Coronavirus in Africa: Businesses brace for far-reaching economic hit

China forms a considerable part of global economic output and adverse shocks to its economy would mean significant economic spillovers to other countries.

The healthcare systems of several African countries are vulnerable to the coronavirus outbreak and so are their economies. Across the continent, over 13 countries have reported coronavirus cases, the most recent being Kenya announcing one case. Experts have raised concerns about the impact of a widespread outbreak in sub-Saharan African countries with an already overwhelmed healthcare system, but these countries might also be staring at one of the worst economic blows since the 2008 global slowdown.

The outbreak first appeared in China, a country that plays a great role in global output, trade, tourism and commodity markets; and containment efforts have involved mass quarantines and restrictions on business and travel. This resulted in steep cutbacks in both exports and imports.

Beijing is an economic powerhouse and adverse shocks to its economy would mean significant economic spillovers to other countries, and African economies are among the most vulnerable due to high exposure to China.

African businesses have already started feeling the impact of an industrial slowdown due to lockdowns in China with supply shortages and disruptions being reported from different parts of the continent.

Nigeria

Chinese goods and services account for around a quarter of Nigerian imports, fuelling a portion of the country's supply chain. Supply shortages have already started to impact even small shops in Nigeria which depend on Chinese products for dealerships.

China is also funding and building much-needed infrastructure in the country and the economic health of the East Asian countries are important to keep the projects up and running.

Nigeria has two confirmed cases of the coronavirus and its stock market has lost millions of dollars in market value ever since the cases were reported. The possibility of more cases hasn’t been ruled out as the first patient is believed to have travelled to two Nigerian states before being diagnosed.

Another key source of Nigeria’s revenue receipts is oil exports. Prices of crude oil have almost halved from January levels due to a price war between Saudi Arabia and Russia on top of falling demand due to coronavirus outbreak. The losses in Nigeria’s oil business are expected to be significant and Finance Minister Zainab Ahmed has already acknowledged the possibility of spending cuts.

Angola

Business disruptions are not only because of suspended imports from China but also because of difficulty in exporting goods to the East Asian country, which form a considerable source of revenue for African countries.

One such country is Angola which exports the bulk of its oil to China. Its demand had fallen sharply as the Asian country imposed lockdowns, restricting movement, public transport and bringing factories to a halt.

Angola’s economy is heavily reliant on the oil sector, which forms about one-third of its GDP and over 90 per cent of its exports. And even as China pushes hard to get back to business as usual, the steep fall in oil prices will exert a substantial drag on Angola’s economy.

Kenya

Kenyan businesses are already reeling under the impact of coronavirus with some suspending operations and events getting cancelled.

President Uhuru Kenyatta has directed for necessary budgetary review to contain the outbreak and to soothe its economic impact. The government is also expected to bar officials from undertaking non-essential travel out of the country and has advised businesses and citizens to do the same.

The East African nation also relies on China for infrastructure funding and any adverse shock to its economy could mean delayed payments and stalled projects.

Kenya has recently confirmed its first case of coronavirus. The patient had traveled back to Kenya from the United States via London and was diagnosed on the night of March 12, according to Health Minister Mutahi Kagwe.

South Africa has also sounded the alarm over the economic impact of coronavirus outbreak with President Ramaphosa saying that it could have a “huge impact” on tourism and economy. Businesses from other countries like Uganda, Zimbabwe, and Mozambique have also reported supply shortages and traders are rushing to costlier alternatives to meet the demand.

(Disclaimer: The opinions expressed are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)