Covid-19's impact on supply chains hits African trade hard, with GDP shrinking for the first time in twenty-five years

11 August 2020

With Africa’s economy scheduled to shrink for the first time in 25 years, boosting trade between African countries will be crucial to offsetting the dire economic impacts of Covid-19, says a new report from London-based think tank ODI.

Across the world policies to address the pandemic have limited and halted work and mobility, and as a result value chains and trade have slowed. While uncertainty remains over the total costs of the virus across Africa, estimates suggest anything from $29 billion to $120 billion might be wiped from the continent’s economy.

ODI’s researchers found that the EU and the UK are important for the integration of African firms into global supply chains - and that the pandemic’s impact of African trade is closely linked to how fast their production and trade recover. In contrast, Chinese economic recovery is likely to have a less significant direct effect.

Significantly, the researchers found that intra-African trade will be crucial to the continent’s recovery and building economic resilience in the medium to long term. Notably, their report restates the case for the much-vaunted African Continental Free Trade Area (AfCFTA).

Maximiliano Mendez-Parra, Senior Research Fellow at ODI, says “The COVID-19 pandemic has highlighted the importance of implementing and continuing the negotiations of the AfCFTA. However, the pandemic has also lessened some countries’ preparedness for implementing the agreement. It is important to avoid a protectionist approach to dealing with the crisis and instead move towards strengthening intra-Africa integration.”

In particular, the report examined the heavy import dependency and vulnerability of Africa’s pharmaceutical sector, which has been exposed by Covid-19. All African countries are net importers of medical and pharmaceutical products, importing almost 100% of their pharmaceuticals.

Pharmaceutical supplies across Africa are being affected by export restrictions imposed by other countries and lower access to medicine supplies as a result of shutdowns of manufacturing facilities in China and India, as well as increased prices of raw materials. This reliance on imported pharmaceuticals have put them in a perilous position to access essential medical supplies, not to mention the impact on secondary pharmaceutical manufacturing within Africa.

Karishma Banga, Research Fellow at ODI, says ''Freer movement of essential goods on the continent, as well as implementation of digital trade facilitation and e-commerce, will help enhance the production of pharmaceuticals and boost intra-regional trade in the sector.''