- In the past few months, Africa has experienced new variants and 2nd and 3rd waves of infection, and is lacking vaccines
- We examine the Covid progress (or lack of it) in Nigeria, Egypt, South Africa, Morocco, Kenya, Ghana and Tanzania
- Inequalities of vaccine distribution mean the pall of Covid will hang over Africa far longer than in many other regions
It has been over a year since the first Covid case was detected in Africa. Thus far, the official infection and death rates have not been as high as feared. Although the lack of testing capacity is a huge problem, the region's relatively young population has been a blessing in keeping the severity of infection low.
However, Africa is likely to struggle more with the virus going forward. In the past few months, African countries have experienced new variants and second and third waves of infection. Worse still, the region is far behind in the vaccine-distribution journey. Just a little over 1 vaccine per 100 people has been administered overall, compared with the current global average of c10 vaccines per 100 people. A few African countries, like the Seychelles, Morocco and Egypt, are doubling down and accelerating distribution, but most have administered fewer than 2 vaccines per 100 people.
In terms of access to vaccines, the African Union – through its Covid-19 African Vaccine Acquisition Task Team (AVATT) – has signed an agreement with Johnson and Johnson to secure 220mn doses, with the potential to order 180mn more. Meanwhile, the WHO initiative Covax has delivered c12mn of the 42mn doses allocated to African countries. But Covax has recently warned countries to expect delays in delivery of the Oxford/AstraZeneca vaccine following setbacks at a manufacturing unit in South Korea and the temporary halting of exports from India. The recent US embargo on raw materials also threatens to stymie global vaccine production. These events illustrate the growing trend of export bans – and hoarding and supply shortages – as countries prioritise distribution to their own populations.
Indeed, so-called vaccine colonialism has highlighted not only the gap between developed and developing countries, but also between larger emerging markets such as Russia, China and India, that can manufacture and have already begun rolling out vaccines, and smaller and less developed ones that lack their own vaccine supplies.
The WHO has warned of inequalities of vaccine distribution across Africa and that “widespread vaccination will not be achieved until 2023 or 2024”. The consequence is that the pall of Covid will hang over Africa for much longer than much of the rest of the world. In particular, it will continue to devastate economies that rely on international tourism, like Egypt, Ethiopia, much of East Africa, South Africa and Namibia.
Africa has, however, benefited from the official sector’s financial response. Some 34 countries have been helped by emergency disbursements under the IMF's RFI/RCF – Sub-Saharan Africa accounts for just over half the total disbursed (51%). Namibia (first timer) and South Sudan (second time) have been the most recent beneficiaries of emergency disbursements, coming at the end of March. (For more on our views on sovereign bonds in Africa through the pandemic, see here). In addition, more than half the 73 countries eligible for the G20’s debt service suspension initiative (DSSI) are in Africa. However, more official sector support might be needed if the pandemic continues for longer.
In this report, we examine the progress (or lack of it) in seven key African economies: Nigeria, Egypt, South Africa, Morocco, Kenya, Ghana and Tanzania.
We have written extensively on Nigeria’s struggle with Covid and securing vaccines. The country has started its vaccine distribution, receiving its first shipment of c4mn AstraZeneca vaccines from Covax in March. So far, just over 1mn Nigerians have been vaccinated and almost all Covid restrictions have been lifted, except for the midnight curfew in Lagos state. Life is almost back to normal, except that the economic impact of the pandemic on the already weak Nigerian economy is causing more pain than from the virus itself. Stagflation continues to worsen amid record-high food inflation of over 22% and FX shortages. Meanwhile, the Central Bank of Nigeria continues to resist normalisation while funding the government deficit. Although the economy is projected to grow by 2.5% in 2021, per capita GDP continues on a downward trajectory.
The pandemic seems to have taken a back seat as the country struggles with numerous economic and security challenges. It is still a long road to mass vaccination and we do not expect that to happen until late 2022 at the earliest.
Egypt has experienced two waves of Covid-19 infections and is in the top five African countries both by number of cases (fifth, at 217,000) and number of deaths (second, at 13,000). However, the economic impact of the pandemic has been less severe than for most African countries, with the Egyptian economy avoiding a recession and growing 3.6% in FY 19/20, compared with 5.6% in FY 18/19 (fiscal year ends in June). This is because of the economy’s improved footing following the IMF-led economic reform in 2016, alongside strong domestic consumption in light of the rollout of its consumer spending initiatives, which also helped minimise the weak growth in tourism activity (which contributes c12% of GDP and 36% of export receipts) and investment flows. (See here for our in-depth analysis.)
The country is at the early stage of a third wave of infections, with Ramadan expected to worsen the situation. Also worrying is the slowing in the vaccine rollout, with only 164,534 doses administered (according to Reuters), despite 1.5mn doses having been received so far from China’s Sinopharm and Oxford-AstraZeneca. In total, the country has agreed to purchase 20mn doses of the Sinopharm vaccine from China and secured 40mn doses of AstraZeneca from the Covax facility.
