An increasing number of African governments have imposed lockdowns in an effort to fight Covid-19, but we think the risk that such restrictive measures fail to contain the outbreak is bigger in the region than in other parts of the world.
- An increasing number of African governments have imposed lockdowns in an effort to fight Covid-19, but we think the risk that such restrictive measures fail to contain the outbreak is bigger in the region than in other parts of the world.
- The science of epidemiology is, of course, far outside of our area of expertise. But there seems to be a growing consensus among health experts that the most effective strategy for slowing the spread of the coronavirus outbreak is a combination of widespread testing and “lockdown” (or social distancing) policies designed to isolate as many people as possible in their homes.
- We had originally assumed that African governments would lack the resources, political will, and administrative capacity to impose lockdowns, but they are now becoming increasingly common. At the time of publication, over 100 million people in South Africa, Nigeria, and elsewhere are subject to rules limiting their ability to leave their homes. (See Chart 1.) Millions more in Kenya and Francophone Africa are living under increasingly strict curfew arrangements.
- It is not clear, however, how effective these rules will be in the region. Successful lockdown policies have been imposed in wealthy, urban societies in Europe or East Asia, but they may be less effective in poorer societies. For one thing, most people in Africa live in larger extended households, making it harder for people to isolate themselves. (See Chart 2.) Outside of South Africa, only a small minority of people have running water in their homes. (See Chart 3.) They will necessarily need to travel to communal areas, which will limit efforts to stop the spread of the disease.
- Moreover, even if lockdowns could be medically effective, they may be impossible to enforce. The suppression of social and economic activity may stall the virus, but it also causes a huge fall in incomes. The shock will be particularly sharp in Africa, where few people can work remotely and informal labour markets mean that – outside of South Africa – the majority labourers are self-employed and will receive no income if they stay home. (See Chart 4.)
- Figures on household savings are patchy, but most people do not have the resources to sustain themselves over a long period of enforced idleness. In Kenya, for instance, just 37% of people report being in a financial position to “cope with shocks”. (See Chart 5.)
- And most African states will struggle to follow the example of policymakers in DMs and some EMs, which are stepping in to provide emergency support to workers (and businesses) that have been left short of cash. Outside of South Africa, there are very few existing social safety nets that could be re-tooled or scaled up. (See Chart 6.) Desperate times may, however spur innovation that fits local circumstances. In Kenya, for instance, the authorities might be able to use the ubiquitous, phone-based mobile money system to transfer cash to workers who are not part of the official tax or welfare systems.
- If lockdowns are successfully imposed, they will be very costly. The hit to output will vary across the region, but be larger in richer and more urbanised societies. In South Africa, we think that GDP will fall by 4% this year. (See Chart 7, and here.)
- The worst-case scenario, however, would be if lockdowns failed to contain the virus, while still inflicting severe economic pain on citizens unable to earn a living. Even though Africa has experience with infectious diseases and its population is relatively young, which might lower the risk according to some studies, the region’s fragile health systems could quickly get overloaded in a widespread outbreak. The number of doctors, equipment or hospital beds is very low compared to other emerging markets. (See Chart 8.)
- Even when assuming that the worst-case scenario is avoided, the social and economic price of lockdown measures will be high. Limited government capacity to cushion the negative impact on households and businesses means that economic recoveries are unlikely to be fast or sharp.
Chart 1: Population under Lockdown Orders (Millions)
Chart 2: Average Size of Household (People)
Chart 3: Households with Running Water (%, Latest)
Chart 4: Employees (% of all Workers, Latest)
Chart 5: Personal Financial Position
Chart 6: Coverage of Social Safety Net Programmes
Chart 7: South Africa GDP (% y/y)
Chart 8: Hospital Beds per 10,000 People (Latest)
Sources: DHS, ILO, World Bank, National Sources, Capital Economics
Virág Fórizs, Emerging Markets Economist, email@example.com