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This is a notable time in the history of the globe. We are in one of those rare moments where the whole world is facing the same enemy, an enemy that can’t be seen with our eyes directly.
This enemy has laid siege to the world’s economy and is swiftly bringing every form of economic system to a halt.
The new Coronavirus which first emerged in the city of Wuhan in China December 2019 has infected over 110,000 people in at least 110 countries and territories globally, with over 37,000 deaths recorded according to World Health Organization; thus a recession globally seems inevitable.
To make things worse, the disease is spreading fast across the world with countries like Italy, Iran and South Korea reporting over 7,000 cases each.
Ben May, head of global macro research at Oxford Economics, said in a report that “from an economic perspective, the key issue is not just the number of cases of COVID-19, but the level of disruption to economies from the containment measures.”
Everything is affected by this new enemy, the stock market, bonds, oil price and health is in chaos. In order to be able to combat this enemy, governments all over the world are placing their citizens on mandatory lockdown.
What else could be an immediate action to take when you are facing an enemy that you can’t see or touch? This is world war 3 and the front-liner here are not generals and their soldiers but scientists, doctors and nurses; some whom have lost their lives to this pandemic called COVID-19.
A moment of silence to those brave men and women……………………………………………
Governments across the world are doing what they can to contain the situation through mandatory lockdown in their countries and through the injection of funds into the system to help support citizens and institutions that will have to temporarily shut down operations.
The Coronavirus is affecting every sector from the financial sector, tech, hospitality, manufacturing, aviation, transportation, tourism, education and agriculture etc. But In regards to this piece I will be sharing thoughts on how this Coronavirius have impacted the agricultural industry, food supply and food security in Africa?
The Impact of Coronavirus on the agricultural sector, food security and food supply in Africa:
As at the time of this writing, there are over 400 cases across Africa and minimum of 30 countries have outbreak. However the impact on the agricultural sector will depend on how long the epidemic last and the restriction measures put in place before businesses can resume back to normal operations.
The spread of the virus have affected various sectors but the food and agricultural sector should be less affected than others, however restriction on the movements of goods and people will have a significant socio-economic repercussion on people’s livelihood, and this will affect the most vulnerable groups in Africa.
Although the isolation measures put in place will help limit spread of the virus, they often lead to food shortages, food insecurity, malnutrition, disruption of market chain, disruption in the trading of agricultural produce with significant impact on the population that depends on them for their livelihoods.
Demands for Africa’s raw materials and commodities in China has declined as well and Africa access to industrial components’ and manufactured goods from the region has been hampered causing further insecurity in a continent already struggling with widespread geopolitical economic volatility.
The manufacturing and industrial sector in Africa is expected to be impacted by a decrease in the supply of key components from China and other relevant countries affected by COVID-19.
Countries such as Zambia, Nigeria and Ghana are significantly expose to risks in terms of industrial commodity exports such as oil; iron ore and copper to China.
It’s impact on Africa is expected to be stern; according to rating agency (Fitch), the Coronavirus outbreak will have a double risk for short term growth for Sub-Saharan Africa growth particularly in Ghana, Angola, Togo, Equatorial Guinea, Zambia, South Africa, Gabon and Nigeria; all countries that export large amount of commodity to China.
According to World Food Program (WFP) Chief Economist; Arif Husain, speaking from an early lockdown in Rome. “It is still too early for an accurate assessment of the impact of COVID-19 on the economy.”
What is sure is that an economy downturn is to be expected at the global level and that is likely to trickle down to developing economies. And this can exacerbate excess food insecurity.
According to the 2019 global report on food crises, Africa remains disproportionally affected by food insecurity with more than half of the global 113 million affected by food insecurity, 58% (65.54 million people) are living in 33 countries in Africa. Yet Africa holds 65 per cent of the world uncultivated arable land.
Food insecurity should not even be a thing to discuss in Africa; we have the right climatic condition, good soil, ample water availability, sunlight and human resource. However, our agricultural sector continues to be vulnerable to shocks such as disease outbreak, economic instability, poor input supply chain network, and conflicts.
