By Abdel Monem Fawzi
African countries are yet to see the light at the end of the tunnel of the Covid-19 crisis, but they must quickly initiate deep economic reforms to prepare for their future as returning to their pre-pandemic model is no longer possible.
hile the pandemic has generated an urgent need for increased international support for Africa within the framework of a more modern form of multilateralism, the region will have to take charge of its own future by building a new kind of partnership with the private sector – both at national and international levels – so as to secure the financing needed for their economic recovery and mitigate the medium and long-term impact of the crisis.
These were the main takeaways of the high-level roundtable “The Big Debate: Was the multilateral system prepared for the Covid-19 crisis and did the private sector do enough?” held during the ministerial segment of the 53rd Conference of African Ministers of Finance, Planning and Economic Development.
In the developed world, the launch of vaccination campaigns and the first positive results of the economic crisis mitigation measures have given countries a significant head start in the race for adaptation to the new post-Covid-19 economic context. However, Africa, which is at the back of the queue regarding access to vaccines, and which has sorely lacked funding to mitigate the impact of the health crisis on its economies, is far from the end of her ordeal.
To curb the spread of the pandemic, all countries have adopted protection measures, which have resulted in a de-facto return to protectionism. This has led to persistent uncertainty, despite the arrival of vaccines, and now, we are living in third waves and the appearance of new Covid-19 variants.
This situation could have significant medium and long-term implications on Africa’s development, and a very real impact on the rest of the world, leading experts to call for an increased support to Africa, according to IMF Director for Africa, Abebe Aemro Selassie.
The region is going to face quite a difficult few years. What will be happening over the next 5-8 years in Africa is in the interests of the international community. The demographic transition unfolding in the region means that at least demographically – but also in my view, economically – the 21st century is the African century.
Mr Selassie lauded the G7 countries’ recent decision to grant new Special Drawing Rights (SDR) for the benefit of developing countries and those vulnerable to Covid-19, a measure that should benefit middle-income groups.
However, here again, international support for Africa can no longer be based on the same model as in the past as it will have to take place within the framework of a new, post-Covid-19 type of multilateralism, and help increase the region’s capacity to navigate future crises.
However we should recognise that the crisis we are facing now is not going to be the final one.
What Africa needs is a more predictable decade ahead, a unified global and regional response, and a redefined multilateral system. This is fundamental. In an unpredictable situation such as the current one, it will be difficult to cope with the crisis without coordinated responses.
In addition to international institutions’ support, Africa will have to take crucial measures, especially on issues such as vaccines, access to which will have decisive economic implications in the coming year.
Africa will also have to seize the opportunity of the post Covid-19 recovery to transform its economies, since returning to the pre-pandemic economic model will not allow it to generate enough jobs for the millions of youths arriving every year on its labour market.
“There are immense opportunities in our countries,” said Zainab Ahmed, Minister of Finance, Budget and National Planning of Nigeria.
“Yes, there are risks, but if you look at businesses that have existed for years, there are extremely good ones among them. We are looking for businesses that will come and partner with local businesses to grow in Nigeria”, Ahmed said. Focusing on industrialisation and productive sectors is the best way to guarantee sustainable growth. Industrialisation cannot be built without the required ecosystems.
In addition to these efforts, African countries will have to change the way they interact with the private sector, both internally and internationally. The private sector will have a decisive role to play in the post-Covid-19 economic recovery because of its capacity to generate jobs.
However, the relationship between governments and the private sectors will have to be reviewed, warned Masood Ahmed, President of the Washington-based Centre for Global Development (CGD).
“In the first phase [of the pandemic], countries sought to help every firm in the private sector because it was an emergency, but now, in the recovery, some firms are going to be viable, others not, because the economic landscape is going to change”, he explained.
Now a much more complex dialogue has to take place about which kinds of firms should be supported; and how to create a partnership that recognises that the future is not going to be simply a return to the past. That requires a degree of more common understanding of future outcomes, a bit less of “us and them” between the public sector and the private sector.
On the international front, African countries will have to rely on capital markets, which account for 40 per cent of the region’s external debt, to reduce the financing gap that stunted Africa’s development even prior to the crisis, and which may now become a threat to its post Covid-19 economic recovery.
African countries will have to invest in investor confidence in order to gain the trust of capital markets.
In previous shocks, investors looked at ratings, and other credible sources such as the IMF, but what investors looked at the most was each other.
In this kind of situation, rating agencies are not part of the problem but part of the solution, because in this kind of market it is necessary to have a measured voice to bring about some stability.
To attract and stabilise foreign investment, African governments must reduce risks by strengthening the quality of their national institutions and taking measures such as stepping up good governance, transparency, ease of doing business, the fight against corruption and investing in infrastructure, technology and human capital.
The list of efforts African countries will have to make over the next few years to mitigate the impact of the ongoing economic crisis is very long.
It’s a marathon rather than as a sprint, and actually it’s a marathon that’s going to be run at a time when it is being changed by global circumstances.