BIZweek n°333 12 mar 2021
BIZweek n°333 12 mar 2021
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  • Parution : n°333 de 12 mar 2021

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

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  • Nombre de pages : 10

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VENDREDI 12 MARS 2021 BIZWEEK ÉDITION 333 MS. BINESWAREE BOLAKY Economic affairs officer ECA Subregional office for Southern Africa Disclaimer  : Views expressed are the authors’own. POST SCRIPTUM THE IMPACT OF COVID-19 IN SOUTHERN AFRICA A case for leveraging the AfCFTA to diversity intra-African trade Four out of the five Sub-Saharan African countries, worst affected by the Covid-19 crisis are in Southern Africa. Data from the latest IMF Regional Economic Outlook (of October 2020) has real GDP of Mauritius, Zimbabwe, Botswana and South Africa (all members of the Southern African Development Community - SADC) contracting by 14.2, 10.4, 9.6 and 8.0 percentage points respectively in 2020 as compared to 2019. This is in contrast to Eastern African Community (EAC) and Economic Community of Western African States (ECOWAS) of South Sudan, Benin, Ethiopia, Rwanda and Tanzania, which lie at the other end of the spectrum – being the five countries least affected by the crisis. SADC stands out as the regional economic community that has been worst hit by the crisis. What can account for variations in the economic impact of Covid-19 across African sub-regions ? A first logical answer lies in the magnitude of the health crisis in different sub-regions and commensurate variations in intensity of responses to mitigate the spread of the virus, characterized by how strict lockdown measures have been, how long border closures have been maintained and how rigorous enforcement of social distancing measures have been. These can in turn determine the harshness of the clamp down on the economy. Economic lockdowns generate falls in consumption demand for goods and services with adverse effects on economic activity, even more so in economies that are services oriented. In many services activities, buyers and consumers must be co-located and remote delivery is not possible. Southern Africa is the most services-dominant sub-region of the continent. The share of services in Gross Domestic Product (GDP) averaged 62.5 per cent in Southern Africa, compared to 54.9 per cent in Sub-Saharan Africa and 53.4 per cent in Northern Africa. These shares as percentages of GDP were respectively in Malawi, 52.1 ; in ESwatini, 54.8 ; in Zambia, 58.3 ; in Lesotho, 59.4 ; in Namibia, 62.2 ; in Botswana, 64.4 ; in Zimbabwe, 66.9 ; in South Africa, 68.3 ; and in Mauritius 75.9. The last five are among the ten most services-intensive economies in Africa. 20.0 15.0 10.0 5.0 0.0 -5.0 -10,0 -15,0 c" Iede 111 1', e e 1,.‹,:.<" -,c...c:.7-'  : Chart -20,0 1  : Real GDP growth rate in Southern Africa and selected RECs  : 2012-2021 2012-2015 2016-2019 2020 2021 Source  : IMF Regional Economic Outlook (IMF, October 2020). Chart 1  : Real GDP GDP growth growth rate in rate Southern in Southern Africa and Africa selected and RECs  : selected 2012-2021 RECs  : 2012-2021 Source  : IMF Regional Economic Outlook (IMF, October 2020). Chart Source  : 2 a  : IMF Cumulative Regional Economic Covid-19 Outlook cases and (IMF, related October deaths 2020). by sub-region as at 12 November 2020. 900000 Chart 800000 2 a  : Cumulative Covid-19 cases and related deaths by sub-region as at 12 November 2020. 700000 600000 500000 400000 300000 200000 100000 So ut he m Africa Eastern Africa Western Africa Cumulative cases Cumulated deaths Chart 2 a  : Cumulative Covid-19 cases and related deaths by sub-region as at 12 Source  : WHO Coronavirus Disease (COVID-19) Dashboard,update of 12/11/2020. Figures relate to th Novemberupdate of 12 2020. November 2020. Note  : The sub-regions refer to member states covered by ECA sub regional Source  : offices WHO Coronavirus for Southern Disease Africa, (COVID-19) Eastern Dashboard, Africa and Westernupdate of Africa 12/11/2020. respectively. Figures relate to theupdate of 12 November 2020. Note  : The sub-regions refer to member states covered by ECA sub- Source  : regional WHO offices Coronavirus for Southern Africa, Disease Eastern (COVID-19) Africa and Western Dashboard, Africa respectively.update of 12/11/2020. Chart 1 depicts the real GDP growth rates Figures relate to theupdate of 12 November 2020. 2 Note  : The sub-regions refer to expected in the region and across selected member states covered by ECA sub-regional offices for Southern Africa, Eastern RECs for 2020. Chart 2 b  : Morbidity rates (in percentages of population) 2 by sub-region as at 12 November 2020. Africa and Western Africa respectively. Chart 2 b  : Morbidity rates (in percentages of population) by sub-region as at 12 November 2020. Source  : WHO Coronavirus Disease (COVID-19) Dashboard,update of 12/11/2020. Figures relate to theupdate of 12 November 2020. Note  : The subregions refer to member states covered by ECA sub-regional offices for Southern Africa, Eastern Africa and Western Africa respectively. 0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 - - Southem Africa Eastern Africa Western Africa Source  : WHO Coronavirus Disease (COVID-19) Dashboard,update of 12/11/2020. Figures relate to the Cont’d on page 7update of 12 November 2020. Note  : The sub-regions refer to member states covered by ECA sub- 4P` 6
