A higher level of preparedness is urgently needed to prevent and mitigate the Covid-19 pandemic in Southern Africa, including additional resources for testing and to reduce the impact on households and the economy, the African Development Bank says in its new Southern Africa Regional Economic Outlook.
In the worst-case scenario, growth in Southern Africa will fall to -6.6% in 2020 before recovering to 2.2% in 2021, according to the report.
“Growth is projected at –4.9% in the baseline case, mainly driven by the deep recession in South Africa, induced by a fall in commodity prices, containment measures, weather-related events, and the structural issues related to public utilities. The region’s growth is projected to be the most affected by Covid-19.”
The report points out that before Covid-19, Southern Africa’s economy was projected to recover from an estimated 0.7% growth in 2019 to 2.1% in 2020. “As has been the case historically, South Africa, the region’s largest economy, is projected to contribute an average of 60% of regional economic output in 2020.”
It adds that following the outbreak of Covid-19, economic growth forecasts declined by 7 percentage points from the original projection under the baseline scenario, and 8.7 percentage points under the worst-case scenario.
The impact of Covid-19 in South Africa is projected to trickle to the rest of the Southern African economies.
Botswana, Eswatini, Lesotho and Namibia are seen as more vulnerable to South Africa’s impending contraction in economic growth, while Mozambique’s sales of gas and electricity could be adversely affected. In addition, countries that rely on tourism, such as Mauritius, will be adversely affected.
However, the immediate outlook depends on the spread of new cases. As the report points out, South Africa is now the fifth-worst affected country in the world.
Economic diversification, characterised by commodity-driven industrialisation, will help boost the region’s resilience during downturns, the report notes.
Compared with other regions in Africa, the region has the highest unemployment levels, averaging 12.5% between 2011 and 2019, followed by North Africa averaging11.8% over the same period.
Unemployment is likely to escalate, especially in hardest-hit sectors such as tourism and hospitality, entertainment, retail and trade and agriculture, where most of the people in the region are employed.
Improving business environment competitiveness in the region is therefore critical, the report adds. The African Continental Free Trade Area (AfCFTA) is projected to provide medium- and long-term opportunities for markets to spur economic growth. “The intra-African market is expected to mitigate some of the negative effects of Covid-19.”
Released annually since 2003, the African Economic Outlook (AEO) provides compelling up-to-date evidence and analytics to inform and support African decision makers.
“This year’s third edition of the Southern Africa Regional Outlook report offers robust options for policy makers at national and sub-regional levels to confront the challenges of sustainable economic development through skills development for the future of the workforce in the post-Covid 19 era,” says Josephine Ngure, the African Development Bank’s Acting Director General for Southern Africa.