Africa faces a ‘triple whammy’ from covid-19
Sir Paul Collier, Professor of Economics & Public Policy at the Blavatnik School of Government, University of Oxford, is widely recognized among the world’s leading experts on African and resource-rich economies.
His latest book is The Future of Capitalism: Facing the New Anxieties (2018). He is also a member of Critical Resource’s Senior Advisory Panel.
Collier addresses the ramifications of the unfolding covid-19 crisis – an example of ‘radical uncertainty’, with multiple variables and unpredictable outcomes – on less developed economies, in particular in Africa.
Key points raised
- African economies will suffer a ‘triple whammy’ due to a sharp drop in commodity prices, a fall in remittances from diaspora communities and the substantial impact of reduced travel and tourism.
- The large drop in foreign exchange earnings will further erode the ability to conduct effective deficit financing or design stimulus packages. Many African countries will be forced to devalue their currencies to manage the fall-out, and the impacts will be felt for years to come.
- The ESG agenda will continue accelerating and the risk of divestment by investors in the resources sector will intensify.
- Companies’ response to this crisis has thus far been disappointing – there will be growing scrutiny in their home countries and where they operate.
- Despite short-term pressures, the long-term route to economic survival for resource companies is to preserve and strengthen their reputations as responsible operators. They will be defined by their engagement with and contributions to the needs of local communities and host countries.