Africa, facing an "unprecedented economic crisis" and a unique opportunity

The economic forecasts for Africa due to the COVID-19 are not at all encouraging: the World Bank (WB) and the International Monetary Fund (IMF) are predicting recession and an unprecedented crisis. These are predictions which, in the eyes of several African economists, fall short, but which present the continent with a unique opportunity to stand up to the debt and policies imposed for years by these multilateral bodies. The WB predicts a fall in 2020 that could range from -2.1% to -5.1%, and with it the first recession in the last 25 years; while the IMF foresees that Africa will face an "unprecedented" economic and health crisis with a 1.6% decline this year.

For the Guinean economist and high representative of the African Union (AU) for Europe, Carlos Lopes, many health forecasts made so far for Africa "are a little alarmist", but the economic ones "not so much" and even "are a little optimistic", in a continent that, so far, has officially registered more than 70,000 cases and more than 2,400 deaths from the coronavirus.

Senegalese economist Ndongo Samba Sylla says the IMF is "very optimistic" in its forecasts and we are "in a period in which we cannot make estimates" because "nobody knows what may happen" but, in any case, "growth is going to fall a lot".

According to the IMF, of the 30 fastest growing economies in the world, 16 are African; and half of the continent's population lives - or used to live - in a country whose economy grew by more than 5%. This growth is justified by the good economic situation, the price of raw materials or the relative political stability since the beginning of the 2000's, but it is criticised by some economists who reproach that this wealth does not benefit the whole population.

"Even in a country with 6% growth since 2012, says Efe Sylla, referring to Senegal, the majority of the population does not live well and surveys show that 52% of households have no access to water or soap". "Our GDP (gross domestic product) has been increasing in parallel with our inequality. So this makes us wonder who growth is for when GDP is increasing, but it is increasingly difficult for people to put food on the table to survive," Kenyan economist Crystal Simeoni warns Efe.

Africa's growth will slow down because its economies are dependent on the profits from the export of raw materials, the prices of which have plummeted, such as minerals, cocoa, coffee and oil, which has fallen to historic highs and has already caused Nigeria - Africa's largest oil producer - to lose 80% of its oil revenue.

"There are 35 African countries that are in the category of 'highly dependent on raw materials'. This means that at least 80 percent of their exports come from raw material revenues - that's huge! They are going to have a brutal reduction in their export earnings," Lopes warns in statements to Efe.

The crisis will hit the continent more than other parts of the world, according to Lopes, because Africa, unlike Europe, cannot define its own monetary policies.

"When there is a crisis in Europe, the European Central Bank can decide that interest rates will be 0% or negative; Africans do not have this possibility. Paying a debt with that kind of fiscal framework, where rates are 0% or negative, is not the same as paying a debt at 7%," exemplifies the Guinean expert.

Among the measures proposed by both the WB and the IMF so that the economic shock is less for African countries and that money can be used to control the COVID-19 is "immediate debt relief" from bilateral creditors.

However, the measures of moratorium on debt interest payments announced by the IMF affect only 19 African countries and, in the words of Lopes, "forgiving a part of that debt, in concrete terms for those 19 countries, is like forgiving only $242 million. It is nothing, it is the cost of a Boeing". "It should not be a moratorium, but a forgiveness of the interest on the debt for one or two years. I think the amounts being talked about are small (worldwide), but it would allow these countries to breathe," says the Guinean economist.

According to Sylla, what should be done is "to cancel all of Africa's external public debt" on the grounds that "it was not contracted in the name of the African people" but "it is the people who pay the debt through the degradation of their economic situation because the most vulnerable populations need public services.

In order to make the impact of the coronavirus as less severe as possible for Africa, the two institutions created by the Bretton Woods agreements (1944) also urged in their reports published in mid-April to increase health spending. "It is important to remember that many of the gaps in the African continent, in the sense of how we cannot manage a crisis or how badly we have been through a crisis, were imposed by the policies of the IMF and the WB in the 1980s and 1990s (of the last century) with their neoliberal structural adjustment plans," Simeoni recalls. For the Kenyan economist, they are using again "the same schemes that caused this crisis, partly to try to solve it".

On May 6, the IMF approved an emergency loan of $730 million for Kenya and $491.5 million for Uganda. Money, once again, that these countries will have to pay back with interest. "It is - Sylla says - what we call crocodile tears. In the 80's the IMF and the WB wanted the countries of the South to pay the debt and for that to happen austerity was necessary", which translated into less investment in health and education.

"They come to tell us that we have to invest in health, yes, but why haven't we started earlier? Because at one point, even to the efforts that some African countries were making to equip themselves to deal with epidemics, the IMF said no," recalls the Senegalese expert.

According to Lopes, the crisis caused by the coronavirus is going to put on the table a set of situations that will completely transform the economic debate and "alter the debate on the role of the State in social protection". 

In a context in which one can observe "the little faith and trust" that African populations have in their governments due to "the perception that the African State is incapable of providing", the Kenyan economist believes that the current crisis "really gives us the opportunity to rethink all these models that we have been implementing and that are imposed on us very externally".

But, as Sylla points out, everything will depend "on the response of governments". South African President Cyril Ramaphosa, whose country holds the rotating presidency of the African Union (AU) this year, is leading the joint response to call for a debt freeze and is putting forward a united front.

But "will they choose to stand up with the AU to push for such a moratorium? -asks Simeoni. Or are they going to say: we just need a little money to solve our health situation right now'.