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COVID-19 a threat to SADC regional economy

COVID-19 a threat to SADC regional economy

By Kumbirai Nhongo

The economy of the Southern African Development Community is at risk as the number of COVID-19 cases continue to increase.

Figures from the Africa Centres for Disease Control and Prevention show that as of 10 April, the SADC region had 2,831 confirmed cases of COVID-19, accounting for 22 percent of the 12,973 cases registered on the continent as of the same day.

Within the first 10 days of April, fatalities attributed to the virus in the region more than doubled from 24 to 65.

Described as the most serious health emergency in generations, the World Health Organisation (WHO) confirms that COVID-19 has had adverse effects on economies and livelihoods.

“The restrictions many countries have put in place to protect health are taking a heavy toll on the income of individuals and families, and the economies of communities and nations,” said Dr Tedros Adhanom Ghebreyesus, Director General of the WHO.

“We are in a shared struggle to protect both lives and livelihoods,” he added.

In the SADC region unprecedented measures such as nationwide lockdowns have been put in place by some Member States to restrict the movement of people and contain the spread of the virus.

Malawi has become the latest Member State to announce such restrictive measures, which take effect from 10 to 23 April.

In South Africa and Botswana, lockdown periods have been extended until the end of April as Member States intensify efforts to combat the spread of the disease.

The SADC Business Council, a regional association of private sector organisations, notes that such measures, though necessary, have had unintended consequences on the regional economy, particularly on intra-regional trade.

In a statement released after its online meeting on 1 April, the SADC Business Council noted the challenges businesses are facing in moving imports and exports, given the travel restrictions obtaining in some jurisdictions.

“Landlocked countries are failing to access ports, with truck drivers failing to pick and drop cargo because they do not have visas to travel to countries with port infrastructure,” read the statement.

Following the Council of Ministers meeting held in March, SADC has since issued guidelines to manage the inter-state movement of goods, services and people during this period.

However, indications are that not all Member States have adopted these guidelines, resulting in bottlenecks in the regional supply chain.

The SADC Business Council notes that delays in the movement of cargo have led to increases in both storage and transport costs.

Apart from the challenges of intra-regional trade, SADC Member States face external risks associated with the slowdown of the economies of trading partners in the rest of Africa, Europe, Asia and the Americas due to the negative effects of COVID-19 in those regions.

Information from the SADC Directorate of Industrial Development and Trade shows that the region is more exposed to exogenous shocks given its reliance on the production and export of unprocessed commodities.

Angola, the main petroleum producer in SADC, has had to revise its national budget figures downwards due to the sharp decline in oil prices; COVID-19 contributing to reduced global demand.

In fact, Brent crude oil prices declined by 66 percent in the first quarter of this year – its biggest ever quarterly loss.

“Oil has fallen drastically and everyone knows the weight of oil in terms of financing the state budget,” noted Vera Daves, the Angolan Minister of Finance.

Other commodities have not been spared, with diamonds, copper, nickel, cobalt, coal and platinum trading at reduced prices.

In countries where lockdowns have been effected, some agricultural markets have had to be closed, a situation that has affected farmers and impacted the livelihoods of those in downstream industries.

The SADC Secretariat notes that about 70 percent of the population within the region depends on agriculture for food, income and employment.

The tourism sector, which accounts for about eight percent of the gross domestic product of the SADC region, has been among the worst affected following a slow-down in global travel.

Prime regional destinations in the Seychelles, Mauritius, Zimbabwe, Namibia, Botswana and South Africa are currently inaccessible due to lockdowns in the respective Member States.

The World Tourism Organisation (WTO) estimates that at the global level tourist arrivals will be down by between 20 and 30 percent in 2020 when compared with 2019, on account of COVID-19.

WTO Secretary-General Zurab Pololikashvili says such a decline translates to a reversal of the growth built over the past five to seven years.

South Africa, the largest and most diverse economy in the region, is already in recession, with indications that it will contract further than the 0.2 percent decline projected by the central bank for this year.

The country has the highest number of coronavirus cases in the region, accounting for 71 percent of the total.

To manage the impact of COVID-19 on their respective economies, a number of Member States have announced policy measures in mitigation.

These include tax concessions, temporary waivers on loan repayments, reduced interest rates, and social security measures for vulnerable communities.

In the Democratic Republic of Congo for example, the Central Bank of Congo announced a rate cut from 9 to 7.5 percent to reduce the cost of borrowing.

Similarly in Eswatini the government has reduced the price of fuel and suspended the increase of electricity tariffs for two months, among other measures aimed at cushioning businesses and consumers.

As of 10 April, Lesotho and the Comoros were the two remaining SADC Member States without any reported COVID-19 cases.


About The Author

SADC Correspondent

SADC correspondents are independent contributors whose work covers regional issues of southern Africa outside the immediate Namibian ambit. Ed.