International think-tanks at McKinsey & Company have warned that Africa’s economies could experience a loss of between $90 billion and $200 billion in 2020, as the COVID-19 pandemic spreads within the continent.
The researchers indicate that 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 delays or cancellation of investments from Africa’s FDI partners.
“Africa could account for just over half of this loss, driven by reduced household and business spending and travel bans,” said the researchers. McKinsey & Company said 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,” the researchers said.
The leaders have also been implored to direct more attention towards small and medium enterprises, which create 80 percent of the continent’s employment, compared to 50 percent in the European Union (EU) and 60 percent in the United States of America. “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.” The researchers argued that efforts at economic revitalisation need to extend to informal parts of the economy, as they are a vital component of economies.