Health care workers holding signs, protest over the lack of personal protective equipment (PPE) during the coronavirus outbreak, outside a hospital in Cape Town, South Africa.Mike Hutchings | Reuters
- South Africa, the continent’s most industrialized economy, still accounts for more than half of all cases and the bulk of the recent rise in new infections, with more than 511,000 now confirmed.
- Concerns that health systems may become overwhelmed has led to the reimplementation of restrictions in South Africa, Kenya and Botswana, with other countries likely to follow suit in the coming weeks.
As many African nations have emerged from strict lockdown measures over the month of July, coronavirus cases have accelerated across the continent, casting doubt over the prospect of an imminent economic recovery.
The World Health Organization warned last week that Africa could be headed for a worse outbreak than the current numbers are suggesting, with total confirmed cases on the continent nearing 1 million and the true extent of the spread uncertain due to comparatively low levels of testing.
South Africa, the continent’s most industrialized economy, still accounts for more than half of all cases and the bulk of the recent rise in new infections, with more than 511,000 now confirmed. The surge has come despite President Cyril Ramaphosa having introduced some of the world’s strictest lockdown measures in late March, which were intended to buy hospitals time and were gradually eased out of economic necessity.
Figures released Monday showed South Africa’s manufacturing PMI (purchasing managers’ index) fell from 53.9 in June to 51.2 in July, cooling for the first time following two months of consecutive improvement from its April trough.
Concerns that health systems may become overwhelmed have led to the reimplementation of restrictions in South Africa, Kenya and Botswana, with other countries likely to follow suit in the coming weeks, according to Capital Economics Chief Emerging Markets Economist William Jackson. The Gambia confirmed Monday that three government ministers had tested positive for Covid-19, days after President Adama Barrow went into self-isolation.
“High frequency data show that this, combined with cautious household behavior and continued weakness in tourism sectors, has caused activity to level off,” Jackson said in a note Friday. “All of this reinforces our view that Africa’s economic recovery will be slow and bumpy.”watch nowVIDEO00:51Coronavirus: Sub-Saharan Africa more proactive than much of Europe, economist says
With South Africa’s reintroduction of restrictions in July likely denting the recovery, Capital Economics’ Mobility Tracker suggests that activity is still 35% below pre-virus levels, and Jackson projected that the weak recovery may prompt more rate cuts from the South African Reserve Bank (SARB) than markets are pricing in.
Based on the latest economic data, Capital Economics also projected that Nigeria, the continent’s largest economy, will suffer its worst economic hit for 35 years in 2020 as the critical oil sector continues to be ravaged by low prices and output cuts.
Fellow oil exporter Angola has suffered similar challenges which have compounded an already deepening recession that began before the pandemic hit. However in East Africa, Kenya’s latest national accounts data offered some cause for optimism, though a recent extension of containment measures may weigh on the recovery, while Ugandan activity indicators have shown the beginning of a recovery in June.
South Africa surge
The surge of infections in South Africa bodes ominously for the rest of the continent as it heads toward its anticipated peak over the next couple of months, according to EXX Africa Director Robert Besseling. So far, according to data compiled by Johns Hopkins University, only 19,975 deaths have been recorded across the continent, but Besseling highlighted that the figures may not tell the full story.
“Some initial enthusiasm over Africa’s low death rate has subsided as reports of mysterious deaths and secret mass graves in West and East Africa have become more frequent,” Besseling said in a report last week.
“New data released by the South African Medical Research Council shows that South Africa witnessed some 17,000 extra deaths from natural causes or 59 percent more than would normally be expected between early May and mid-July, suggesting many more people are dying of Covid-19 than shown in official figures.”
A health worker wearing a protective suit takes a swab from a resident during a door-to-door testing in an attempt to contain the coronavirus disease (COVID-19) outbreak, in Umlazi township near Durban, South Africa, April 4, 2020.Rogan Ward | Reuters
In the event of an uncontrollable surge across multiple major economies, the much hoped for “V-shaped” recovery in 2021 could become increasingly unlikely. Besseling suggested that the implications for trade, exports, and other foreign exchange generating sectors such as tourism were bleak if cases continue to surge and the threat of multiple waves persists.
“African finance ministers seem blind to the potential threat to their economies and many governments have committed to further unfunded spending on infrastructure projects which will balloon their budget deficits and mount the debt burden to unsustainable levels,” Besseling said.
“Rather than a rebound in economic performance, Africa is likely to witness a spree of defaults on external loans over the next year, even if so-far meagre debt relief initiatives are expanded and extended.”
However, there is cause for optimism in certain countries, he argued. West African countries with diversified economies such as Ghana, Senegal and Benin have had more success in containing the virus and sustaining economic activity, despite the deep recession in nearby Nigeria. Recently-released figures suggest that economic activity in Ghana has started to recover from a sharp downturn that hammered the external sector.