The Africa Report
WIDE ANGLE / Brace for impact
The Africa Report examines the deep changes that the Covid-19 crisis is bringing to Africa and its international partners. From South African president Cyril Ramaphosa’s reforming dilemmas to the Us/china cold war, the global health crisis is leaving scars and challenging ‘business as usual’ in terms of multilateralism, public health and economic responses to the novel coronavirus.
The Africa Report explores the wide-reaching changes that the Covid-19 crisis is bringing to Africa. The AFDB predicts -3.4% economic growth as the worst-case scenario this year. We zero in on how reformers can use the fast-moving situation to accelerate improvements across health and other sectors (p28). We also talk to Nigerian magnate Abdul Samad Rabiu (p34) about businesses’ adaptation strategies and plans for this new period.
If South Africa’s President Cyril Ramaphosa wanted a pretext to do radical things, this is his best chance – with a global economic meltdown as collateral damage from the pandemic. Everyone around the governing African National Congress (ANC) is dreaming up insurgent policies.
The business cabal think it is time for the ANC to dump its lukewarm Fabian socialism and let market forces rip. The leftists say capitalism is breathing its last and the National Democratic Revolution is dawning.
That is, the state should take over those ailing conglomerates on the JSE. And they want a swingeing wealth tax on the well-fed elite, as well as land redistribution. All of that will be needed to fund an ambitious national health insurance scheme to deal with the next pandemic.
Ramaphosa and his market-minded finance minister, Tito Mboweni, agree the pandemic’s devastating consequences will force far-reaching structural changes. There is no consensus about what those changes should be and who should pay for them.
The economy entered a recession in the second quarter of the year as the government’s lockdown measures shut down the country. The central bank predicts national output will have fallen by more than 7% by the end of 2020, the biggest drop since the Great Depression in 1931.
This comes on top of Ramaphosa’s dire inheritance after a decade of Jacob Zuma’s presidency. Bonang Mohale, chairman of the giant Bidvest Group, reckons the accumulated cost of ‘state capture’ by Zuma’s business allies at R1.5trn ($88bn). Total public debt is set to hit 80% of national income this year and the budget deficit is likely to be 15% of GDP.
Last year, Mboweni set out a shock-therapy programme to stabilise the economy: at its core was the aim of ending bailouts for state-owned companies – all except Eskom, the power utility. Follow the logic and Mboweni left three unpalatable options for his critics in the ANC: let the companies collapse, get rid of their remaining assets in a fire sale or privatise them.
An early sign will be the fate of South African Airways. Mboweni asks why the government should pay another penny to the bloated and mismanaged state carrier. Ramaphosa is said to agree with him in private but has steered a middle course in public debate, mindful of the jobs at stake and the blow to national pride.
Another dilemma looms after the government broke with precedent and borrowed $4bn from the IMF in April. It is now heading back for another credit, and the negotiations will be tougher, with conditions such as cutting the deficit and ending bailouts. That will test Ramaphosa’s revolutionary credentials in full public view.
The former UK prime minister Tony Blair chats with more than a dozen African presidents on his Whatsapp. The one subject they are asking most about? “They all want to know how to navigate the confrontation between China and the US,” Blair tells The Africa Report. His answer: make the African Continental Free Trade Area just the beginning of a far greater political and economic integration, to give Africa heft on the world stage.
Pan-african institution building is the right move, but even the most optimistic are talking in years, not months. So what about today, amidst soft-power and other jockeying for position between China and the US during the Covid-19 crisis? The often hysterical criticism by US cable-tv hosts of Ethiopia’s Tedros Adhanom Ghebreyesus at the helm of the WHO blends into a broader US critique of ‘debt diplomacy’, whereby officials accuse Beijing of wanting to bring African countries into its orbit through underhanded infrastructure deals. But Chinese medical aid was in the African headlines this year (see page 90), and the US largely withdrew into its own worsening Covid-19 outbreaks.
Beyond the Us-china trade-war impacts – which are not particularly welcome in a world facing a sharp downturn – there are other faultlines to navigate. These are particularly sharp in technology. South Africa’s President Cyril Ramaphosa has already suggested the US is “jealous” in its hostility to China’s aggressive 5G plans.
Nevertheless, China does not hold all the aces while the dollar is king. Donald Trump has forbidden US companies from selling components to Huawei from 19 August. Huawei is the principal supplier for French mobile operator Orange in Africa. And if things really heat up? Does Kenya want to be locked into a Chinese payments ecosystem and potentially lose correspondent-banking privileges?
For Eric Olander, managing editor of The China Africa Project, it is time to tune out the rhetoric and look at the tells. In Beijing, he says, top diplomats and thrusting young financiers are no longer interested in the continent. According to him, Africa’s real problem is not China taking resources and land or debt enslavement; it is that China loses interest. China can now buy all the raw materials it needs on the open market, which was not the case 20 years ago. Its large companies are taking big hits on projects that are not coming good on the continent. Africa represents less than 4% of China’s total global trade of more than $4trn – will it be worth the headache? 0.736 1.7 0.92 1.6 5 5.6 4 6.7 6.6 10
Transport Power Mining Communication Water Other social Government Unallocated Industry Multi-sector Agriculture Budget Business Banking Education Health Other commodity Trade Food Environment 11.9 16.6 12.3 11.5