Last year was a challenging one for Africa. Though the continent seemed to cope with the first wave of the Covid-19 pandemic better than most regions, the economic consequences were dire. At the same time, conflict and civil unrest continued to feature prominently, while extreme climatic conditions compounded underlying issues.
Many of these themes will continue to shape the outlook for the new year. In this context, the FM assesses some key issues for the continent to navigate in 2021.
The Covid storm
To the surprise of many, Africa had much lower Covid-19 mortality and morbidity than other regions in 2020.
Many had predicted that the poorest continent, with its weak public health-care systems, would be hardest hit. But the reality was different. According to a December tally compiled by news agency AFP, Africa had reported 2.4-million cases — just 3.6% of the global total.
There are several possible reasons for this, ranging from Africa’s climatic and topographic conditions, and the nature of its community health-care systems, to its young population and favourable demographics.
Some attribute the relative success to skill, others to luck. In reality, it’s been a combination of both.
Any analysis should not discount the governance response mounted by officials, particularly via pan-African agencies. This was agile and comprehensive, as seen in the proactive stance of the African Centres for Disease Control & Prevention (Africa CDC) and the AU in mobilising resources and interacting with the World Health Organisation.
The continent also leveraged its experience in crisis management — specifically in dealing with infectious diseases such as Ebola and TB — to great effect.
That the virus arrived in Africa later than it did elsewhere was another advantage, allowing authorities more time to prepare.
Though there is an obvious caveat around testing capacity, suggesting that the death rate may be understated, the continent’s response has generally been effective.
Can this be maintained in 2021? Predictions are a fool’s game, but with second waves upon us and new variants afoot, there is cause for concern.
It’s expected that infections across Africa will peak in February, says Dr John Nkengasong, director of the Africa CDC. And the emergence of new Covid mutations may pose additional dangers.
Stretched resource capacity, lockdown fatigue and expected delays in vaccine procurement suggest it may be difficult for Africa to replicate its initial success, leaving little room for complacency.
Will there be an economic recovery?
In 2020, the continent was hit by the triple shock of a commodity price rout, a crisis of confidence and a contraction due to Covid-19 that exposed the structural vulnerabilities of economies already in crisis. Capital flight, currency weakness and revenue shortfalls pushed Africa into its first recession in 25 years, according to the International Monetary Fund.
The implications were profound — most notably in the area of sovereign debt. Zambia’s recent default has cast a shadow over the capacity of several other countries to manage their debt obligations.
Africa must now avoid the spectre of a sovereign debt crisis.
The Debt Service Suspension Initiative (DSSI) pioneered by G20 creditors has emerged as a potential solution. However, progress has been slow due to opacity around the mechanics of the initiative. It is not clear who will participate, on what terms and in what form.
There is a fear among private creditors, for example, that debt suspension may eventually turn into debt cancellation, with uncertainty around who will carry the can for the ensuing losses.
Meanwhile, governments are concerned that taking part in the DSSI will trigger automatic ratings downgrades or defaults, which would affect future market access.
How the continent manages its relationships with international creditors will have a significant bearing on its future economic performance.
Paradoxically, while the debt dilemma remains unresolved, investors have indicated a strong appetite for African debt.
As ratings agency Fitch noted in November: "The global hunt for yield as a result of massive monetary easing in development markets has helped bring down the cost of debt. [Ivory Coast’s] bond was priced at a record-low yield of 5% and was still five times oversubscribed."
Optimistically, this suggests African debt sustainability may be viewed through a country-specific, rather than a generalised, lens. Cynically, it suggests investors are ignoring the risks in favour of attractive returns.
In 2021, "vaccine economics" will be the key determinant of global growth, with recovery dependent on how quickly the pandemic can be arrested.
Africa’s economic growth could rebound, depending on how well governments manage the Covid-19 infection rate, according to updated forecasts from the African Development Bank.
Supportive global fiscal and monetary conditions through the better part of 2021 will act as a tailwind, even if most domestic policy war chests in Africa are maxed out.
Growth prospects should be driven by stronger global demand, increased trade, higher commodity prices and a resumption of tourism.
Free-trade area: a game-changer?
