The African continent has made steady progress over the last four decades – surviving high levels of poverty, various natural disasters (such as drought and floods), diseases, political instability and high levels of migration. And when the health pandemic struck, Africa’s resilience was tested yet again.
COVID-19 pushed millions of households further into poverty due to its disruption of economic activity. On the macro-economic front, African governments experienced loss of revenue from reduced economic activity and a fall in commodity prices such as oil while expenditure levels remained high due to the fight to safeguard lives of the populace.
Amid the pandemic, the world experienced the swift response by African leaders through fast implementation of lockdown measures, regional collaboration, use of technology, effective vaccination deployment (although at low levels) and, most importantl, a strong reliance on the continent’s previous experience in handling similar disease epidemics.
The pandemic’s effects led to a contraction in most sub-Saharan African economies. The GDP for the entire sub-Saharan Africa contracted by almost 1.7 percent. Many economies voluntarily opted for the Debt Service Suspension Initiative (DSSI) to free-up resources over the short- to medium-term for critical uses.
On the upside, several countries took advantage of the crisis to implement structural and tax reforms of their economies that would support recovery and inclusion. A few of such reforms include Ethiopia’s privatisation of its telecommunications sector, Ghana’s digitisation drive and Nigeria’s fuel subsidy reform. Significant strides were also achieved in the health sector across Africa, where there was an increase in health infrastructure.
The continent made a promising recovery despite these shocks and returned to a positive growth trajectory estimated at about 4.5 percent (IMF) in 2021 – a figure slightly higher than pre-pandemic levels.
Yet another challenge emerges for sub-Saharan Africa after the steady progress pandemic-era. Russia’s invasion of Ukraine impacted the positive growth projection within the short-term. Western sanctions against Russia have rattled global financial markets, creating supply chain disruptions with significant spill-over to African economies. The conflict has also triggered a surge in energy and commodity prices on the continent.
With most sub-Saharan countries being import-dependent, there has been a strain on external and fiscal balances. The region’s positive outlook continues to be hampered by high levels of inflation, exchange rate pressures and inability to service debts. Reactions of investors have reflected in the high sovereign spreads recorded on some African sovereigns over the past few months.
In spite of these challenges, there is a conscious effort by Africa to provide solutions to its problems through efforts of individual countries, the wider African Union and Developmental Financial Institutions (DFIs).
For example, the timely launch of the Dangote fertiliser plant, targetting exports to other African markets, is expected to address food security concerns by making the African continent self-sufficient in its food production.
This positive development, coupled with the expected boost in intra-Africa trade enabled through the African Continental Free Trade Area (AfCFTA), will alleviate the continent’ss high poverty levels and improve economic growth. The AfCFTA effect, I believe, presents a great prospect for Foreign Direct Investment into the continent; and investors are encouraged to seize this opportunity.
Will Africa survive yet another extended shock? Will governments implement yet another set of reforms to improve macro-economic growth and bridge the societal gaps through job creation? The answer lies in Africa’s ability to implement other strong interventions such as AfCFTA, bold economic recovery plans for sustainable growth and self-sufficiency in food production among others. The change in narrative can be partly achieved through the continuous resilience of Africa – fighting past its challenges with the support of pan-African Institutions such as the African Trade Insurance Agency (ATI).
ATI has over the last two decades supported trade and investments worth over US$71billion on the continent, and has contributed immensely toward the reforms implemented by African governments during the pandemic. ATI continues to support African countries to weather the storm through challenging times. Institutions like ATI and its partners exist to allay investor fears of doing business on the continent, by offering trade and political risk solutions that mitigate African risks by turning them into opportunities. Investors are therefore encouraged to take advantage of Africa’s resilience, its growth prospects and the large free trade area presented by the continent.
>>>the author is a Political and Credit Risk Underwriter with the African Trade Insurance Agency (ATI), based in Nairobi, Kenya. She previously worked at Hollard Insurance Ghana as the Reinsurance Manager.