After lockdown, Uganda, Ghana and Senegal show early recovery signs
Kampala, Uganda | RONALD MUSOKE | Dozens of African countries will experience subdued economic recovery next year, according to predictions shared by experts at a recent roundtable organized by the Nairobi-based Africa Trade Insurance Agency.
The annual roundtable event which this year was organized virtually on Dec.09 provides a platform for international investors, financiers and other stakeholders from the private sector to have open and honest exchanges with African governments about current investment and trade risks and potential solutions.
Speaking on the prospects for the region to recover from the impacts of COVID-19, several investors, risk analysts and African governments agreed that Africa is only likely to reach the 2019 economic growth levels in 2022.
The International Monetary Fund (IMF) estimates that US$345bn will be required in the next three years to help countries fully recover from the economic impacts of COVID-19, while the most comprehensive debt support initiative – the G20’s debt service suspension initiative (DSSI) will only provide US$6.5 bn to eligible countries through to June 2021.
Despite Uganda being in the midst of a general election, the country is expected to grow by 2.9% this year and 3.5-4% in 2021— growth that puts Uganda among the continent’s top performers
Currently, there are over 2.3 million cumulative infections with 300,000 active cases on the continent, according to the Africa Centres for Disease Control and Prevention dashboard.
Robert Besseling, the founder and CEO of Pangea-Risk told the virtual participants that the pandemic seems to have impacted mostly North and Southern Africa with each of these regions accounting for one-third of the cumulative infections.
One of the striking features of the pandemic’s impact is that, unlike previous economic shocks that left their mark largely on commodity-dependent countries, the COVID-19 pandemic is affecting a broader swathe of countries including more diversified economies including those reliant on tourism and the aviation sectors.
As a result, analysts say, debt defaults are likely to be contained to a small subset of countries with little chance of contagion spreading to other countries in the region.
In 2020, Moody’s took the most ratings actions, 20 in total, since 2016 and were focused on a small subset of countries, where the COVID shock exacerbated pre-existing credit weakness prior to the pandemic leaving these countries more susceptible to shocks and possible negative ratings.
By 2021, six African countries are expected to record government gross debt of over 100% of GDP while debt burdens overall were expected to rise then stabilize by 2021/2022 above 60% of GDP.
The most vulnerable countries are well known to the markets and have had pre-existing challenges. Given the isolated nature of current defaults, however, the general trend does not show any threat of regional spread or contagion, the risk analysts said.
Not all doom and gloom
Despite the gloomy outlook, analysts noted that there are no surprises for countries like Senegal, Ghana and Uganda which have responded relatively better than their peers during this period, thanks to the sound fiscal and monetary policies they already had before the pandemic.
Moses Kaggwa, the Director of Economic Affairs in the Ministry of Finance, Planning and Economic Development told the virtual participants that despite Uganda being in the midst of a general election, the country is expected to grow by 2.9% this year and 3.5-4% in 2021— growth that puts Uganda among the continent’s top performers.
Kaggwa said the government’s focus has been put on generating jobs within the agriculture sector, which accounts for the employment of 70% of the population. He said entrepreneurs in the sector are being supported by ramping up value addition of some of the exports. Kaggwa added that the government is focusing on domestic tourism while the Uganda Development Bank is bridging the current financing gap to manufacturing and agribusiness.
Ghana, which has a fairly diversified economy has been helped by stable cocoa prices and a resurgent interest by investors in gold, which countered the effects of the downturn in oil prices, according to Samuel Arkhurst, the Chief Economics Officer and Director of Treasury and the Debt Management Division.
Meanwhile, Senegal which is ranked second out of 36 countries globally for their COVID response could not have achieved much had the government not implemented a U.S $ 1.7bn economic and social resilience programme in April this year.
Khalifa Sarr, an Advisor to the Minister of Economy, Planning and International Partnerships said this stimulus is credited for saving thousands of lives and strengthening social infrastructure that will protect the country against future pandemics while adding to the next phase of their recovery programme aimed at attracting the private sector through a new PPP framework and policies that will ease bureaucracy for investors.
Going forward, Manuel Moses, the executive director of ATI noted that the trade agency will focus on lending more support to the most vulnerable economies, which the company plans to do through rapid membership expansion in the coming months with the support of partners like the European Investment Bank and the African Development Bank.