VENDREDI 12 MARS 2021 BIZWEEK ÉDITION 333 Did Southern Africa suffer disproportionately more than other Sub-Saharan African sub-regions in terms of the spread of the virus and related morbidity rates ? The answer is affirmative. As illustrated in Chart 2 the Southern African region was the most severely contaminated in Sub-Saharan Africa, recording,up to November 12, 2020 a total of 828, 068 cases and 21,480 related deaths for a total population of roughly 185 million people. Eastern Africa registered 228,992 cases and 3,685 related deaths for a larger population of about 449 million people. In Western Africa, 195,091 cases and 2,800 deaths were recorded for a total population of about 397 million people. The morbidity rate as a percentage of population was 0.45 in Southern Africa relative to 0.05 in the other two comparator sub-regions. South Africa was by far the most afflicted country in Africa, in terms of cumulative cases, related deaths and it responded with swift and hard lockdown actions. Lockdown was imposed when the country had only around 1,000 recorded cases and two deaths. Mauritius was another Southern African country that was hailed for the strictness of its lockdown conditions and was the first African country to be declared Covid-free but the legitimate maintenance of border closures long after had had a devastating impact on its tourism industry. While the relatively stronger physical severity of Covid-19 in Southern Africa may have translated into a relatively more intense adverse economic impact due to the length and intensity of lockdown measures, the relatively stronger trade openness of Southern African countries and their economic ties with South Africa have been contributing factors to the region’s heightened economic vulnerability to Covid-19. First, there was the relatively stronger adverse effect on trade in Southern African countries and second, the dependence of the region on trade with South Africa. The international trade transmission mechanism was more strongly at work in Southern Africa than in Africa. POST SCRIPTUM An analysis of data from the IMF Direction of Trade Statistics shows a sharper fall in merchandise exports at the start of the crisis in Southern Africa relative to the continent as a whole. As early as March, merchandise exports were falling compared to the same month a year earlier and falling more sharply in several countries than in Africa in general, especially in Botswana and South Africa in April and Angola and Mozambique in May. Falls in exports were matched by falls in imports in the same month-to-month comparisons but the contraction in imports was lower, except for a few countries. This is confirmedin the monthly merchandise trade deficits observed for these countries in 2020 and their higher levels relative to comparative months in 2019. For countries like Angola, it was tantamount to a narrowing of monthly merchandise trade surpluses. However, in a few cases (Malawi, Mauritius, Namibia, South Africa, and Zambia) the monthly merchandise trade deficits in 2020 were not always higher than comparative months in 2019. Disruptions in global supply chains, combined with slow-downs in domestic consumption and business activities have had noticeable contracting effects on imports in a few countries (e.g. Malawi, Mauritius and South Africa). In Namibia, exports rebounded as of May driven by Chinese demand. China accounts for about 40 per cent of its total exports. Zambia experienced a surge in export revenues in August and September as copper prices and demand from China resurged. China’s early rebound as of second quarter 2020 helped a few countries to cushion the impact of Covid-19. Notwithstanding, trade in services should also be analyzed to get a more complete picture of the Covid-related impact of international trade on national economies. Southern Africa is relatively more trade intensive than other subregions but also vulnerable to South Africa’s economic fortunes. What characterizes Southern Africa as a region is the fact that it hosts Africa’s second largest economy by size, South Africa, valued at US$350 billion in market prices, accounting for 16 per cent of Africa’s GDP on a continent where 75 per cent of GDP is accounted for by only eleven economies. Associated with this is the deep trade and investment linkages between South Africa and the periphery Southern African countries and the dominance of South Africa as an economic driver in the region. South Africa accounts for 60 per cent of Southern Africa’s GDP. When South Africa fares badly, it has a domino effect on the rest of the region. Another characteristic of the sub region is its relatively higher openness to international trade relative to other sub regions  : Lesotho is among the top five most trade intensive countries in Africa with a trade to GDP ratio above 130 per cent ; Mauritius and Mozambique have trade to GDP ratios above 90 per cent ; ESwatini and Namibia are in the 80-90 per cent range ; Botswana, Malawi and Zambia are in the range of 65 to 80 per cent ; Angola, South Africa and Zimbabwe are in the 50 to 60 per cent range. Additionally, for a few of these countries South Africa is a major export and import market. Chart 3 sketches the merchandise trade linkages between each Southern African country and Africa and South Africa. Countries like ESwatini, Lesotho, Namibia and Zimbabwe export a significant share of their global merchandise to Africa and within Africa to South Africa (chart 3a.). ESwatini for instance exports 90 per cent of all its goods to Africa and within its continental exports, 71 per cent flow to its neighbor, South Africa alone. Botswana, ESwatini, Lesotho, Namibia, Zambia and Zimbabwe source a significant share of their imports from Africa and within Africa a large share from South Africa (Chart 3b.). Such trade dependence is rather unique to the Southern African region and can be accounted for by South Africa’s relatively more developed industrial base on the continent that creates room for neighboring countries to participate in South Africa led-regional value chains on the export side (this is for instance the case with ESwatini and Lesotho in the area of apparel) while Cont’d on page 8 7

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