Although radical technological solutions seem to have doused the devastating effects of the COVID-19 pandemic, the ramifications of the COVID-19 virus are still being felt across the world especially in Africa. Though different facets of society have been affected, perhaps, the economic toll of the virus supersedes its health impact in much of the rugged terrains of Africa’s fragile health systems.
The decimation of the economies of many African countries as well as the huge debts taken on at the peak of the pandemic to ameliorate the impact of the virus means that many African countries are now saddled with huge debts. The scourge of the virus may or may not be behind us, but the economic consequences of the virus will linger for a while.
The year 2020 saw collective African GDP contract by about 2% though it is projected to grow by about 3.1% this year largely due to improvements in global commodity prices as a result of the global economic recovery. Many things may still derail this optimistic projection though, due largely to political uncertainties, corruption, even a third wave of COVID-19 attack or any combinations of the above, among others.
Economically, many African countries borrowed so much to sustain their economies at the peak of the viral outbreak, with many triggering the release of emergency support funds from the Bretton Woods Institutions. This is simply as a result of the low production capacity and the export of non-value-added commodity by almost all African countries.
In all, between 2020 and 2021, debt to GDP ratio in Africa increased from 60% to a little over 70% due to the huge accumulation of debt. This comes to compound the continent which already owes billions of dollars to multilateral organizations like the World Bank and IMF. Of the 54 African countries, 18 are already in high debt distress which is to say these countries debt to GDP ratio is oscillating dangerously around the average threshold mark of 75%.
It also among other things mean that many African countries will continue to depend on the export of raw extractives and not the refining and export of finished goods. The AU Agenda 64 will also likely be affected since among its lofty ambitions is an interconnected continent linked by roads and rails facilitating the easy movement of people across the continent by 2064.
The exacerbation of unemployment in Africa
Many African countries thrive on the export of raw extractives without adding value to these products. The decline in commodity prices drastically affected many African economies leading to the loss of jobs and closure of some infant manufacturing factories in the continent. The public and civil service in many African countries are simply bloated and underperforming.
Saddled with huge debts, many African governments may likely freeze employment in the public sector, as a direct intervention from the Bretton Woods Institutions as they return to them for debt restructuring and credit ratings, while urging the private sector to fill the gap.
The private sector in many African countries is still underdeveloped and have neither the capacity nor the wherewithal to fill the gap for the government, and governments seldom create that enabling environment for private sector to thrive. This means for many of the youth across the continent, they may have to develop their entrepreneurial acumen and learn to survive on their own, or their governments may not be able to give them the employment they so much crave for.
Expect protests and demonstrations
The huge debts hanging on many African countries means among other things too that cost of living will soar and standard of living will fall. Many within the periphery of the middle class in Africa will fall back to the lower class and this will lead many people to demonstrate. Last year saw many protests in countries such as Nigeria, Senegal, Guinea, and Burkina Faso among others.
In our country Ghana, the government got the Courts to derail the planned #FixTheCountry demonstration which was scheduled to be mammoth. Already Kenyans have demonstrated against the excessive borrowing by the Uhuru-led government. As the year progresses, expect more of such spontaneous demonstration across the continent. It is the natural reaction by the populace to the growing angst and hardships across the continent.
The pandemic has affected all countries considerably and the ramifications will be felt for a while. This writing discussed the geopolitical implications of the huge debts that African governments are saddled with. African countries can however expect donor support if they prioritize transparency in the governance process, respect for human rights, clamp down on corruption and among others. A more formal economy will also maximise tax receipts and tackle more effectively the problem of leakages within the economic sub-system, thereby enhancing the revenue horizon for government and by extension create a more resilient budget expenditure.
When the late Tanzanian president, John Magufuli, sought counsel from the veteran Kenyan politician, Raila Odinga, on how to mobilise funds to support his ailing economy and avoid borrowing, he told him to focus on the “revenue and procurement officers at all levels of government.”
On fighting corruption, Odinga advised him to subject his appointees and civil servants to “lifestyle audit, retire or even jail the incorrigibly corrupt and transfer others, then revenue collection would shoot up.” Guess our leaders can learn a thing or two from this advice.
>>>The writers loves to read and write on international developments and geopolitics. Email: [email protected]