The pandemic has struck the global economy the hardest, causing traditional business operations to plummet and face a recession. For the African marketplace, things have not been any different. The year remained economically constrained for business in Africa, with the GDP witnessing a 2.1% contraction in 2020. Let’s explore the impact of COVID-19 on the African marketplace and what the coming years are going to look like.
COVID-19 and the Outlook on African Economies
South Africa, the continent’s second-largest economy, has had a macroeconomic adjustment to the COVID-19 shock, according to Dr. Chris Loewald. Although the country suffered a reduction in consumption of consumer and capital goods, Africa has bounced back pretty well due to China’s fast recovery from the pandemic. Moreover, South Africa is the world’s largest rhodium producer, which helped accelerate its trade during recessive times as the world’s demand for rhodium and vanadium shot up.
Despite a quick rebound, it is predicted that African economies will take up to 2023 to resume the levels they had achieved in 2019.
Projected Economic Recovery
African countries are focused on building new ties with emerging markets. It has planned to form alliances with India, Russia, and the UAE besides China to establish strong investment and trading partnerships. Real GDP is expected to grow by 3.4% in 2021, underpinned by the restart of tourism, rebound in commodity prices, and the reversal of the pandemic-induced restrictions on trade dealings.
Strengthened International Collaborations
Due to the geographic proximity, UAE has become the gateway between the Emirates and Africa. Emirates Airlines boasts African destinations now as one of its largest networks in the world. Meanwhile, Dubai has resumed its role as central crossroads to re-export goods to the continent. The Global Expo, a six-month-long event, brings together 190 countries to develop knowledge-sharing and collaboration in an attempt to seek new investment and trade opportunities.
India, on the other hand, ties to Africa due to a common experience of colonialism. They are natural trade partners with similarities in language, law, and commerce. It does and will continue to export raw materials, including crude oils and minerals.
Another market that is likely to increase trade engagements with the African marketplace is Russia. With a plan to double trade ties in the next five years, Russia has long since invested in North Africa. Recently, Russian Railways is one of the projects to have signed a memorandum of understanding with Nigeria and Congo. For 2021 and the next five years, it is critical to court a wider network of partners, including, importantly, China, to achieve ambitious plans for the future.
The African Continental Free Trade Area (AfCTFA) is going to be quite the game-changer for the years to come, as predicted by Chief Economist Rita Babihuga-Nsanze. With China as the key investment partner, Africa sees a new light to close the financial gap in the form of Belt and Road Initiative lending space for international lenders. Conclusively, according to African Development Bank Chief Economist, the emergence of fintech and innovation is going to transform the whole continent with digitization coming out as the most popular trend in 2020.