Covid-19 did not deter the continent’s integration project, but the pandemic did bring extensive challenges and necessitated wholesale process and timeline changes. However, after two postponements, the African Continental Free Trade Area (AfCFTA) finally came into effect on January 1.
The AfCFTA will now create the largest free-trade area in the world, measured by participating countries. By the World Bank’s estimate, it’s expected to connect 1.3-billion people across 55 countries with a combined GDP of $3.4-trillion.
However, there are three key dilemmas for policymakers to resolve to realise the potential of the initiative.
The first is harmonising Africa’s very different economies under one agreement. There are huge infrastructure and industrialisation gaps between AU members. This means more-developed African countries will have to take the lead in avoiding trade mismatches that could destabilise economies and drive a wedge between the continent’s economic powerhouses and smaller states.
Second, forging ahead with the AfCFTA will require huge trade-offs. Political leaders will need to think beyond short-term election cycles, and cede sovereignty in policymaking. Aligning continental objectives with a domestic agenda won’t be easy, especially given rising global populism and nationalism, along with a protectionist impulse.
Third, African politicians will have to accept that the benefits of membership far outweigh any pockets of discontent that might stall the process. The narrative must change from a top-down, technocratic agreement to a bottom-up one that benefits the person on the street. The divide between citizens, business and politicians will need to be bridged to allow comparative advantages to be leveraged for the benefit of all.
Free-trade agreements are complex and fragile, and their impact is only as strong as the willingness of signatories to adhere to the rules. The AfCFTA’s success will be measured by its impact, which requires the secretariat to swiftly pivot from its focus on sign-off to implementation.
Though there will almost certainly be teething and unresolved issues (including around regional economic communities and rules of origin), the start of trade could be the catalyst to accelerate continental manufacturing, e-commerce, digitalisation and food security.
Africa and vaccine diplomacy
Affordable and equitable access to Covid vaccines has the potential to dramatically shape the global economic recovery, while the speedy and effective rollout represents a huge opportunity to remould global power dynamics.
Naturally, the stakes are high and the competition is intense to achieve both first-mover advantage and scale.
Vaccine diplomacy will be key in 2021, with the US, China and Russia all vying for supremacy. In this context, Africa will emerge as an arena for competition. But with limited financial resources and a lack of bargaining power, the playing fields will be skewed — unless African countries are able to offer strategic value to suppliers.
As it stands, most African countries are relying on the Covax facility — a global alliance of countries and institutions that seeks to provide equitable access to vaccines. However, there are concerns about the rollout and reach of this facility, and a number of countries have started to look elsewhere for alternatives.
If Western countries continue along a path of vaccine nationalism, and the shots remain unaffordable or inaccessible, the neglected global south (and Africa in particular) will be forced into the arms of partners such as China and Russia. Indeed, the current circumstances create fertile conditions for a new set of power dynamics to take root in the region, spurred by vaccine diplomacy.
The security environment
Worryingly, but unsurprisingly, the pandemic has worsened security concerns across the continent — directly and indirectly.
The implications of Ethiopia’s Tigray conflict — which was partly catalysed by the federal government’s decision to delay elections due to Covid — have spread far beyond the borders of the country, and present a threat to the stability of the Horn of Africa itself.
Meanwhile, the crisis engulfing the Sahel region continues to deepen, with interethnic violence increasing and jihadis extending their reach.
In Southern Africa, attacks by armed extremist groups have increased in Mozambique, with the oil-rich province of Cabo Delgado hit especially hard. Increasing insecurity has caused neighbouring countries and investors to panic, and could derail the country’s gas exploitation plans if left unaddressed.
All these issues point to the failure of state structures and governance — a situation that will only be made worse by the pandemic and climate change.
Climate change in particular is a key multiplier of conflict, and Africa’s susceptibility to extreme weather patterns may escalate food insecurity, water scarcity, migration and competition for resources.
Governments facing the quartet of crises — coronavirus, climate change, insecurity and economic decline — may be forced to make trade-offs due to limited political and institutional capacity. If not carefully managed, these could undermine a year of rebound for the continent.
*Gopaldas is director of risk consultancy Signal Risk
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