As disaster is looming large, saving lives takes priority over economic matters
The economic fallouts of the global pandemic on Africa in general and the Horn of Africa in particular are not based on speculations. These are real threats and they have started to bite. Take a look at what the aviation industry in Ethiopia has lost in a week of disrupted operations. The mighty Ethiopian Airlines has for instance lost more than 190 million dollars in almost a single week and the damage has barely started. Some of the biggest carriers are unlikely to survive the present disaster without massive government bailouts. The titans of the industry such as Emirates airlines and others in the Middle East are tittering on the brink in no time. The corona is hitting hard not only people but also entire industries and livelihoods. The economy of the Horn of Africa region cannot be an exception.
How things change dramatically in this part of Africa has always astounded both distant observers and direct actors. Three months back, it was business as usual in the Horn of Africa with predominantly positive outlooks in South Sudan where a new government has taken shape. Ethiopia was planning for further growth, money was flowing from abroad and big projects were in the pipelines or in the process of implementation. Now the corona virus has changed things so much that the situation rather looks extremely fickle and taking a direction no one ever imagined a couple of months back.
Economically speaking, the countries of the Horn were either in the process of recovery like in Sudan and South Sudan, a robust promise for takeoff of the economic reforms in Ethiopia, tangible prospects of cooperation between Ethiopia and Kenya and business as usual in Djibouti and Somalia. Now all the countries are in reverse gear and the main culprit is the corona virus pandemic. The virus is present in Ethiopia, Kenya, Sudan, Djibouti and Somalia although the frequency and intensity of infections may vary from country to country. Until now only Eritrea among the Horn countries has not revealed any case of corona virus infection. This may be largely because the country’s borders have remained tightly closed even before the pandemic and.
In all these countries, the talk is now about how best to curb the vicious march of the virus on the one hand while limiting its damages on the other. The feeling of optimism that was evident a few months ago had fast evaporated and governments and their peoples are phobic, helpless if not confused as to how to avert a potential catastrophe. Most if not all of the economies of the Horn are in shambles. Sudan was expecting a flow of cash and negotiating for the lifting of the sanctions by the US. South Sudan which is barely emerging from years of civil war has not yet formed a stable government. Ethiopia’s growth scenario, that was taken as a success story is going to be reversed if not seriously affected by the virus attack.
Ethiopian PM Abiy Ahmed’s recent statements reflect how seriously the economy is going to suffer from the pandemic. Europe is in the grips of the most serious cases of infections and deaths from the virus. Markets are made dysfunctional and trade is at a standstill. There is increasing talk about a global economic recession similar to the one in 1907-1908. In Ethiopia, key export products such as flowers, textiles and other agricultural products are going to suffer because of falling demands. European countries, such as the Netherlands, Spain, Italy, Turkey and others are the major trading partners and importers of Ethiopian products and these countries are scaling down their imports.
These countries are themselves the victims the corona-induced economic recession leading to sharp fall in demands. Income from foreign trade is expected to hit an all time low and local manufacturers are going to suffer the most. The government needs to make a comprehensive assessment of the negative effects of the pandemic on the economy. However such an assessment should be timely done in order to see where the flickering lights of optimism can be taken advantage of before things might go from bad to worse.
In Europe and America, the auto, airlines, the entertainment and sports industries are facing a crash. China’s economic growth is expected to go down the drain as a result of the lockdown of entire cities and productive industries. Massive layoffs are expected and government are bracing to prepare for subsidizing unemployment benefits for hundreds of thousands if not millions of workers who lose their jobs. The loss of working hours and production resulting from lockdowns is estimated to ran into billions of dollars. The United States is fast going in that direction as the Ford and other car producers are closing down shops because of the manpower losses they suffered and the negative fallouts from lockdowns of key industrial areas as well as lost working hours from the death and infection of workers. The entertainment industry is receiving a hard hit as cinema halls are being closed down and large gatherings are prohibited. China, which is not only the epicenter of the corona virus but also the hub of the new global film industry is going bust for similar reasons.
We are not talking here about an economic recession or downturn in the Horn of Africa but a global recession whose effects are being felt throughout the world as if a powerful economic earthquake has hit the planet.
In Africa in general and in East Africa in particular, Ethiopia and Kenya are leading the way in the economic downturn caused by the pandemic. As we said above, Ethiopian Airlines, the best carrier in Africa and a highly competitive company globally, has already suffered heavy financial losses. The decision by the government to stop Ethiopian Airlines Flights to some 30 destinations is going to hit the company even harder and force it to incur additional losses and if the pandemic persists, the future might even look grimmer for a once leading carrier in the industry.
By the same token, passengers on incoming flights from countries where the corona virus prevails are expected to be quarantined for 14 days at their own costs and in hotels and places offered by the authorities. All these things do not obviously bode well for the economy in general and they are coming at a time when the country was buoyant with the recent economic reform program. The pandemic could not come at a worse time.
Trade with China is inevitably expected to be affected and various industrial projects might be scaled down or shut down altogether; not only by sharp drop in hard currency earnings but also by temporary curtailment in demands for Ethiopian products. Unemployment which is already a big problem in the region as well as in individual countries is likely to be compounded by job closures, layoffs or the absence of new investments. China is a big investor in the Horn of Africa and the rise as well as the fall of the region is directly linked to the speed of economic recovery in China as well as the effectiveness of the battle Beijing is waging against the virus. China’s success in both fronts is therefore crucial for the region because a healthier China is likely to restore confidence in these countries.
China may not a democracy in the Western sense of the term but it is no doubt a highly resourceful, creative as well as altruistic when it comes to dealing with global challenges as it was the case during the 2008 global economic recession when Chinese capital and investments helped stave off further damages and restore the economic equilibrium in Europe in particular.
The Horn of Africa is not however an economically lost case. The virus will sooner or later be defeated with the combined forces of global research and development companies. Like all such pandemics, its lifespan will come to an end sooner than later as hopes for a vaccine are flickering here and there around the world and researchers are coming together to pool their knowledge while governments are making generous donations to speed up the work in the most prestigious laboratories in Europe, Asia and the US.
What makes the pandemic more difficult to manage or contain is the acute lack of resources to do the job. This is not unique to Africa but to even the most advanced countries in the world that have been unable to produce or offer even the most fundamental equipments. like testing kits and face masks essential to contain the pandemic. Thus, the pandemic has exposed not only the vulnerability of poor economies but also the inherent weaknesses of even the most powerful countries on the planet.
At this stage, Horn countries are likely to take a strategy of economic survival and damage limitation. However this can be tried if and when the pandemic will start to show signs of abetting. The African Union is best-placed to assess or come to the rescue as far as COVID-19’s disastrous economic and social effects are concerned. What the AU can do to avert a disaster is something that has to be yet explored via video conferences as conventional large gatherings are prohibited in almost all countries. An extraordinary AU conference will be called sooner or later in order to assess the damages and chart a joint strategy for economic recovery on the continent. At this stage, saving millions of lives endangered by the COVID-19 comes before any prospect of economic recovery. For now And China seems to give a glimmer of hope to the world both in stopping the virus and a possible engineering of a global economic.
The Ethiopian Herald March 29/2020
BY MULUGETA GUDETA
