Economic recovery after COVID-19

CORONAVIRUS (COVID-19) is the worst crisis the world has experienced since the Second World War. It is also the worst health crisis since the Spanish flu in 1918.

The impact of COVID-19 is being felt in different spheres of life. There is no doubt that it has and it will continue to alter the way we live and do business.

Nations have been left poorer due to decreased or loss of income. A recovery strategy is needed. As the world grapples with attempts to beat back the impact of COVID-19, this is the right moment to count the costs while chatting a life with and post-COVID-19 recovery. Not doing so would be downright myopicism whose outcome is nothing but a perpetuation of the impact of the crisis.

The first priority is, of course, saving human lives which should be the baseline of any social and economic recovery in living with or after COVID-19. It is critical that governments prioritise their people, improving their welfare and preserving the human capital. This is important because the people are the primary and major source of any economic recovery. They are the first capital required to recover or boost economies.

Looking after them entails keeping them healthy, fed, alive and capable of providing labour at whatever levels of the economic spectrum. This should not be seen as political but the reality of the order of things.

The more people are infected and affected by the pandemic, the less likely economies are able to recover and the higher the welfare burden the government will have to shoulder when they are supposed to focus on economic investment than expenditure.

It is even worse when the working age group is the worst affected demographic group as this will mean their dependants will become government responsibility. With proper planning, these can be avoided.

The second priority is for governments to think outside the box. After the Second World War, several initiatives kicked in, some of them global, some national and others bilateral.

Global governance institutions were established to facilitate, coordinate and support recovery. This included International Finance Institutions to finance this global project. The tenets of colonisation were reframed into what has turned out to be development today.

What is critical to note from this period is that big economies were unable to recover without dedicated flows of cheap raw materials from poor and colonised countries. They had that advantage.

If the playing field was level, it was an important opportunity for poor countries to bargain better prices for resources needed by big economies. During this COVID-19 period, poor countries need to be more organised, proactive and realise that the demand for their raw materials is coming and it will create an opportunity for better bargaining on the global markets.

Better bargaining means a lot more than getting the right prices for their materials. It can be an opportunity to acquire new technology to industrialise and create more economic and employment opportunities for citizens. Western investors are known to be wiser and to capitalise on financially greedy and gullible politicians capable of selling material for free after receiving kickbacks.

The third priority is that recovery will require a multi-facetted approach, but most important is to prioritise local investors. Current responses have focused on humanitarian approach by providing relief supplies to families, keeping companies alive to maintain the economy and employment, loosening some expenses, reducing taxation and providing financial liquidity to minimise or stop companies from closure.

All these are noble, but very short term and more will need to be done. For poor countries, save for those who serve in the civil service, governments need to dump the idea that they can create jobs.

One of the reasons civil service is collapsing is because politicians destroyed economies — a financial stream from which civil servants’ salaries are derived. Governments must facilitate conducive economic growth environments for both the informal and formal sectors as foreign investment alone will not be able to meet the unemployment burden. This simply means prioritising local investors whether formal or informal. This is what most countries will do because it is more long-term and sustainable.

Africans are generally entrepreneurial if given fair opportunities and conditions which is why earlier on I argued that it is critical to keep people alive and healthy so that they can play a part in the economic development of their countries.

It also entails connecting the informal sector with the formal sector to maximise on productivity and market share. Family businesses can produce products for big companies, while governments focus on improving skills and capacities of household businesses.

Big corporates can seek or open markets while ensuring quality standards for family-produced products. Some big economies such as the United States have already started this approach and it is the same approach that gave rise to the Chinese economic growth. This is not only critical for addressing economic growth at household level, but it is an effective way of addressing poverty at that level, freeing government to focus on macro-level economic priorities.

Demand for big corporates will be high and overstretched given that major economies are on a recession. There is no better way of kick-starting long economic recovery than an approach that is inclusive of the people. Once this baseline is established, it does not only provide the needed reprieve, but evidence of a conducive business environment so attractive to foreign investment.

Tapiwa Gomo is a development consultant based in Pretoria, South Africa. He writes here in his personal capacity.