What does the ‘Great Reset’ mean for Africa?
Few countries have been spared the profound social and economic impact of Covid-19. The crisis has demanded coordinated mobilisation both nationally and internationally, drawing on the expertise of both the private and public sectors. The World Economic Forum has called on leaders to seize the “unique window of opportunity to shape the recovery” and framed the challenge as “The Great Reset”. However despite this momentum, the pandemic has also deepened global inequalities, highlighting the need for any recovery to bring with it heightened investment in underserved communities and emerging markets and a more unified approach to global challenges.
According to the World Bank, the pandemic has pushed up to 40 million people in Sub-Saharan Africa into extreme poverty, with women, young people and those in informal low-skilled jobs the worst affected. Now, as richer nations hit their vaccination targets, the IMF has warned that a “two speed” recovery could undermine promises to “build back better”. With 17% of the world population, the Continent has received less than 2% of vaccines leaving its people exposed to further waves. Estimates suggest that faster access to vaccines for at risk populations could save half a million lives over the next 6 months alone. As well as this moral imperative, allowing the virus to continue to thrive in Africa could undermine global recovery efforts as new variants force further lockdowns and flagrant inequalities create instability at the heart of the global economy, dampening investment and growth prospects. Swift action to finance global vaccinations and unblock supply chains could yield returns of up to $3 trillion by 2025.
“With 17% of the world population, the Continent has received less than 2% of vaccines.”
The international community needs to act quickly to accelerate Africa’s vaccine rollout through financial and logistical support. The weakness of Africa’s pharmaceutical supply has been exposed by the pandemic which has seen many countries use their global weight to secure domestic supplies. The private sector has an important role to play in investing in the Continent’s vaccine production capacity. If the ‘Great Reset’ is to place Africa in a stronger position to tackle existing and future health crises, investments in African healthcare must be made now for the long-term. Recent news that the South African pharmaceutical company, Aspen, has received a $600 million long-term financing deal from the IFC, Proparco, DEG and DFC points to the role that blended finance can play in supporting the fight against Covid-19 and setting the Continent on a more robust footing for the long-term. Meanwhile the World Health Organisation’s plan to support the creation of vaccine production hubs across Africa shows the right ambition to invest in the long-term health of the Continent.
An ambitious approach to recovery will be essential to Africa’s long-term success as leaders grapple with the fallout of Covid-19. Beyond vaccines, investing in manufacturing is key to setting Africa’s economies on a more prosperous and sustainable path. Where the pandemic has highlighted deep inequities in the global economy, the African Continental Free Trade Agreement offers some means to redress structural economic imbalances. African economies continue to be over-reliant on soft commodity export while under-investing in value addition. The cocoa producers of West Africa provide a prime example of this, exporting 75% of cocoa as raw product leaving producers and retailers in Europe and Asia to take advantage of the value-add opportunities. Facilitating trading relationships between African countries, which tend to exchange more processed and manufactured goods amongst themselves, is one way to begin to redress this imbalance.
However, the AfCFTA will not be enough on its own. Dr. Carlos Lopes has emphasised the need to understand the unique characteristics of industrialisation in different countries and regions. Africa is looking to raise significant investment for its industry and infrastructure at a time when global value chains have never been more complex and automation is transforming production and transport. Only by leaning into these technological innovations can Africa thrive in the 21st century economy. Where manufacturing drove job creation in Asia, Africa’s industrial strategies must also be targeted towards industries without smokestacks. Agro-processing, tourism, tradable services and light manufacturing are all high job creation sectors which can allow African countries to compete more effectively in the global market.
“Investing $800 million on climate adaptation measures in emerging markets could result in benefits of between $3 billion and $16 billion per year.”
Efforts to diversify Africa’s economies must also place the climate crisis at the heart of national and international strategies. In addition to Covid-19, Africa faced a heavy burden of environmental disasters in 2020. From swarms of locusts in the Horn of Africa to drought to the South and floods in the East, the frequency of extreme environmental events is clearly increasing. The financial case for investing in climate mitigation and adaption measures is clear. Without action Africa is set to see its GDP decrease by 30% by 2050 due to climate-related disruptions. The Global Center on Adaptation has predicted that investing $800 million on climate adaptation measures in emerging markets could result in benefits of between $3 billion and $16 billion per year. Africa has an opportunity to seize on the growing interest in green deals as well as the falling cost of renewable energies to make green investments a central pillar of recovery.
As Dr. Ngozi Okonjo-Iweala has highlighted this week, though there is still work to do, “it is still within our grasp to try to do what is necessary to put us on a sustainable and inclusive recovery”. Amidst warnings of a trust deficit between developed and developing countries, the global efforts to build back better after the crisis cannot succeed if they exclude Africa. Significant investments in future healthcare preparedness, climate adaptation and new industries are needed to empower the Continent to emerge from the current crisis on a stable and sustainable footing. The good news is that capital is available in the global market and, as investors look for returns in a challenging global context, Africa can lean on its strong fundamentals to attract international investment. It is incumbent on all stakeholders from public and private sector alike to ensure that the opportunity of Africa’s ‘Great Reset’ is not missed.
Interested in shaping Africa’s ‘Great Reset’? Join the debate 14-16th September. Register here.
