The African economies are not diverse enough to help them navigate tough times like the one posed by the covid-19 coronavirus pandemic.
This means that when the sectors that are popular in these economies are hit, the countries suffer immensely and take longer to recover. This is no different now and with projections that the economies will slow to about 2 per cent growth continent-wide.
Despite Africa’s immense wealth of natural resources and human capital, limitations still remain since the countries have no capacity to add value to these resources. For instance, Africa should be producing steel but it does not since it has to export the raw materials to be processed elsewhere denying the continent the much-needed revenues.
Speaking in Kigali, Rwanda last December, the African Union Infrastructure Envoy Raila Odinga said that Africa needs to go beyond just producing the raw materials but invest in value addition to give the continent’s youth an opportunity at benefitting from what the continent has.
The Economic Community of Central African States (ECCAS) will for instance collectively shed 4.7 percentage points in their projected GDP growth this year. This is as a result of the severe impact of the covid-19 coronavirus pandemic.
The continent’s economic growth rate will also drop from the previous 3.2 per cent forecast of to 1.8 per cent. The Central African sub-region will be one of the most highly exposed areas to the economic downturn. This region excessively depends on the export of commodities with the UN Economic Commission for Africa (ECA) projecting that the region’s supply chain, tourism, remittances from the diaspora and commodities such as coffee, cocoa, rubber and timber will be hardest hit.
Countries such as Gabon, Congo, Chad and Equatorial Guinea will be among the hardest-hit in economic terms given the weight of oil exports in total exports.
In a scenario of a US$30/barrel, this would be a 50% reduction in oil export revenues caused by a demand and price contraction. The latter is as a result of downward projections of the rate of growth in Chinese and Western economies and unresolved dispute between Russia and Saudi Arabia on oil production ceilings.
This brings in the aspect of value addition which would make it better for the countries engaged in the minerals economies.
Nigeria, Africa’s largest economy will also suffer a similar blow slowing its growth since the country relies heavily on oil exports. The country’s total exports of crude oil in 2020 could reduce by between US$ 14 billion and US$ 19 billion with the entire continent’s export revenues from fuels falling at around US$ 101 billion in 2020.
Antonio Pedro, Director for ECA’s Office for the ECCAS sub-region says that Africa produces more than 70 per cent of the total cobalt used globally to produce the batteries for electric car engines. With cobalt being the lynchpin of electric cars, he wonders why rich African capital owners do not take on this sector headlong.
He has appealed to the business community on the continent to have an inward-looking business strategy because “the opportunities, the markets – especially with a rising middle class – and the endowments are there to do this.”
“What if the myriad of huge business and capital owners in Africa copied the example of Aliko Dangote who did not wait for the environment to be perfect before taking on giants in the manufacturing and sale of cement?” Pedro asks.
“This is the pathway to follow as for example the global world switch towards electric cars fueled by batteries which will represent a USD 300 billion a year industry by 2050 with about 160 million vehicles to be produced,” he adds.