Covid-19 Crisis Pushes 55mln People in Africa to Extreme Poverty

ADDIS ABABA – The disruptions caused by the COVID-19 pandemic pushed an estimated 55 million Africans into extreme poverty in 2020 and reversed more than two decades of progress in poverty reduction on the continent.

This is according to the Economic Report on Africa 2021(ERA2021) that the UN Economic Commission for Africa (ECA) launched on Saturday.

The report, titled “Addressing Poverty and Vulnerability in Africa during the COVID-19 Pandemic”, says the pandemic has caused job losses, reduced income and further limited the ability of households to manage risks.

“Non-poor people whose consumption is $1.90–$2.09 a day are likely to fall into poverty due to the pandemic because even a small amount of consumption volatility can push them into poverty,” the report says.

It estimates 12.6% more people are likely to be pushed into poverty in one year alone, more than the combined total of the additional poor since 1999.

Furthermore, poor households move into and out of poverty because of exogenous shocks like the COVID-19 pandemic and that their inability to manage uninsured risks only increases their vulnerability.

So, achieving sustained poverty reduction requires thoroughly understanding the nexus of poverty, risks and vulnerability, the report claims.

“Under current projections, the pandemic is likely to increase the number of people living in extreme poverty, in Africa and globally,” forecasts the report.

Impact varies

The authors say the poverty effects of the COVID-19 pandemic “vary with government responses and policies.

Countries with low initial poverty and vulnerability, capacity to generate enough jobs, low youth and old-age dependency ratios, a highly educated labor force and good internet infrastructure to support a digital economy are likely to experience low vulnerability

“The opposite is true for countries without these critical attributes and that can seldom afford social assistance—such as Ethiopia and Nigeria,” the report claims.

This group is the source of most of the “new poor” created by the pandemic, it says.

New dimension

Hanan Morsy, ECA’s Deputy Executive Secretary said the report analyzes the implication of COVID-19 in terms of poverty, but brings a new dimension stressing the vulnerability in Africa.

It also conveys the element of people centric analysis of what has been happening during COVID-19 and what we need to do to ensure that the vulnerable population are protected in terms of social safety net and putting up the right policies, according to Morsy.

“The most critical implication of COVID-19 has been the reversal of the very hard-won gains that the continent had managed to achieve in reducing poverty,” he added.

The report calls for an urgent need to explore innovative and affordable market-led insurance schemes which can insure the poor from future shocks.

“Collaboration of governments with the private sector is paramount,” it stresses.

The report sees the African Continental Free Trade Area (AfCFTA) as an opportunity to build forward. Most African countries depend on raw materials exports and on imports of essential goods such as food items and pharmaceuticals.

“If AfCFTA is effectively implemented, intra-Africa trade is expected to be about 35% higher than without the grouping by 2045,” says the report

“The AfCFTA would help Africa industrialize and diversify, reducing trade dependence on external partners and boosting the share of intra-Africa trade from roughly 15% today to over 26%,” the report projects

The key highlights of the report are on the economic trends, monetary policy performance, exchange rate, fiscal deficit and external debt and Africa’s trade trends.

Economic Trends

The COVID-19 pandemic has heavily disrupted the movement of people, goods, services and capital, and its impacts led Africa’s GDP to contract by an estimated 3.2% in 2020.

The pandemic is expected to weigh further on already slow economic growth.

Monetary policy performance

In 2018 and 2019, before the COVID-19 pandemic, most African countries had accommodative monetary policy as inflation remained stable or declined

Exchange rate performance

In 2019, many African countries experienced exchange rate volatility as their currencies depreciated, mainly on trade-related uncertainties and capital outflows, as well as country-specific factors such as widening fiscal deficits, declining foreign exchange reserves and lower capital inflows.

Rising fiscal deficits and external debt

Africa’s fiscal deficit narrowed from 5.3% of GDP in 2017 to 3.0 per cent in 2019, mainly because of government fiscal consolidation efforts.

Africa’s trade trends

The share of global exports decreased from 2010 to 2019 in Africa but increased in other global regions.

The continent’s share fell from 2.48 per cent in 2019 to 2.14 per cent in 2020, though Asia and Europe were resilient, owing partly to continued supplies of consumer goods and medical goods during the COVID-19 pandemic.

More Recommendations

The report recommends that African governments should adopt targeted social protection; provide short-term social assistance to the most vulnerable people; ensure health protection for all.;

Over the longer term, African countries need to build resilience by investing in health protection for all, which also offers high potential for employment creation.

African countries also advised to build a national and regional health emergency preparedness and response system for future pandemics and domestic vaccine production capacity.

featured Image caption: A security man administers sanitizer to a visitor to a state hospital in Lagos, on February 28, 2020. [Photo PIUS UTOMI EKPEI / AFP)

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