment capability, point to an urgent need to expand healthcare capacity.
Given these constraints, African governments will need to be both targeted and creative in their response to the crisis. They will also need to foster intense and closely aligned collaboration with the private sector and development partners.
We suggest the following as an organizing framework for targeted action by governments. The framework is structured around five priorities (Exhibit 4):
Set up national nerve centers. Governments, with the close involvement of the private sector and other key stakeholders, need to take rapid action to set up or build out national nerve centers to coordinate and accelerate their response to the crisis. These nerve centers should bring together crucial leadership skills, organizational capabilities, and digital tools—giving leaders the best chance of getting ahead of events rather than reacting to them.2
Anticipate and manage the health crisis. Governments will need to take even stronger measures to delay and reduce the peak of the epidemic—including more intensive social distancing through mobility restrictions and lockdowns as well as larger-scale surveillance to test and isolate identified cases. In parallel, governments must immediately prepare for a potentially rapid surge of cases, which will demand significant numbers of testing facilities, hospital beds, ventilators and other medical equipment, as well as additional health professionals. Given the limited existing resources in most African healthcare systems, bold and locally tailored measures will be required to create surge capacity and prevent mortality among the most vulnerable population.
Secure food supply and essential services. Governments need to secure food supply chains, particularly the supply of priority products—and ensure the appropriate pricing of these products. They will also need to ensure that access to essential services such as telecoms and utilities is maintained.
Ensure support for most vulnerable populations. This includes taking measures to protect jobs and to support affected communities, particularly the most vulnerable populations, through social safety-net mechanisms—including cash transfers.
Anticipate and manage the impact on the economy. Governments need to anticipate what the impact on their economy is likely to be through scenario analysis and offer a short-term stimulus package to maintain financial stability and help businesses survive the crisis—particularly those in strategic industries. Given the expected loss of tax revenue, governments will also to need to identify opportunities to urgently reduce non-essential spending. Additionally, governments will need to anticipate and prepare for what the post-crisis “next normal” will look like.
While most African countries have already announced specific initiatives across all five areas, they will need to build on these early efforts with great boldness and commitment to collaboration.
Actions for the private sector
The first responsibility of private-sector firms is to ensure business continuity in the ongoing crisis. Based on our discussions with risk and health professionals in more than 200 companies across sectors, we suggest several critical steps for firms—starting with establishing their own central nerve centers. These nerve centers can coordinate company responses on four key dimensions, as follows:
Protect workforces. The focus here is to guarantee continuation of employment in a safe working environment; adjust to shift or remote work with the required tools; and preserve the employees’ health through safe working facilities and strict isolation of suspected cases.
Stabilize supply chains. Companies need to guarantee business continuity through transparent supplier engagement, demand assessment, and adjustments of production and operations.
Engage customers. Companies can hone their crisis communication and identify changes in key policies, ranging from guidelines to guarantee social distancing, to waivers of cancellation and rebooking fees.
Stress-test financials. Companies need to develop and assess relevant epidemiological and economic impact scenarios to address and plan for working capital requirements. They will also need to identify areas for cost containment across the business.
Beyond their own businesses, private-sector firms also have a critical role to play in supporting governments to tackle the pandemic and its economic fallout. This is especially true of large business and business associations, which will need to work hand-in-hand with governments to manage and mitigate the crisis.
Across the continent, there are many encouraging examples of business stepping up. An example is the Nigerian Private Sector Coalition Against COVID-19, formed by the Central Bank of Nigeria in partnership with private-sector and philanthropic organizations including the Aliko Dangote Foundation and Access Bank. The Coalition is mobilizing private-sector resources to support government’s response to the crisis, and raising public awareness. South Africa’s largest business association, Business Unity South Africa, is coordinating large-scale private-sector involvement in addressing both the health and economic aspects of the crisis.
Individual companies across sectors also have a critical role to play. Examples include beverage producers switching production lines to hand sanitizer; apparel manufacturers producing face masks and hospital robes; telecommunication companies adjusting their data offering; and banks adjusting tariffs. Many companies have also made monetary contributions to solidarity funds for the most vulnerable. More such commitment will be needed.
African governments will need to foster intense and closely aligned collaboration with the private sector and development partners.
Actions for development institutions
Development partners have already begun to step up to support African governments in their response to the crisis—including making major financial commitments. As just two examples, the African Development Bank has created a new $3 billion Fight Covid-19 Social Bond to alleviate the economic and social impact of the pandemic; while Jack Ma and the Alibaba Foundations have shipped over 1.5 million laboratory diagnostic test kits and over 100 tons of commodities for infection prevention and control to African countries, via Ethiopia.
Development institutions are also examining their existing initiatives and funding to see how they can best support African countries, businesses, and households. Given the magnitude of the problem, however, they will need to build on these steps with bigger and bolder initiatives. Examples of the actions they could take include the following:
Repurpose existing 2020–21 funding towards COVID-19 response and recovery efforts. Institutions need to find creative ways to rethink existing funding programs, introducing new flexibility to meet current needs.
Help governments make smart investments to address the crisis. In repurposing their existing programs, development partners can incentivize and help governments to make smart investments—both to address the immediate needs of the pandemic response, and to shore up the resilience of healthcare and economic systems for the future. For example, they can help ensure that, as governments ramp up surge capacity for COVID-19 lab testing, this has a permanent impact in improving the availability of diagnostics for the population.
