According to the latest data on the battle against the corona virus on the economic front, the projected growth scenarios in the Horn of Africa in particular are not totally disheartening. While Western countries speak of fast economic decline or a possible economic depression comparable to the Great Depression of 1933, the situation is far from being alarming in less developed countries in Africa. There is no ready explanation for why the virus is slower in spreading and killing people in Africa in general while Europe and the US are seeing the ugliest face of the pandemic. It is nevertheless less difficult understanding why COVID-19 will cause less damage to the economies of developing countries than it has already done to those of Western countries.
One explanation can be that Western countries have huge economies, complicated economic structures and sophisticated management systems that make it more difficult to predict what will happen in the future. Growth scenarios are generally weak in rich countries than in the poor ones that are struggling to cope with the basic issues of economic development. Rich countries are past their growth peaks and the issues that face them now are radically difficult than those they faced in their prime time of economic maturity. When crises occur, rich countries are more severely affected than their poorer counterparts simply because the challenges that face them are simpler and the stakes smaller and the risks lower.
This is not the case in developed economies. Recent projections by international financial institutions show that rich countries will be hard hit by the corona-caused economic mishaps than will poorer countries that are struggling to cope with basic issues of survival. In general terms, the human devastations caused by the corona virus in both types of countries are far more damaging than to their economies. It is easier to play economic catch up in poorer countries than in bigger ones. If we take unemployment for instance, it is a huge problem in rich economies than it is in poorer ones. Unemployment benefits are virtually unknown in poor countries while it is a huge economic and social problem in rich countries where millions of workers are made jobless by the pandemic.
Horn of Africa countries are, according to widely accepted conventional wisdom, some of the poorest countries in the world where per capita income is very low, the economy is largely agrarian or nomadic and the immediate challenge is not the payment of unemployment benefits to workers but to allow people secure the basic necessities of life like food and clean water. The urban economies in the Horn of Africa are underdeveloped and largely dependent on global trends and on international monetary institutions that foot the bills of payments to balance their budgets and provide them hard currency to effect foreign payments.
The Ethiopian economy is comparatively speaking better off than most economies of the Horn. Economic growth projections in Ethiopia might give us some idea on how the economies of the Horn region will be faring in the coming few months or years. The projected trend for Ethiopia’s economy since the onset of the pandemic are not too bad by African standards.
Ethiopia is expected to see its economy shrink by only 2-3 per cent on the previously targeted growth prospect according to official sources. This is to say that the Ethiopian economy will be smaller by 2-3 per cent from the growth projection done before the advent of the pandemic. Although the figures look small, the shrinkage is likely to make the lives of tens of millions of people across Ethiopia more precarious than it used to be. Although relevant data is not available, the situation in other Horn countries is likely to be more difficult.
The lockdown in rich countries is proving economically untenable according to recent developments and people are calling for a return to the old normal. One of the reasons why poor countries are avoiding the total lockdown strategy of virus containment practiced in rich countries is because such a measure will impact more people in negative ways than it did in richer countries.
Hundreds of millions of people who make their livings through day labor and contractual work would find their condition deteriorating even more if they were forced to stay home. That would mean more people will simply die of hunger and a deep social crisis and a possible conflict between those who eat well and those who eat nothing would make the pandemic even worse.
There is no robust information on how most countries of the Horn are handling their economies or how they are dealing with the corona virus containment strategy. Yet the general picture is not one of total despair but one of coping by any means short of total lockdown that would be counterproductive for most of them. What would a lockdown mean for tiny Djibouti or in war-torn South Sudan or even for Kenya with a relatively vibrant economy? That would mean slow motion economic collapse as port services would be closed down in Djibouti and humanitarian supplies would stop in South Sudan or that Kenya’s vibrant tourism and hotel sector would be totally knocked down.
In this context, the Ethiopian government’s policy of pragmatism and selective closing of workplaces to ease the congestions in big towns that could serve as breeding ground for the virus deserves commending. A total lockdown in the capital Addis Ababa which is considered the epicenter of the pandemic would be unimaginable let alone practicable. The Addis Ababa city administration has shown creativity and flexibility in establishing a correct balance between the need to control the pandemic and that of maintaining the economic momentum in a city that is still implementing many projects and providing jobs for tens of thousands of young workers.
What the city administration needs to do now is to sort of ‘de-congest’ some of the most congested or crowded parts of the city that are feared to serve as a large pool from which the virus might find easy route into the larger population. Mercato is one example. It is still the biggest market in Ethiopia and that attracts hundreds of thousands of sellers and buyers every day of the week including Sundays. However, Mercato is highly crowded and the balance between controlling the pandemic and maintaining economic activity has one of its weakest links there.
Under these circumstances, one possible solution would be to program business activities in Mercato by opening up some of the shops on specific days while closing down others in order to lower the level of congestion and prevent the virus from circulating freely and widely. For instance, the administration can open part of Mercato where people can sell and buy clothes on specific days while closing down other outlets thereby reducing the human traffic. The example of the vegetable market that has recently been moved from its old place to the field of Janmeda further to the east of the capital may not serve as a good model of de-congestion. It does not make sense to change old market sites without changing the modus operandi of the new market sites. What is the use of changing location if both are the new market places are as crowded
as old ones?
So, Ethiopia’s economic coping mechanism with the pandemic needs constant revision or regular calibrating and updating or improvement so that reducing infections could be properly synchronized with the objective of securing economic activities. In this way, both unemployment would be reduced or maintained at its pre-corona level while the threats of growing infections avoided. In this way, Ethiopia may serve as a good example of creative and imaginative strategy of properly clicking economic activities with pandemic control.
This may not be the reason why official figures of corona virus infections are relatively lower in the region given the country’s large population size but it may serve as an indicator of how things should be done according to local conditions by avoiding solutions that look feasible on the surface but are likely to fail in the end simply because they do not take local conditions into account. Other Horn countries are likely to develop their home-grown strategies of pandemic control that synchronizes well with economic activities.
Horn of Africa countries may not have a strong economic muscle to flex but they have the wisdom, creativity and most of all, the sense of solidarity required to beat the pandemic without undermining their local economies. This can be done both vertically through experience sharing and horizontally through domestic initiatives that involve the public and government functionaries in a joint bid to address common problems with joint solutions.
In the short term, the number of people affected by the virus is likely to rise and the local economies to face mounting pressures as more pressure will be put on resources and local capacities. They may even entertain negative economic growth and face the possibility of having thousands of victims of the pandemic. This is a window of opportunity suited for building resilience and preparing a plan of action at local and regional levels.
What will happen if massive cross-border migrations from countries most affected by the pandemic to countries like affected would materialize? How well should Horn of Africa countries prepare for such eventualities without panicking and appealing for international assistance that may not come readily. COVID-19 has reduced the number of traditional donors and of international assistance to a common denominator. Both are facing similar challenges as the pandemic has the tendency to equalize communities by aggravating poverty and economic woes. This may come as a big surprise in developed countries but African in general and those living in the Horn region in particular are used to the strains and stresses of daily living and will cope better under even the harshest conditions. This is also where African resilience and hope finds the strong expression.
The Ethiopian Herald May 3/2020
BY MULUGETA GUDETA