Most of the African countries that have been affected by the spread of COVID-19 are already experiencing disruptions in import/export, panic-buying which has led to inflation in prices of food.
Take Ghana for example:
Ghana is one of the over 30 African countries feeling a direct negative impact of the Coronavirus on food security systems as they have over 68 cases recorded so far, with at least three deaths.
According to media report, President Akufo-Addo announced the closure of Ghana’s air, land and sea borders. He also directed the closure of all schools from nursery to the tertiary level and announced a US$100 million package to boost the economy. This closure is already having a grave impact on Ghana’s food supply as they usually spends about a $100 million every month importing agricultural products from countries like China, the United States and Europe, which are struggling to export as the virus spreads.
There is an expected rise in food cost after the government announced a nationwide lockdown that would force everyone except essential workers to stay at home.
Citizens have begun to show signs of panic buying of food and basic supplies as they go into isolation in their homes. Food prices have soared; fueled by rumors when an announcement that markets would be closed to allow for fumigation exercises was made.
In Nigeria, the Poultry Association of Nigeria are pleading with the government for exemption, being included in the restriction will amount to huge losses to farmers who need to tend, care and sell the produce from their farms. Inadequate care for the birds could lead to mortalities, and a resultant huge loss for the farmers.
The losses will lead to shortage of poultry meat and eggs for the consumers and even a more dire situation for farmers who may not be able to recover from such loss.
In a report by the United Nations Food and Agriculture Organization (FAO), they mentioned that border closures, quarantine measures, market supply chain and trade disruptions could restrict people’s access to sufficient/diverse nutritious sources of food especially in countries hit hard by the virus or already affected by high levels of food insecurity.
“We are faced with a looming food crisis unless measures are taken fast to protect the most vulnerable, keep global food supply chains alive and mitigate the pandemic’s impacts across the food systems,” says the FAO report.
Thousands of jobs have been lost due to this pandemic take for example the multibillion Shilling flower industry in Kenya.
In an online article by dailynation.co.ke Mr. Wesley Siele the chief executive Officer of the Agricultural Employers Association (AEA) which oversees the operations of 94 flower companies in the country speaks on the impact of the virus on the industry. He says that their members who export flowers, fresh vegetables and fruits are counting huge losses.
Growers who sell direct to the auction in Holland are destroying the entire consignment of flowers and this translates to a loss between Sh1.8 billion and Sh2.2 billion per month.
Now imagine if this virus is not contained as soon as possible how much would this booming industry in Kenya loose. He further said that no one is buying the flowers and there are no flights. Supermarkets have cancelled their orders worth billions of shillings.
In South Africa, Joseph Kan, an agricultural economist at the Agricultural Research Council said the outbreak came at a time when South Africa, through the BRICS platform was entering a new market for agricultural produce, particularly horticulture in China.
Wool is South Africa’s most important agricultural commodity export to china. A decline in China’s demand to South Africa agricultural exports would negatively affect the country’s capacity to generate foreign revenue.
The spread of the Coronavirus has forced the world’s largest importers of cashew products such as India, China and Vietnam, to stop imports as processing factories close due to lockdowns in their countries as well.
In Ghana the COVID-19 virus spread is having a strong negative impact on cashew, a major export crop for Ghana that is grown by hundreds of thousands of farmers across the country. According to the Ghana Export Promotion Authority (GEPA), the country earned $981 million from the export of cashew in 2016, making it one of their top agricultural export commodities after cocoa.
Due to this halt in demand checks in Ghana’s cashew growing areas by the Business and Financial Times show the price at which farmers sell bags of raw cashew nuts to processors has dropped between 40 and 50 percent, reducing farmer income.
Also the spread of the virus have had a big impact negatively on Africa’s largest economy “Nigeria” whose major source of revenue is her crude oil. China; the epicenter of the Coronavirus is the world largest importer of crude oil. Oil price dropped due to lower demand from china; oil prices are in one of their biggest weekly drop since 2008 due to the impacts of the Coronavirus pandemic.