As with the rest of Africa, the slow progress on vaccinations puts Egypt’s economic recovery at risk, with the IMF expecting the country’s real GDP growth to slow to 2.5% in FY 20/21. The gradually evolving third wave is also negative for the recovery of the country's tourism sector. On the positive side, the fiscal and monetary authorities are committed to stimulating economic activity, as the central bank has lowered its policy rate by a total of 400bps since the start of the pandemic, while the government has rolled out several funding programmes. The country’s funding from external sources in 2020, which comprises US$8bn from the IMF, US$300mn from the AfDB, US$450mn from the World Bank and US$5bn from the eurobond market, is also supporting the government’s efforts at boosting growth.
On many fronts, South Africa has been hit the hardest by Covid in Africa. The country ranks first in terms of number of cases (c1.6mn and 35% of Africa’s total), and deaths (c540,000 and 46% of Africa's total), a striking position considering that the next country on the list, Morocco, has one-third fewer cases. The country’s GDP contracted by 7% in 2020 – among the largest contractions in Africa – due to the negative economic impact of containment measures, and ripple effects from the global slowdown.
Currently, South Africa is just emerging from a second Covid wave (which lasted from December 2020 to February 2021) that saw the entrance of a new and more infectious Covid-19 variant termed "B.1.351". There are now rising concerns of a possible third wave of infections, given the mass gatherings associated with recent religious holidays.
South Africa has an ambitious vaccine rollout strategy in place, with the aim of vaccinating at least 67% of its population (c40mn) by the end of 2021, to achieve herd immunity. To that end, the country has independently secured (excluding avenues such as the Africa Union and Covax) c52mn vaccines from both Johnson & Johnson and Pfizer, expected to be delivered at different points in Q2 21. It has also reached an agreement with Covax to secure 12mn vaccine doses. However, vaccination progress has been lethargic, with c293,000 healthcare workers vaccinated currently compared with a target of c1.2mn by mid-April, and vaccination for other citizens yet to commence. By all indications, delays in setting up a ‘no-fault compensation scheme’, which is being required by its vaccine manufacturers (as it protects manufacturers from lawsuits arising from vaccine-induced injury claims), as well as 'vaccine hesitancy' (arising from fears of side effects) are key factors hindering an effective rollout programme.
For 2021, the IMF expects the economy to grow 3.1%, which is a moderate recovery from the 7.0% contraction experienced in 2020. South Africa’s growth outlook will depend heavily on its vaccination drive in 2021, which if it goes well, could limit the risk of further Covid waves hitting economic growth and preventing a permanent reopening of its economy. However, the country’s macro picture is still weak, given the continued structural constraints, such as unreliable electricity supply, the weak financial positions of its state-owned enterprises (particularly Eskom) and large public sector wages, all dragging on the public finances and the (expanding) fiscal deficit.
Morocco's battle with Covid has been a roller-coaster ride. After the first case was identified in March 2020, the government declared a state of emergency and enacted strict lockdown measures, keeping cases in check. However, the economic hardships caused by the pandemic, which the Finance Minister estimated cost the country cUS$100mn daily, led to a decision to ease lockdown measures in June. Infection rates, though, rose to unprecedented levels, with daily cases peaking in November at 6,195. To date, the North African country has had over 500,000 cases and almost 9,000 deaths.
The country has remained in a state of emergency since then, and night curfews are even being enacted during Ramadan to curb further spread. There are also flight restrictions and border closures in place with 50 countries. This has weighed heavily on the tourism sector, which contributed 7% of GDP in 2019. The three-month lockdown, coupled with a drought that hit farming badly, led to a recession after three consecutive quarters of contraction in 2020 (FY 20 saw a 7% contraction).
Morocco has now embarked on an aggressive vaccination campaign. As of 18 April, 4,655,007 people have been vaccinated (over 10% of the total population), of whom 4,186,449 have received their second doses; adding up to a total of almost 9mn vaccinations since the campaign began in February. The country aims to attain herd immunity (vaccinating 80% of the population, or 33mn people) by the summer. This together with monetary and fiscal support – including a 75bps cut to the policy rate and a MAD120bn (US$12.8bn) stimulus programme, representing 11% of GDP – is expected to boost growth in 2021. The IMF projects growth of 4.5% in 2021 and 3.9% in 2022.
Kenya is experiencing a third wave of Covid. Like other African countries, the vaccine rollout has begun, albeit at a slow pace. So far, only c650,000 people have been vaccinated (translating to around 1 in 100 people), with the majority of these being frontline medical personnel and essential services workers. Vaccines are yet to officially reach the general population, which will have to wait for more supply. The government has plans for a series of phased rollouts, with the current target being to vaccinate 30% of the population by 2023. This remains lower than global targets, which stand at above 50%. The Kenyan government will update its target depending on funding and the availability of vaccines. For the most part, though, the impact has been less severe than in many countries – the death rate has been low, with most cases being mild and asymptomatic.
