Maverick Citizen

PANDEMIC IMPACT

Africa’s economies need global solidarity and economic restructuring to recover from Covid – Stiglitz

Professor Joseph E Stiglitz. (Photo: EPA-EFE / GIAN EHRENZELLER)

African economies will need deep structural changes, and not just the tweaking of education and health systems, to recover from the devastating impact of the Covid-19 pandemic, says Nobel prize-winning economist Joseph Stiglitz.

Rich countries will have to do far more to ensure all Africans are vaccinated and that all African economies recover. 

“We heard the refrain….that no one is safe until all of us are safe. Similarly….we won’t have a robust global economy until every country is in the process of economic recovery,” the Columbia University economics professor said.

He was speaking at a webinar about a new report produced by South African scholars – The Economic Impact of Covid-19 and Prospects for a Post-Pandemic Economic Recovery in Africa.

It was produced by the Institute for Social and Economic Research and Policy (ISERP) New York’s Columbia University, Johannesburg’s Brenthurst Foundation and the US non-profit organisation Academy for Political Science (APS). It examined the impact of the pandemic and the way it was handled in five key countries—Egypt, Ethiopia, Kenya, Nigeria and South Africa.

The report was written by Lyal White, Brenthurst Foundation research associate; Liezl Rees, head of the Centre for African Business at Johannesburg Business School at the University of Johannesburg;  independent public health medicine specialist Heinrich Volmink; and Nikitta Hahn, a researcher at the Gordon Institute of Business Science (GIBS) at the University of Pretoria (UP).

It found that African governments had not been prepared to effectively manage the pandemic which had accentuated challenges that had existed in Africa for decades. These included poor governance, a lack of growth-friendly policies, weak institutions, poor health and education systems, widespread poverty and inequality, poor statistical data and digital access and predominantly informal economies.

White noted at the webinar that these pre-existing conditions were probably more important in determining the future trajectories of Africa than anything they had done since the pandemic hit. They  had hampered growth before the pandemic and hindered management of the crisis during it. They would also  affect the pace of the recovery which was likely to be uneven, to be slower than elsewhere and to exacerbate the inequalities between Africa and the rest of the world. 

White also noted that although Africa appeared to have experienced lower Covid infection rates than other regions, this might have been because its data were inaccurate. 

The report noted Africa’s economy had shrunk by 2.1% in 2020 – though some estimates have put it higher. This was in any case less than predicted, though anti-Covid-19 measures had nonetheless precipitated Africa’s first recession in 25 years pushed a further 25 million Africans into extreme poverty in 2020.

And the longer-term economic impact of the pandemic was likely to be greater in Africa than elsewhere, with IMF estimates of near 6% global growth in 2021 and 4% in 2022 for the world  but only 3.4% and 3.8%, respectively, in Africa. White said per capita GDP in Africa would probably only return to pre-Covid levels by 2025. 

The authors homed in on Egypt, Ethiopia, Kenya, Nigeria and South Africa because together they constitute well over 60% of Africa’s economic output, about 40% of its population and represent many of the features of its various regions. The report also laid much of the blame for Africa’s slow economic recovery not only on these domestic factors but also on unequal vaccine distribution, largely due to “vaccine nationalism” by the rich world. 

It noted that by February 2021, soon after the global vaccine roll-out began, 175 million vaccinations had been administered worldwide, while the whole of sub-Saharan Africa had not yet started a single vaccination programme.

The main barrier to vaccine acquisition by poorer countries was cost, as vaccine manufacturers had on average charged countries more than six times the cost of production, forcing many countries to rely on loans and vaccine donations. Volmink told the webinar that Covax, the global initiative to secure vaccine access for lower income nations, could have provided Africa with all of its vaccine needs by the end of 2021 – if it had been able to buy the vaccines at cost price. But because it had had to pay more than five times the cost of production, only 15,5% of the populations of the five countries in the study had been vaccinated by 22 February 2022, compared with 65% globally.

