Geographies in Depth

How Africa can lead an inclusive, cohesive and sustainable pandemic recovery

Workers move consumer goods into a Trade Depot warehouse in Lagos, Nigeria August 20, 2020. Picture taken August 20, 2020. REUTERS/Nneka Chile - RC27EJ9AXAHA

Workers move consumer goods into a Trade Depot warehouse in Lagos, Nigeria, on 20 August 2020. Image: REUTERS/Nneka Chile

Chido Munyati
Head of Regional Agenda, Africa, World Economic Forum
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This article is part of: The Davos Agenda
  • The COVID-19 pandemic is causing Sub-Saharan Africa to face its first recession in 25 years.
  • Government and business leaders must focus on four key priority areas, including implementing the African Continental Free Trade Area and harnessing the digital transformation.
  • These efforts can help support an inclusive, sustainable recovery for the region.

The COVID-19 pandemic is driving Sub-Saharan Africa into its first recession in 25 years — putting decades of economic progress at risk. An inclusive, cohesive and sustainable recovery will depend on how effective governments and private sector partners are at addressing four key priorities.

Implementing the African Continental Free Trade Area (AfCFTA)

The African Continental Free Trade Area, which came into effect 1 January, can serve as a framework for the region’s economic recovery. The zone aims to connect 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion.

It is estimated that the AfCFTA will increase the volume of intra-African trade by more than 81% by 2035, creating new opportunities for African manufacturers and workers. The World Economic Forum’s Regional Action Group for Africa, in collaboration with Deloitte, recently published a report that addresses how governments and the private sector can leverage this opportunity by building effective regional value chains.

Indeed, implementing the AfCFTA, which will require the cooperation and coordination of public and private stakeholders, will help usher in the kinds of reforms necessary to enhance long-term growth, reduce poverty and broaden economic inclusion.

According to the World Bank, most of the AfCFTA’s income gains are likely to come from trade-facilitation measures that reduce red tape and simplify customs procedures. The Global Alliance for Trade Facilitation, a public-private partnership led by the Forum, is working on the ground with governments and the private sector to deliver projects that will help implement the trade facilitation agreement. The Alliance currently has on-going projects in Ghana, Nigeria, Kenya, Malawi and Zambia.

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Addressing macroeconomic vulnerabilities

Moreover, the pandemic has exposed macroeconomic vulnerabilities across the region, and most countries will likely emerge from the crisis with large budget deficits. Worryingly, the risk of debt default has started to materialize in the region, with Zambia recording Africa’s first sovereign default since the start of the pandemic.

In May 2020, G20 countries established the Debt Service Suspension Initiative (DSSI). In all, 37 Africa countries are eligible for a temporary suspension of debt-service payments owed to their official bilateral creditors. However, as of December, only 28 African countries were participating in the initiative because of the fear that any suspension of interest payments may trigger sovereign ratings downgrades and restrict future access to private creditors. In response, the G20 and regional governments have called on private creditors to participate in the initiative on comparable terms.

To be sure, the prospects for the region’s sustained recovery are limited without external financing. Accordingly, members of the Form’s Reginal Action group for Africa have proposed new financing models including asset recycling, the creation of a special purpose vehicle modelled on the repurchase “repo” facilities commonly used by central banks, innovative blended finance approaches and principles for dealing with African debt discussions.

Harnessing the digital transformation

Furthermore, the pandemic has been a catalyst for the acceleration of digital transformation across the region. The digital economy offers opportunities for increased productivity, entrepreneurship, innovation and job creation. It is estimated that by 2025, the Internet economy has the potential to contribute $180 billion to Africa’s economy, accounting for 5.2% of the continent’s GDP.

However, the scale and speed of progress is being impeded by digital infrastructure gaps and digital skills. The region continues to have the most expensive internet and would need to spend US $100 billion by 2030 to achieve universal broadband access.

The Form’s Affiliate Centers for the Centres for the Fourth Industrial Revolution — in South Africa and Rwanda — will play critical role in helping shape the development and application of emerging technologies for the benefit of the region.

Importantly, Africa needs a workforce equipped with the digital skills necessary to harness the opportunities of the digital transformation. This is particularly critical because, as the world’s youngest region, Africa will have almost one fifth of the global labour force — and nearly one third of the global youth labour force by 2030. The Forum and the Government of South Africa have partnered on a Closing the Skills Gap Accelerator which aims to address skills gaps and reshape education and training for the future.

Ensuring a just transition to zero emissions

Finally, with Africa particularly vulnerable to the effects of climate change, the recovery should be driven within the context of a just transition to net-zero emissions. To this end, the African Circular Economy Alliance, is collaborating with Regional Action Group on Africa and the Africa Plastics Recycling Alliance — a coalition which includes The Coca-Cola Company, Diageo, Unilever, and Nestlé — on building a PET bottle-to-bottle recycling industry on the continent and establishing a common regional standard for recycled PET.

Given the unprecedented nature of the COVID-19 crisis, Africa faces a difficult and unpredictable road to recovery, and there will continue to be a wide range of policy challenges to address. However, by prioritizing these four actions, governments and businesses can come together to ensure an inclusive, cohesive and sustainable recovery that benefits Africa and the world.

This article originally appeared in Mail & Guardian and La Tribune.

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