Oct 28, 2020 - Economy & Business

Africa loses economic hope

Illustration of a downward trending chart with a hole in the shape of the African continent in the middle
Illustration: Sarah Grillo/Axios

The good news is that most of Africa has done surprisingly well in terms of COVID-19 cases and deaths.

  • The bad news is that the pandemic has greatly exacerbated a continent-wide economic crisis. Even before the virus hit, Africa was suffering from weak commodity prices and a devastating plague of locusts.

Why it matters: There's not remotely enough money to help finance the needed recovery.

The big picture: The pandemic has killed far more Americans (225,000) than Africans (41,000), despite the fact that Africa has a much larger population.

  • The U.S. might be behind epidemiologically, but it has a huge advantage economically. Like other rich virus-hit countries in Europe, it can respond to the crisis by borrowing as much money as it needs.
  • African countries, by contrast, have lost their market access, and one of them — Zambia — has already defaulted on its bonds as a result.
Data: Dealogic; Chart: Andrew Witherspoon/Axios
Data: Dealogic; Chart: Andrew Witherspoon/Axios

By the numbers: Zero sub-Saharan African countries have managed to issue an international bond since the crisis hit, according to data from Dealogic.

  • Rich nations, by contrast, painlessly issued 288 bonds with a combined value of more than $430 billion in just the second and third quarters of this year. Those countries — the 37 members of the Organisation for Economic Co-operation and Development — are paying roughly 0% interest on the money they're borrowing, and using it to rebuild their economies.

Between the lines: There is some funding available for sub-Saharan African countries. Nigeria, Ivory Coast and South Africa all managed to borrow in their local currencies, and the International Monetary Fund has lent $26 billion in emergency funding to the continent. Still, IMF managing director Kristalina Georgieva estimates that Africa has an eye-popping funding gap of $345 billion between now and 2023.

  • The lack of money means a lack of growth: The IMF forecasts that Africa will grow by just 3% in 2021. That's well below the expected global growth rate of 5.2%.
  • Georgieva has begged her counterparts at the World Bank, where she was previously CEO, to provide grants to needy African countries.
  • An analysis from the Center for Global Development found that the World Bank has moved more slowly this year than it did during the global financial crisis, even as global poverty rates rise alarmingly.

The bottom line: More than 60% of Africa's population is under the age of 25. That has helped keep the death rate low, even if some individual countries' COVID-19 statistics are unreliable.

  • 1.2 billion Africans don't just need to live, however; they also need economic hope. And that, currently, seems further away than it has done in years.
Go deeper