The report also noted that other problems, such as the logistical challenges of administering vaccines, including lack of electricity as some vaccines have to be kept at minus 70 degrees Celsius – and vaccine hesitancy – had also impaired Africa’s roll-out. 

Nonetheless South Africa’s Wilmot James, chair of ISERP’s Center for Pandemic Research, who, with ISERP president Robert Shapiro, was one of the architects of the report, said: “While the pandemic exposed a range of problems from poor data and high levels of informality in the private sector to comparatively low digital connectedness, inequality, and poor health and education systems, it has also provided a catalyst for change.”

Covid-19 had highlighted the need to improve health governance and to overcome international barriers to accessing health products and technologies, including vaccines. This had also focussed on the need to produce medicines and vaccines in Africa. This is starting to happen, especially in South Africa. 

Stiglitz, though, emphasised that Africa needed major structural changes – and not just tweaking of education systems or industrial policy – to recover from the pandemic.

He noted that in Ethiopia, for instance, the “genocide” perpetrated by the current government during the current civil war, had undermined the efforts by the previous government to keep the country together and would be the major determinant of the country’s post-pandemic trajectory. 

And Stiglitz said Nigeria was a good illustration of the report’s conclusion that the most important determinant of how a country recovered from the pandemic was its pre-Covid systems. Nigeria was still plagued by the resource curse including corruption and had failed to exploit its oil riches to diversify its economy.

Nigeria had developed no strategy for its future when oil exports ended- which they would do even sooner as the world moved to zero net carbon emissions by 2050.

Stiglitz said the Asian model of economic transformation via export of manufactures was not available to Africa as the total number of manufacturing jobs globally was diminishing. So Africa needed an “alternative paradigm, a fundamental shift” to be able to recover fully. 

He said Africa had been impacted more than other regions even though it had suffered relatively fewer Covid deaths and infections, largely because other regions had been able to spend far more on resuscitating their economies.

The US, for example, had infused capital equivalent to about 25% of its GDP to resuscitate its economy while emerging and developing countries had spent very little and the least developed countries had spent almost nothing.

The lack of global solidarity in helping African and other poor countries float their economies was self-defeating, Stiglitz said. “We heard the refrain… that no one is safe until all of us are safe. Similarly… we have a robust global economy until every country is in the process of economic recovery.

“Instead there was selfishness and short-sightedness, vaccine hoarding… the worst manifestation of that was the Trump administration vetoing the issuing of US$650-billion of SDRs.” (IMF Special Drawing Rights) Though the Biden administration had lifted the veto and the SDRs had been issued to refloat economies, only about US$50-billion of that had gone to poorer countries, while richer countries had held on to most of it, even though they didn’t need it. 

He noted that in the US the Republican Party had stymied efforts to create a fund to recycle the SDRs to poorer countries and to issue them more regularly. 

And Stiglitz said he was amazed that global leaders had still not realized how global inequities in Covid vaccine distribution would also hurt them in the long run. The benefits of providing vaccines to everyone in the world were overwhelmingly obvious – to prevent the evolution of new Covid variants in unvaccinated populations.  

And Stiglitz said efforts to help poorer countries to recover from the pandemic by relieving them of debt had also been frustrated. The G20/OECD initiative to suspend their debt service payments for a period had not worked because private creditors had refused to participate.

And initiatives to forgive debt were also being frustrated by lack of participation of Chinese lenders which meant that other lenders were concerned that if they forgave debt the Chinese and not African countries would effectively benefit. 

Njuguna Ndung’u of the African Economic Research Consortium and former Kenya Reserve Bank Governor, agreed that Africa lacked a continental strategy of recovery from Covid-19. This would have to include reform of health institutions but also economic measures such as the protection of markets – which is where the recovery would come from – and the boosting of domestic mobilisation of government revenues. DM

 

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