Some of the things that can derail Africa’s course of recovery from the devastative impact of the coronavirus pandemic and further spike a new wave across the continent are reluctance by people to get vaccinated and supply bottlenecks from the vaccine deployments, according to a new report.
The report, titled ‘Africa’s 2021 Growth Prospects: A puzzle of many pieces’, stated that such a development could lead to a feebler recovery or protracted recession on the continent and will therefore destabilise the transition back to fiscal and debt sustainability.
“If vaccine deployment is hindered by supply bottlenecks or some citizens’ reluctance to be vaccinated – as has been the case in parts of Europe – new waves of infection could rage. Slow growth in Africa’s main trading partners could inhibit the region’s resurgence through lower export demand and reduced investment.
Equally noteworthy is the danger posed by vaccine hoarding by advanced economies, which threatens to undermine efforts to contain the virus and return to growth in Africa and other emerging markets around the world. This latter risk, sadly, seems highly likely to materialise in the current beggar-thy-neighbour global economic environment. It is an understatement to say that mustering a coordinated international response to the biggest public health crisis in a century has been challenging.
A feebler recovery or protracted recession could destabilise the transition back to fiscal and debt sustainability and increase the risk of debt overhang in the most vulnerable countries, as fiscal revenues remain below pre-pandemic levels for longer than expected,” the report published by AFREXIMBANK said.
The report also highlighted positive developments on the continent that could propel growth, should the pandemic be subdued. One of them is the African Continental Free Trade Area (AfCFTA) agreement which creates an opportunity for economies across the sub-region to industrialise and deepen trade relations.
“Two other key factors will propel the expected growth in investment post-containment across Africa. The first is improved global demand in the short term. The second, in the medium and long term, is structural transformation accelerated by expanding growth opportunities and increasing economies of scale and competitiveness during the implementation of the African Continental Free Trade Agreement (AfCFTA).
Investment expenditures across Africa had been rising pre-pandemic and were the leading growth driver in 2019, accounting for more than 54 percent of aggregate GDP growth. This reflects the effectiveness of supportive policy measures designed to crowd-in private capital and alleviate supply-side constraints to align domestic production and demand.
The AfCFTA will accelerate this trend, catalysing the growth of regional value chains and better connecting Africa with global value chains. This will help drive industrialisation and boost intra-African trade flows that are relatively more diversified, containing higher value-added goods than exports to the rest of the world. Beyond engendering investment flows, and particularly the growth of patient capital, the AfCFTA, which became operational early this year, will shift the composition and direction of investment,” the report added.
Due to the opportunity presented by the continental free trade, the report added that more investment will go to labour-intensive manufacturing industries as corporations capitalise on increasing efficiency and economies of scale to spread the risk of investing in smaller markets across the region.
It further added that for greater resilience post-COVID-19, the AfCFTA could also emerge as an effective framework for reducing Africa’s vulnerability to future disruptions, as well as hasten the process of sectoral and structural transformation of regional economies.