HomeIndustry SectorsFinance and PolicySouthern Africa’s economic growth now linked to path of COVID-19

Southern Africa’s economic growth now linked to path of COVID-19

A higher level of preparedness is urgently needed to prevent and mitigate the effects of the COVID-19 pandemic on Southern Africa, says the African Development Bank in their new Southern African Regional Economic Outlook 2020.

Worst-case scenario planning says economic growth in Southern Africa will fall to -6.6% in 2020 before recovering to 2.2% in 2021. The negative growth, projected at -4.9% in the baseline case, is mainly driven by the deep recession in South Africa. This has been prompted by a fall in commodity prices, lockdown containment measures, weather-related events and longstanding structural issues related to public utilities.

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Before COVID-19 struck South Africa’s economy was projected to recover from an estimated 0.7% growth in 2019 to 2.1% growth in 2020. The region’s largest economy, South Africa was projected to contribute around 60% of regional output in 2020.

Now, however, economic growth in a post-COVID-19 setting is forecast to decline and the impact on South Africa will trickle through the rest of the Southern African economies.

Botswana, Eswatini, Lesotho and Namibia are seen as particularly vulnerable to South Africa’s impending negative economic growth, while Mozambique’s sale of gas and electricity could also be adversely affected. All southern African countries which rely on tourism will be adversely affected.

The immediate outlook, however, depends on the spread of new cases. South Africa is now the fifth-worst affected country in the world, with close to 400,000 confirmed cases of COVID-19 infections.

The service sector, which would normally account for more than half of the GDP of Southern African economies, is already being negatively affected by the pandemic and attendant disruptions to transport, distribution, hotels and restaurants, entertainment, retail and trade.

Addressing poverty and inequality through economic growth

The Report does note that economic diversification, characterised by commodity driven industrialisation, could help boost the region’s resilience during downturns.

The Southern African Regional Economic Outlook 2020 identified poverty and inequality as twin challenges affecting the region and called for policies aimed at making growth inclusive, broad-based and pro-poor if economic growth is ever to address these issues.

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Compared to other regions in Africa, the region has the highest unemployment levels, averaging 12.5% between 2011 and 2019 (North Africa averages 11.8% over the same time period). Considering the sheer bulk of people employed in hard hit sectors such as tourism, hospitality, trade and retail, unemployment is likely to escalate.

The Outlook identifies quality education and skills as the basis of not only prosperity, dignity and well-being for individuals but the backbone of every successful economy. Hence the recommendation that a better skilled and more adaptable labour force is necessary to achieve economic diversification and structural changes towards high-productivity sectors.

“This year’s third edition of the Southern Africa Regional Outlook report offers robust options for policymakers at national and sub-regional levels to confront the challenges of sustainable economic development through skills development for the future of the workforce in the post-COVID 19 era,” said Josephine Ngure, the African Development Bank’s Acting Director General for Southern Africa.

Thus, the Outlook concludes, improving business competitiveness in the region is critical. The African Continental Free Trade Area (AfCFTA) is projected to provide medium and long-term opportunities for markets to spur economic growth. The intra-African market could mitigate some of the negative effects of COVID-19.

The Southern African Economic Outlook – Coping with the COVID-19 pandemic is available online.

Theresa Smith
Theresa Smith is a Content Specialist for ESI Africa.