There is no denying the impact of the COVID-19 pandemic on Africa’s economy. Uncertainty continues to linger concerning when the global economy will begin its recovery process, seeing the humanitarian and economic harm caused by the COVID-19 pandemic. Nevertheless, three massive trends are now emerging amid the COVID-19 pandemic, which will most likely shape the future of Africa’s economy.
The planet is not converging any more, but rapidly diverging. Air travel and shipping volumes are simple indicators, both of which have plummeted in the face of shutdowns and enforced transport restrictions.
With the serious impact on global sectors such as hospitality, entertainment, real estate and construction, trade, small business and others which account for over 80 per cent of global GDP, the World Trade Organisation (WTO) recently warned that trade could fall between 13% and 32% this year. The last time a similar drop was recorded was in 2009 after the financial crisis.
Government policies that restrict international trade to help domestic industries are worsening market shock. Countries on the continent are simply not supporting liberalised markets and are seeking economic relief by restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other regulations.
Unfortunately, multilateralism has been left behind. Increased trade frictions would lead to commercial division, especially targeted at China, which is likely to react reciprocate the gesture. We are likely to see a rapid deterioration of free trade values that could hinder the recovery of the global economy.
Another trend is Asia’s increased importance as a trade bloc with China as the centre. This will have strategic geo-economic consequences for developing countries, which have primary commodities as their main exports, given China’s demand for such commodities both for infrastructure roll-out and industry.
Despite these macro patterns, African economies are still minor players in global trade and are facing the danger more marginalization. It is disappointing that the African Union agreed to postpone Africa’s Continental Free Trade Area (AfCFTA) introduction to next year, perhaps the most ambitious free trade agreement since the WTO itself.
It is envisaged that the economic opportunities of Africa – a continent with more than 1.3 billion people and a combined Gross Domestic Product (GDP) of $2.5 trillion – almost equal to India’s – would be improved by increased barriers to trade. It has been estimated that if Africa was to boost its share of global trade from 2% to 3%, the one-percentage-point rise would produce approximately $70 billion in additional income for the continent per year.
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