Post-pandemic: The impact of COVID-19 and outlooks for Africa’s recovery

The immediate impact of COVID-19 will see Africa experience its first recession in 25 years, but more worrying is the lack of fiscal headroom available to African governments to engage in stimulus spending.
The immediate impact of COVID-19 will see Africa experience its first recession in 25 years, but more worrying is the lack of fiscal headroom available to African governments to engage in stimulus spending. For many countries, economic recovery will have to be driven by their private sectors, which were already weak and have only become weaker during the pandemic.


“The economic impact of COVID-19 will be varied but the recovery will be even more so” says Jacques Nel, Head of Africa Macro at NKC African Economics. “The optimists will hope to see a race to the top as governments undertake desperately needed reforms, while the pessimists will see a continent set back more than a decade. The reality will be somewhere in between, with each country finding a unique spot on this spectrum.”

However, there are already indications that the scale of this crisis is prompting some welcome reforms. Faced with a volatile global landscape, African governments have a pressing need to develop downstream manufacturing, regional supply chains and domestic capital markets. There are also indications that large portions of the workforce are entering the formal economy to access government financial support and cope with pandemic containment measures.

Some of these trends were set in motion before its outbreak, but COVID-19 seems to have accelerated them. Investors who stay with Africa despite the current downturn will not only have an important role to play in its recovery, but will also see some exciting changes and opportunities.

The great enabler: How Africa is using new digital solutions to revitalise old industries

Investment into African tech has reached record levels in recent years. These are likely to fall in 2020, a consequence of both recent high-profile sector struggles and the impact of COVID-19 on external finance. However, any such decline should be viewed as an opportunity to reset expectations and approaches, not as an indication that the affected sectors are becoming less attractive.

COVID-19 has served to emphasise the need for tech and digital solutions across the continent. It has sparked the development of healthcare apps to help fight the pandemic, e-commerce platforms to facilitate life under lockdown, and new payment and microinsurance systems.

Digital and tech is set to play a far greater role in post-pandemic Africa than it ever did before. 
The wave of informal workers and companies entering the formal economy will need access to basic financial and legal services, which are likely to be provided through online or mobile platforms. Digital solutions may also help facilitate the growing push to build regional supply chains.

The wave of informal workers and companies entering the formal economy will need access to basic financial and legal services, which are likely to be provided through online or mobile platforms. Digital solutions may also help facilitate the growing push to build regional supply chains.

Hostile narratives: Reputation and African geopolitics in the age of influence operations 

Africa has always struggled to set its own narrative and get past generalisations that cast the entire continent as beyond redemption or the next economic powerhouse. This struggle is becoming more acute as internal and external actors actively push false narratives through influence operations and disinformation campaigns.

Foreign powers engaged in such tactics are motivated the geopolitical competition over Africa, which has steadily intensified over the past decade. African governments are also building their own capacity to mount such campaigns.
Investors should not assume that such activities impact only governments.

Foreign investment is frequently the subject of political debate in African countries, and when that debate is distorted by external actors, individual companies face significant reputational risks. Not only that, but disinformation campaigns have been used by militant groups for recruitment and to cause peaceful protests to escalate into violence, posing security threats to commercial operations.

The risk posed by influence operations in Africa should not be overstated, though the trend is growing as social media is adopted more widely across the continent. Just as grasping the political and business landscape can help investors avoid pitfalls and maximise their chances of success, understanding the information landscape – what the narrative is and who is seeking to influence it – will become increasingly important.

Methodology

The Africa Risk-Reward Index is defined by the combination of risk and reward scores, integrating economic and political risk analysis by Control Risks and NKC African Economics, the Africa-focused subsidiary of Oxford Economics.

Risk scores from each country originate from the Economic and Political Risk Evaluator (EPRE), while the reward scores incorporate medium-term economic growth forecasts, economic size, economic structure and demographics.

For details on the individual risk and reward definitions, please contact us on enquiries@controlrisks.com or africa@oxfordeconomics.com

The 2020 Africa Risk-Reward Index is attached (attach PDF of the report and graphics)

ends
Issued on behalf of Control Risks and NKC African Economics, an Oxford Economic Company.
For more information, please contact:
Claire Peddle
Marketing Director, Middle East and Africa
claire.peddle@controlrisks.com
+971 50 600 5993 (Dubai)
Shreena Patel
SEO & Digital Marketing Specialist
 spatel@oxfordeconomics.com
+44 (0) 7999379025 (London)

About Control Risks 
Control Risks is a specialist risk consultancy that helps create secure, compliant and resilient organisations. We believe that taking risks is essential to success, so we provide the insight and intelligence you need to realise opportunities and grow. From the boardroom to the remotest location, we cut through noise and emotion to give you dependable advice when you need it most.

We have been assisting clients in Africa for the past 40 years and today we have eight offices across five countries on the continent, alongside an unrivalled network of embedded consultants and on-the-ground network. We work with the largest investors into Africa and the largest African companies, from mining and energy to media and telecommunications.

About NKC African Economics and Oxford Economics
NKC African Economics, based in South Africa, has specialised in macroeconomic research in Africa since 2003. Insights are provided within the context of comprehensive knowledge of the African continent, its history, and each country’s unique political and economic setting.

In 2015 we became part of the Oxford Economics group, to better combine Oxford Economics’ global base and unparalleled technical expertise in modelling with our Africa-specific skills and insight.

Oxford Economics is a leader in global forecasting and quantitative analysis. Our worldwide client base comprises more than 1,500 international corporations, financial institutions, government organisations, and universities. Headquartered in Oxford, with offices around the world, Oxford Economics employs 400 people, including 250 economists and analysts.

The group’s best-of-class global economic and industry models and analytical tools give us an unmatched ability to forecast external market trends and assess their economic, social and business impact.

About Control Risks and Oxford Economics

Control Risks and Oxford Economics have partnered to provide an innovative political and economic risk forecasting service that takes a holistic view of risk in a complex, rapidly changing, globalised world. Control Risks and Oxford Economics combine extensive geopolitical, operational and security expertise with rigorous economic forecasts and models on 200 countries and 100 industries.

Together, we offer full-spectrum consulting that enables your organisation to navigate the world of political and economic risk. Covering all aspects of the investment journey, including security and integrity risk, our joint consultancy practice can overlay geopolitical and economic scenarios to bring new insights and direction to your business.
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