Re-imagining Africa’s Economy Post-COVID
The International Monetary Fund (IMF) projects global growth in 2020 to fall to -3 percent. According to Gita Gopinath, the IMF’s research director, for the first time since the Great Depression, advanced economies, emerging markets and developing economies were - as of the end of Q1 - experiencing a decline. (See Fig 1.)
The World Bank reports that the continent will experience its first recession in 25 years, threatening jobs or incomes of 150 million Africans—one-third of the entire workforce.
The Impact of the Pandemic on Trade in Africa
By 29th July, the continent recorded 874,036 confirmed infections and 18,498 confirmed deaths according to data from John Hopkins University and Africa Center for Disease control. Even though these numbers are relatively small compared to the continent’s 1.2 billion population, Africa is not able to avoid the impact of COVID-19. This is because trade with the rest of the world is vital to the continent; it is fully integrated into the global economy both as a supplier of raw materials and as an importer of finished goods.
Trade directly impacts the Gross Domestic Product (GDP) of any economy and is central to ending global poverty. Countries that are open to international trade tend to grow faster, innovate, improve productivity, provide higher income and more opportunities to their people and low-income households have access to more affordable goods and services.
As a result, mass-production shutdowns and supply chain disruptions have created a ripple effect across all sectors causing further uncertainty for a continent already grappling with instability.
Women & Women-Owned Small and Medium Sized Enterprises (SMEs) Disproportionately Impacted by Covid
In the face of the human and economic crisis caused by COVID-19, existing gender inequalities in economic opportunities may worsen, as was seen in previous large-scale health shocks such as the 2014-2016 Ebola epidemic.
Hafez Ghanem, Regional Vice President for Eastern and Southern Africa at the World Bank, shared the following observations during a webinar on ‘Covid-19 Risks for Women Entrepreneurs in Africa: What Role for Multilateral Institutions?’ hosted by the Women In Africa (WIA) Initiative.
Most women entrepreneurs in Africa work in the informal sector and consumer-facing sectors that were immediately hit by decline in consumption due to recession and the pandemic.
60% of these women are in agriculture, one of the hardest-hit sectors.
Women-owned firms tend to have fewer financial buffers than male-owned firms (which have 6x the capital investment than women-owned), making them more vulnerable to economic shocks.
School closures and confinement measures increase care-related tasks for women and subsequently, authorities have also seen an increase in gender-based violence. The long term socio-economic impact is likely to get worse.
While the immediate priority for policymakers is to address the health crisis and contain the short-term economic damage, there is also a long-term need for authorities to improve the fundamental drivers of economic growth once the health crisis lifts.
Opportunity to Reinvent Economic Systems on the Continent and make Small Businesses more Resilient
The after-effects of the crisis will most likely reshape how work and business in Africa is done across many sectors. It also highlights the need for urgent action to cushion the pandemic’s health and economic consequences, protect vulnerable populations, and set the stage for a lasting recovery. The World Bank lists three main areas from which to start:
Building resilience and Sustainability in strategic sectors
It is crucial to further diversify African economies and strengthen the strategic sectors of food and health for all countries. Africa is uniquely positioned to further leverage its rich agricultural resources by improving basic infrastructure and efficiency, and agro-processing capacity.
Technology
Businesses and organizations of all types are being forced into remote working and distance learning. Africa must embrace the digital age and adopt more and more digital technologies for both production and services in areas such as banking, retailing, and learning as well as public services. The sectors with high-level of digitization seem to weather the storm much better. In doing so, the continent needs to strengthen its education system, especially in digital skills training.
Intra-Africa Trade
Africa and its countries must strengthen intra-regional trade by making concerted efforts to harmonize trade-related regulations, customs controls, and reduce both tariff and non-tariff barriers, meanwhile, improving the infrastructures and connectivity to lower the logistics cost. This crisis provides an opportunity to take more concrete steps towards realizing the African Continental Free Trade Area (AfCFTA) Agreement.
Opportunities for AWEC Fellows, Entrepreneurs and SME’s Across Africa
Despite these challenges, we have seen African women entrepreneurs rise to the occasion, pivot their business strategies, and adopt new tactics and technologies. Entrepreneurs should proactively innovate as the world changes.
Innovation and inclusion in the digital space:
Those able to use mobile and digital marketing, have transformed their businesses. As a result, they now have markets outside of Africa, which is a very good development.
Entrepreneurs should focus on gaining digital apprenticeship and mentorship to help them upskill while still working on their businesses. AWEC’s Core Program and Business Academy were designed for African female entrepreneurs with this in mind. The programs are practical and immediately applicable.
Business owners need to address the digital gap by upskilling teams, adapt processes and innovate businesses to take advantage of the Digital age. Speaking of adapting, we pivoted our annual AWEC General Assembly to a virtual event in response to the pandemic.
Virtual product and service offerings:
Working from home and the challenges of meeting child care and home needs have highlighted the opportunity to create safe spaces and co-working with social distancing
There is also an urgent need for virtual services to support traditional healthcare and particularly maternal health.
Continuing education is extremely important. While distance and online learning is not a new concept, Africa still lags behind its Western counterparts when it comes to e-learning accessibility and inclusion.
Disrupting industries and innovating employment creation:
Flexibility and adaptability has allowed entrepreneurs to scale innovative solutions emerging from the crisis. If commercialized and scaled up, innovations could create even more employment opportunities.
For example, the World Economic Forum highlights a local textile factory in Kenya that was transformed into a surgical mask assembly line within a week. The factory already employs 400 workers, including 320 women, and plans to use the proceeds of the sales revenue to open two more facilities.
Across the continent, the Institut Pasteur de Dakar, a biomedical research center in Senegal, developed a prototype for a ten-minute COVID-19 diagnostic test. The Institute formed a partnership with a British biotech company to obtain international certification and as production will likely lead to new hires of young Senegalese men and women.
There is no argument that the pandemic has had a devastating impact on the global economy, and like every continent, Africa is bracing itself for an economic downtown. Yet, despite these challenges, this crisis has also created unique opportunities for the growth and expansion of SMEs.
All of us at AWEC welcome the chance to help empower and enable women-led businesses across Africa to rise to this challenge. Subscribe to our newsletter to get the latest AWEC news and learn about how you too can impact these businesses.