Nigeria may have to face another recession as oil revenues plunges due to the impact of the Coronavirus global outbreak.
There is an Increase in the number of unemployed people; even in the US there are 3.3million jobless claims as at 27th March 2020. Job Insecurity and reduced income (half Salary) will have an impact in limiting people’s ability to access nutritious food. Some companies have had to send their workers home as they are losing money by the second and won’t be able to pay their staff salaries in the coming month.
Supply shortages are expected to affect a number of sectors due to panic buying which leads to shortages and inflation of food prices, pharmaceuticals and other grocery items.
Evans Okomeng of Graduate Farmers Network in Ghana and two other young scientists noted that panic buying and soaring food prices have “sent us all a clear warning that our food supply in these difficult times is in trouble…”
He says that the situation will only get worse if the [virus] situation persists. He noted that the hard reality facing Ghana is that they are virtually sitting on a food security time bomb that needs attention and that Ghana has made a lot of progress in ensuring food for the past few years, but this virus threatens to erode the massive gains that have been made,” they said in a press statement issued in Accra.
One report by United Nation Economic Commission for Africa (UNECA) represents some damning numbers and spells out the grave reality that Africa growth is expected to drop from 3.2% to 1.8% due to this virus, a drop of 1.4% as demonstrated in the figure below:
What are Governments doing to control the impacts on her economy?
Government across the world, working with their security force and health workers are ensuring that the restriction of movements and symptomatic people are isolated and given due treatment. While working with their Central banks are beginning to implement measures to mitigate the effect of the virus on the economy, cutting interest rates and injecting liquidity into the banking systems.
In early March, the World Bank announced it would commit 12 billion USD in aid to developing countries to help them deal with the impact of the virus and curb its spread.
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on Monday 23rd of March 2020 announced some policy measures to douse the adverse economic impacts of COVID-19 pandemic on the economy.
The measures they are putting in place include a moratorium of one year on all principal repayments, interest rate reduction on all applicable CBN intervention facilities from nine per cent to five per cent per annum for one year effective March 1, 2020, the creation of a ₦50 billion targeted credit facility through the NIRSAL Microfinance Bank for households and small and medium-sized enterprises (SMEs) that had been particularly affected by COVID-19, including but not limited to hoteliers, airline service providers, health care merchants, among others.
The outbreak of the virus has led to unparalleled disruptions in world supply chains, quick reduction in crude oil prices, stock and financial markets are bearish, widespread cancellations of sporting, entertainment and business events, lockdown measures in many countries, and intercontinental travel ban across the world.
The central bank governor also said that in furtherance of its financial stability mandate, the Central Bank of Nigeria (CBN) is committed to providing support for affected households, businesses, regulated financial institutions and other stakeholders in order to cushion the adverse economic impacts of this pandemic.
He said “the bank stands ready to provide liquidity backstops as and when required in view of its role as banker to the Federal Government and lender of last resort.”
The governor added that the CBN would continue to monitor developments and issue further updates as may be appropriate.
The headship of the Central Bank of Nigeria (CBN) says the impact of COVID-19 on the African economy is becoming severe, especially the sharp decline of global oil price and called for massive investment in agriculture.
We will always be greatly affected negatively whenever oil price drops because we have made no proactive efforts to diversify our economy despite what we faced in 2016.
We need to hedge our economy through risk minimization and revenue generation maximization and the only way we can do that is through diversification and implementing policies that will help Nigerians get private capital for investing in and building great infrastructures.
We also need to rejuvenate our steel industries which can serve as a kick starter for other industries to spring up in the manufacturing sector so that we don’t have to depend so much on China for supply of component and other manufacturing raw materials.
If anything, this virus impact on Africa have shown just how dependent the continent of Africa is on China and that have to change. We need a more pro active and inclusive Africa!
Also i will like to say one more thing before i sign off. The probability of taking this pandemic lightly is high, however Coronavirus is real. Your family need you to be safe therefore please #Stayhome #Staysafe!