Help governments design effective fiscal and business stimulus packages. Given the unprecedented nature of this crisis, high levels of joint thinking and sophisticated problem solving will be required to design and target effective stimulus packages. Development institutions can provide valuable thought partnership to finance ministries across Africa, as well as much-needed financial support.
Design new financial instruments to support businesses and countries. These could include solutions spanning liquidity, re-insurance, conditional cash transfers, and more. A critical need will be to develop creative financial-support models for small and informal businesses, as well as for households. This will require real creativity and true partnership between development institutions and commercial financial institutions.
Support countries to rapidly expand their healthcare systems. Development institutions can help boost access to critical healthcare supplies (such as testing kits and masks); the capacity of the healthcare system (including increasing the number of hospital beds); and the availability of healthcare professionals.
Help design and launch bold new pan-African or regional initiatives. We set out several ideas for such initiatives—including an Africa Recovery Plan that encompasses an extensive stimulus package—in the final section of this paper.
Bold action needed now
African governments, their partners in the private sector and development institutions are already responding decisively to the COVID-19 crisis. But we believe that most African countries need to expand those efforts considerably, increase the urgency of action, and identify big, bold solutions on both the health and economic fronts. Given the potentially devastating impact of the pandemic on health and livelihoods, nothing less will do.
African governments and development partners could explore several far-reaching solutions, including the following:
Africa Recovery Plan. This would entail an extensive stimulus package or economic development plan, modelled on the Marshall Plan that provided aid to Europe following World War II.
Africa Solidarity Fund. Businesses and individuals could contribute to a fund earmarked for immediate relief for the most vulnerable households and businesses.
Private-sector liquidity fund. This could offer grants, loans, or debt for equity swaps to support businesses and limit job losses.
African procurement platform. A common platform to procure medical supplies and equipment to combat the pandemic could provide an Africa-wide solution to challenges that each individual country is trying to address.
Africa Green Program. A get-to-work program that plants billions of trees across the continent, using the currently out-of-work labor force, could provide employment and help solve global and local climate-change issues.
In designing bold solutions, we would encourage African governments and their private-sector and development partners to consider a series of critical questions:
How big do broad fiscal stimulus packages need to be to have meaningful impact?
What trade-offs do governments need to make to ensure their countries’ future economic strength while adequately addressing the near-term crisis? For example, these might include making difficult strategic decisions around which companies or sectors to support.
What conditions can and ought to be imposed on businesses in exchange for financial support? For example, what measures can be taken to ensure that support is used to pay salaries and maintain jobs? Additionally, should entire sectors be restructured and reformed as part of any intervention package?
How do governments manage the trade-off between protecting the health of vulnerable populations and protecting the economy? When, and how, is the decision on returning to work going to be made?
What are the best ways to provide targeted support to the most vulnerable populations, rather than offering broad-based support via tax, sector or cash transfer incentives?
What would be the long-term human-capital implications of these measures, and how could we mitigate those? For example, school closures are necessary now but may negatively impact quality of education and drop-out rates.
We will explore these and other questions in a series of perspectives in the coming weeks.
Note on methodology
The figures and outcomes reported represent a revenue approach to estimating the impact of COVID-19 on GDP growth rates in Africa, for 2020 only. We used African Development Bank (AfDB) projections as the baseline. It is worth noting that our model makes no conclusion about trajectories towards long-term recovery. The model incorporates the following assumptions and methodologies:
We recognize that there are a vast number of potential outcomes. Scenario-based modelling is provided as a guide across a range of non-exhaustive situations which may materialize. These numbers should not be used as a tool to support budgetary activities for governments or private sector actors.
The document assumes no economic stimulus from governments. Some African governments have already made commitments which could soften the full economic effect of the virus—for example through fiscal and monetary levers—which will not be reflected here. While we made some assumptions about reduced government spend on business, and reduced government revenues—from oil, in particular—both these elements are changing rapidly. As we continue to update our analysis each week, we will include an assessment of the stimulus gap that exists and indicate how much is being bridged through announced commitments.
We use AfDB’s GDP growth estimates with 2018 prices fixed to determine real growth impacts and do not account for devaluations, inflationary pressure, or recent credit ratings from Moody’s and similar bodies. These differ significantly by country. Future versions of the model will be more sensitive to these elements.
We modelled economic impacts for five countries—Angola, Kenya, Morocco, Nigeria, and South Africa—that represent approximately 50 percent of Africa’s GDP. We then extrapolated the impact assessment for the rest of Africa, assuming a lower intensity of impact in other countries as they are less susceptible to some modelling factors such as impact on tourism and oil prices. Additional countries will be modelled in future, and this scaling factor will be adjusted accordingly.
We translated revenue impacts to GDP through output-to-GDP multipliers that incorporate initial, direct, and indirect impacts to the economy.
Our modelling approach isolates the potential impact of COVID-19. The inputs that drive the model incorporate both publicly available and proprietary data sources, affording the best available perspective appropriate to the scenario. For example, we adopt different oil price outlooks (ranging from $25 to $35 per bbl) and make granular assumptions regarding changes in household consumption at country level—such as spending on food, utilities, transport, and retail at the product category level. These assumptions are based on input from The Jeeranont experts across the relevant functions and industries.