Photo credits: World Bank Photo Collection
By Frank Hartwich, Anders Isaksson and Jenny Larsen
Africa has so far been spared the worst health effects of the COVID-19 pandemic. But despite a lag in the arrival of the virus on the continent and a large informal sector, policymakers say the impact on industry will be severe. More help is needed at international level to develop policies to prepare industry for the post-COVID-19 economic environment.
In a new online survey of policymakers in African ministries of industry, the majority said they expected industry revenue to drop by more than 25 per cent in 2020, with some suggesting it could be over 50 per cent. In the survey carried out by the UN Industrial Development Organization (UNIDO), just over half the respondents expected recovery to take at least a year, while the remainder said at least two years was more likely.
One major reason given for the anticipated fall in revenue is the widespread supply shortages of inputs caused by the pandemic, along with a simultaneous drop in demand and supply, and factory closures.
“While African economies did not, per se, intensify the stay-at-home policies and lockdown protocols, they were still hit with a double whammy effect that has played out both on the supply and demand side for manufacturing goods,” according to the UNIDO working paper based on the survey.
The crisis will harm already vulnerable economies, many of which had previously been on a promising growth path. If predictions of a longer recovery prove correct, it threatens to reverse some recent development progress.
The longer that mitigation policies are kept in place, the greater the risk that other measures necessary to push forward industrial development will be neglected. “If COVID-19-related policies imply a delay in industrialization and a slowing down of productivity, we can expect to see a regression of some of the advances in development experienced hitherto in Africa,” according to the UNIDO paper.
In its more conservative outlook scenario, the United Nations Conference on Trade and Development (UNCTAD) predicts a drop in African GDP of at least 1.4 per cent in 2020, with least developed countries (LDCs) and small island developing states (SIDS) most affected. In a more pessimistic outlook, it says exports could fall by over 16 per cent, with countries such as Nigeria and Ethiopia suffering severe losses.
The impact on industry comes on top of a general trend of slow to stagnant industrialization on the continent. UNIDO figures show that Africa’s share of world manufacturing value added (MVA) stands at 1.6 per cent, with signs of deindustrialization in some countries, especially LDCs. There has also been a general fall in the share of manufacturing in GDP across most regions, although there have been signs of consolidation in recent years.