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Africa Update 1

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AfCFTA is a shining beacon on Africa Day!

The celebration of Africa Day on 25 May offers a chance to pause and survey the state of play on the continent after an extraordinary year. We look at some lessons learnt from the pandemic – with health and digital sectors to the fore.

The global economy is expected to shrink by a massive 5.2% in 2021 in the wake of the Covid-19 pandemic – the deepest worldwide recession since the Second World War and almost three times as steep as the 2008/09 global recession.

The toll on economic activity in Africa has been particularly heavy, putting a decade of hard-won economic progress at risk, says the World Bank. The continent is in its first recession in 25 years. GDP per capita in sub-Saharan Africa has contracted by 6.5% and, by the end of 2021, is likely to have regressed to 2007 levels.

The World Bank estimates that Covid-19 has pushed 43 million African people into extreme poverty, erasing at least five years of progress in fighting poverty. “The road to recovery will be long, steep and must be paved with sound economic policies,” says the bank in its latest Africa Pulse report.

It is not all doom and gloom, however. The pandemic’s punch is not yet a knockout blow and might rather be seen as a wake-up call.

The World Economic Forum has set out a plan for what it calls “The Great Reset” post-pandemic – a phrase implying fundamental change in the way things are done. Drifting back into old patterns of entrenched thinking and political ideology is unlikely to bring about the reset needed to turn around the fortunes of those 43 million Africans.

Fortuitously, an engine of change is on hand: The African Continental Free Trade Area (AfCFTA), which almost all African nations have signed up to and which is due to become operational on 1 July 2021. It will create a free-trade zone covering 1.2 billion people with a combined gross domestic product of $2.5 trillion.

This potentially huge boost to inter-African trade and economic growth promises rapid advances in all economic sectors, with desperately needed job creation. There is the inevitable cynicism attached to African grand plans and their implementation but the economic ravages of Covid could be the shock needed to get African leaders working together.

Right now, health is the sector most urgently in need of intensive care.

African countries are vulnerable to exogenous and internal shocks because of their generally high levels of informality, poor savings cushions, dependence on imports for medicine, food and other essentials, not to mention structural problems that distort activity and increase inefficiency and costs of doing business. There are also few safety nets.

The pandemic revealed health system inadequacies and underlined high levels of underlying diseases, which present co-morbidities with Covid-19. African countries have among the highest prevalence of diabetes, tuberculosis, HIV and growing obesity and respiratory problems.

“The pandemic highlights the urgent need for health and economic policy action — including global co-operation — to cushion its consequences, protect vulnerable populations and improve countries’ capacity to prevent and cope with similar events in the future,” says the World Bank.

The AfCFTA has been hailed as an opportunity for countries to build greater manufacturing capacity and build stronger value and supply chains – including in pharmaceuticals. The pact contains provisions for countries to reduce tariffs by 90% and address impediments to trade, with the aim of growing intra-African trade to more than 50% of its trade with the world.

As analysts far and wide have said, African leaders must make the AfCFTA work – most urgently in the health sphere.

On a more short-term note, ambitions for Africa to develop its own pharmaceutical-producing capacity got a huge boost early in May when the US government backed moves at the World Trade Organisation to temporarily remove patent protections from coronavirus vaccines.

There are fewer than 10 African manufacturers with vaccine production capability – South Africa, Egypt, Morocco, Senegal and Tunisia. There is limited upstream production with most local companies only engaging in packaging and labelling, and occasionally “fill and finish” steps, says the World Health Organisation.

If the patent waiver initiative gets the go-ahead, new opportunities will open up across Africa, with foreign investment and job-creation flows.

In 2007, a Pharmaceutical Manufacturing Plan for Africa was endorsed by all member states of the African Union, with the objective of strengthening the continent’s ability to produce high quality and affordable pharmaceuticals.

The plan suffered the fate of many grand pan-African plans and ended up gathering dust. As a result, the continent still imports more than 90% of its medicines.

The lesson here seems to be that reliance on central governments in such projects is folly and leadership of The Great Reset should assumed by the private sector.

This is borne out by another pandemic revelation – in digital technology, where African ingenuity and innovation has risen like a phoenix from the ashes of Covid. Reliance on technology with people working remotely has born transformation of the digital space.

Below are just two examples of how small and medium companies can quickly grow into giants that generate revenue and jobs. If Africa can achieve such success in financial matters, why not in the field of healthcare?

After a few years of dramatic growth, in 2021 Nigerian payments system start-up Flutterwave achieved rare “unicorn” status – an SME hitting a $1-billion valuation.

In October 2020, giant US payments company bought Nigeria’s Paystack for more than $200 million because of it sophisticated tech solutions and reach into the pan-African market.

These are examples of the much-talked-of African solutions, yet there is not a government minister in sight. Of course, governments do have a pivotal role to play – but as enablers rather than protagonists.

As the World Bank says: “Ultimately, sustained recovery will depend on how fast African countries prioritise policy actions and investment that address the challenge of creating more, better and inclusive jobs. These policy priorities, in turn, operate through three critical (an inter-related) channels: the digital transformation, sectoral reallocation and spatial integration. Countries must expand digital infrastructure and make connectivity affordable, reliable and universal across Africa.”



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