Africa can have an inclusive, cohesive and sustainable recovery from Covid

COMMENT

The Covid-19 pandemic is driving Sub-Saharan Africa into its first recession in 25 years, putting economic progress at risk. Recovery will depend on how effective governments and private sector partners are at addressing four key priorities. 

The African Continental Free Trade Area (AfCFTA), which came into effect on 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 $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.  

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 has projects in Ghana, Nigeria, Kenya, Malawi and Zambia. 

Addressing macroeconomic vulnerabilities

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

In May last year, 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. But, 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 forum’s Regional 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, blended finance approaches and principles for dealing with African debt discussions.

Harnessing the digital transformation 

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. 

But 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 $100-billion by 2030 to achieve universal broadband access.

The forum’s affiliate centres for the Centres for the Fourth Industrial Revolution — in Africa these are in South Africa and Rwanda — will play a critical role in helping shape the development and application of emerging technologies for the benefit of the region. 

Africa needs a workforce equipped with the digital skills to harness the opportunities of the digital transformation. This is 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 South African government have partnered on a Closing the Skills Gap Accelerator that aims to address skills gaps and reshape education and training for the future.  

A just transition to zero emissions

Finally, with Africa particularly vulnerable to the effects of climate change, the recovery should  be driven in the context of a just transition to net-zero carbon 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 that includes The Coca-Cola Company, Diageo, Unilever and Nestlé — on building a PET (polyethylene terephthalate) plastic 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 be a wide range of policy challenges to address. But, by prioritising these four actions, governments and businesses can come together to ensure an inclusive, cohesive and sustainable recovery that benefits Africa and the world. 

Chido Munyati is acting head, Africa, at the World Economic Forum. This article is part of the Davos Agenda, 25 to 29 January 2021. He previously worked as a lawyer at the Swiss law firm, Froriep, and at the United Nations International Criminal Tribunal for Rwanda.