From an economic perspective, the government has rolled out support measures including tax reductions, lower fees and commissions charged on digital banking channels, and the banking regulator has allowed banks to restructure non-performing loans. Although these have served to support the economy for the past year, tough restrictions including curfews, school closures and lockdowns have been periodically implemented in the three different waves to stem the spread of the disease, hitting the economy. Overall, GDP is estimated to have shrunk by 0.1% in 2020, according to the World Bank.
In 2021, the IMF expects the country’s economy to grow by a strong 7.6% yoy. This is likely to be supported by a rebound in the trade, transport, agriculture and construction segments, which had already recovered to a degree in the Q3 20 numbers. The recovery of commodity prices is also expected to boost the export of goods from the country.
There are three key growth risks, though:
Continued lockdowns, which have been the common response to surges in cases. These have reduced business hours and shut down key economic segments, such as tourism and transport;
The elections in 2022 are likely to dampen investment appetite, with investors taking a wait-and-see approach; and
The slow roll-out of vaccines could hit investor confidence in the country’s ability to recover swiftly.
Ghana had it tough during the first wave last year, which necessitated a three-week lockdown in March 2020. As a result, the economy entered a technical recession, following contractions in Q2 (-3.2%) and Q3 (-1.1%) 2021 – the first contraction in four years and the first recession in 37 years.
Currently, Ghana is pulling through the second wave of the virus, which has hit even harder than the first wave, as daily infections and deaths peaked at higher levels and new variants surfaced. Unlike in the first wave, Ghana has not enacted strict lockdown measures during the second wave, but activities in social clubs, places of worship, etc., have at times been restricted. Things, though, have resumed to near normalcy, although preventative measures such as wearing masks and social distancing are in place.
Despite the recession, the IMF estimates Ghana's economic growth will be positive at 0.88% in 2020 and grow further to 4.6% (revised higher from 4.2%) in 2021. Efforts by the monetary and fiscal bodies have supported the economy through Covid. The Bank of Ghana cut the key interest rate by 150bps to 14.5% to boost the economic recovery. This, together with the IMF’s US$1bn rapid credit facility, the World Bank’s US$100mn support, a US$3bn Eurobond and the GHS100bn post-Covid CARES programme, have helped. However, mitigating the economic impact of Covid may have come at the price of an additional fiscal burden and a sharp rise in public debt.
Aside from the monetary and fiscal support, the recovery is expected to be supported by driving down Covid cases, following the receipt of 970,000 AstraZeneca vaccines – including 600,000 vaccines from the COVAX facility and others from private and public bodies. To date, 756,000 vaccine doses have been administered since the vaccination programme began in March. The government expects to take delivery of another 1.4mn vaccines from COVAX in the coming weeks. In addition, 1 mn doses of the Russian Sputnik V vaccine are set to be delivered to Ghana after it was tested and approved in February.
Under Tanzania’s former president, the late John Pombe Magufuli, the country did not acknowledge the existence of Covid for the greater part of 2020. Even when the country did acknowledge Covid towards the close of the year (after the country lost some key government officials), the former president still opposed vaccines and instead urged the country to seek out traditional medicines to deal with the symptoms of the disease. Although there is still no significant data, on the ground the presence of the virus in Tanzania does not seem too different from the situation in Kenya – there is strain on hospital infrastructure, but deaths have not spiked in a manner to cause concern, to the extent that was witnessed in Italy and Spain last year, or India now.
President Samia Suluhu Hassan, who took over after the death of President Magufuli, has announced that her government has put together a task force to provide information on the Covid situation and advise on the way forward. In her speeches, the president seems committed to releasing information and catching up with the rest of the world.
The IMF expects Tanzania’s economy to grow 2.7% in 2021. Unlike its regional peers, the country has not enacted any lockdowns, which has helped the country to avoid a recession (estimated GDP growth of 1.0% yoy in 2020). Going forward, Tanzania’s economic growth depends on infrastructure projects resuming, tourism numbers increasing (in turn, dependent on confidence in the new president’s management of Covid) and rising commodity prices.
- 1 Strategy Note/Global Emerging market strategy and valuation amid inflation and Covid wobble
- 2 Sovereign Analysis/Zambia Zambia: IMF negotiations progress, but still far from final
- 3 Strategy Note/Philippines Philippines fintechs are well placed to help drive financial inclusion
- 4 Strategy Note/Vietnam Vietnam ranks first on our Fintech Financial Inclusion Scorecard
- 5 Sovereign Analysis/Belize Belize government's low-ball restructuring proposal falls flat
This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...