Could the economic cost outpace the health impact of COVID-19 in Africa?

Blog COVID-19, pandemic, coronavirus, health systems and economic growth

The policy response to the COVID-19 crisis in African countries should not only factor in their weak health capacity, but also the extreme economic vulnerability of its population.

It is April 2020 and nearly the entire world is under lockdown to fight COVID-19. Whole sections of the economy have effectively been put on pause. It took 67 days between the first reported case in China to reach 100,000 infections; but only a further 11 days to reach the next 100,000.  Now we have just reached a million confirmed cases. Given the limited testing capacity that most countries face, this is probably a gross underestimation of cases.

What will the pandemic look like in Africa?

Countries in Africa are now increasingly adding to these statistics. In fact, worryingly, the virus seems to have multiplied faster across the continent in the past 30 days, than it has in Asia or in Europe to date.

If this rate continues, Africa’s already weak health systems will collapse. When COVID-19 started hitting Lombardy, the most affected region in Italy so far, it had a little over 700 Intensive Care Unit (ICU) beds for its 10.4 million people. The US currently predicts, under a moderate outbreak, that they will need more than 200,000 ICU beds. By comparison, the number of ICU beds is 55 in Uganda, a country with a population of 42 million people. The situation regarding ventilators, which are required to keep people on life support, is even starker: countries like Mali, Burkina Faso, Liberia, have less than 20 ventilators each.

To date, most hospitalised COVID-19 patients do not need intensive care and eventually recover. It is likely that this hospital-based care is preventing many patients from being more harshly affected by the virus. Across Africa, however, there are only approximately 1.2 hospital beds per 1000 people. This is compared to 6.5 in France, 3.5 in Italy, 3 in Spain, the US and the UK. This may mean mortality from COVID-19, under similar transmission rates, could be even higher in Africa, as people cannot access the required initial care.

Some predict, however, that the health impact of COVID-19 for Africa could actually be lower than in China or European countries. This is due to the continent’s different demographic and geographic characteristics. For example, a recent report from the UK shows that about 80% of patients with COVID-19 admitted to ICUs in the UK are above 50 years old. Put into context, the share of Europe’s population above the age of 50 is 40%. Comparatively, this share is only 10% for sub-Saharan Africa. There is further, still controversial evidence, suggesting that the spread of the virus could be lower in hot and humid places. Overall, these factors may benefit the African continent whose population is young and temperatures are hot.

Therefore, the full potential health impact of the pandemic in Africa is not yet known. Since we do know that Africa is the region of the world least prepared to manage the impacts of a global pandemic, we do not have time to wait to find out. If infection rates are similar, or higher in Africa, as they have been in China, Europe and the US, health systems will collapse and hundreds of thousands could die.

Economies and livelihoods threatened

In an attempt to “flatten the curve” of transmissions, primarily to support countries to manage the potential caseload within healthcare capacity, first China and now most European countries and parts of the US, have implemented a form of lockdown. Many African countries have adopted similar, and even harsher, approaches, effectively stopping people moving and interacting.

Yet, shutting down also means bringing economies to a grinding halt. It is still hard to predict the full long-term economic cost of these mitigation measures. However, it is already clear that individuals in African countries are suffering.  These impacts are likely to be far worse in the days and weeks to come. Furthermore, it seems likely that the economic consequences of the lockdown across Africa are going to be even harsher than they will be in Europe or the US. Therefore, a legitimate question at this stage is whether the economic cost of the lockdown mitigation measures may potentially outweigh the health impact of COVID-19.

Take the informal sector, for example, where people selling food and other goods or services such as hairdressing and carpentry, and for the most part, live a hand-to-mouth existence. A survey of informal sector firms in Kampala, showed that 93% of them are already operating below the poverty line and the ILO estimates that this sector represents 66% of total employment across Africa. For these populations, their economic existence is predicated on their daily customer flow and face-to-face interactions. A lockdown to enforce social distancing effectively stops all revenue generating activities. Urban dwellers are further impacted by the already rising food prices both driven by panic buying and the disruption of food supply chains, through border and transport closures.

Larger firms, which typically provide more stable employment, are not spared either. For those relying on imported inputs from China, the first impact came when China’s exports plummeted earlier this year. With domestic economies now shutting down, the second wave is hitting much harder. This fall in domestic and foreign demand will affect production and sales, and in all likelihood, will translate into major worker layoffs.

Without any safety measures in place, the economic impact of the response to the pandemic is likely to hurt livelihoods, by having deep consequences on inclusion and growth for years to come. The Ministry of Finance, Planning and Economic Development in Uganda already predicts that in their current worst case scenario an additional 2.6 million people could be pushed below the poverty line.

It may also cost lives. The World Bank estimated that between 30,000 and 50,000 additional infants died across Africa as a result of the 2008 Financial Crisis. Yet this was still a time of positive GDP growth in Africa; current estimates for OECD countries predict that lockdown measures will have a drastic impact on GDP. Therefore, fighting the virus will save lives but could at the same time shorten many others.

Protecting people: cushioning the blow

To protect those most strongly affected by the lockdown, the US has just agreed to a 2 trillion USD stimulus package and countries in the EU have already committed to packages worth billions of dollars. These packages include measures such as compensating the self-employed as well as family and micro businesses for their loss in earnings.

Yet, these sorts of measures are currently infeasible in many African countries. Prior to this crisis, spending on social protection in low income countries overall was already negligible. Even if governments wanted to extend social protection in this crisis, it is unlikely they will be able to do so on their own. The slowdown in economic activity means that tax revenue will decline and borrowing further will be tough. With already unfavourable government bond credit rating, most countries in Africa cannot afford the further COVID-19 downgrade that some countries, including the UK, have already experienced. Often safety nets are provided in the form of remittances by relatives working abroad. But remittances are also slowing as the economic impacts are felt globally.

Policymakers worldwide, including in Africa and other developing countries, have extremely difficult decisions to make. What measures can slow down the spread of the virus while protecting their populations from the economic damage? It is not yet clear what the optimal response should look like. However, it is becoming increasingly clear that directly following policies taken in Europe, US and elsewhere may not be economically viable. Lockdown measures put enormous pressure on the most vulnerable, and without any social safety nets in place, there is nothing to cushion the impact. Saving lives from COVID-19 is a clear imperative, but policies must also take account of the economic vulnerability of populations who live a hand-to-mouth existence and who risk being pushed further into poverty.

Disclaimer: The views expressed in this post are those of the authors based on their experience and on prior research and do not necessarily reflect the views of the IGC.