Prof. Ahmadou Aly Mbaye

Excerpt

(Prof. Ahmadou Aly Mbaye at WASCAL, 2020)

Since it first broke out in China in December 2019, The COVID-19 is spreading very rapidly throughout the globe, putting a lot of stress on national health systems which, even in developed countries, are struggling to muster the resources (masks, tests, respirators, qualified medical personnel, and others) needed to manage the number of patients needing care which is also growing at an exponential rate. A very few countries in the world have so far managed to contain the spread of the disease. In Africa, besides the public health-related challenges, the economic challenges the pandemic is posing to national governments, are even more perilous. Indeed, the stability of most African countries will greatly depend on how the economic and social ramifications of the crisis are being managed.

Health VS. Socio-economic Challenges

Faced with the crisis, African countries are both exposed by the poor level of adequate capacities in intensive care units and the high prevalence of factors favoring the spread of the disease. Indeed, the results of medical research indicate that while the elderly are more likely to die from the disease, the youth, on the other hand, are more likely to contract it. Furthermore, these results also indicate that all forms of direct physical human contact (by touch, hugs, or other) or non-physical (a conversation not respecting a minimum distance of 2 meters or less) are likely to cause transmission of the disease. The number of these contacts depends very much on the social norms enforced in different countries and is also influenced by certain factors such as the average size of households.

While social distancing is key in any attempts to mitigating the pandemic, the system of social interactions in Africa, in particular, the intrinsically informal nature of the African production system poses a significant risk to the success of confinement and social distancing policies. The economy is based on a complex ecosystem of small informal actors over which the state has very little visibility, and even less control. Self-employment, household entrepreneurship and other forms of micro and nano-enterprises operating in agriculture, industry, and services, are overwhelming. In Senegal, for example, they constitute more than 97% of private firms and contribute at least 40% to GDP and at least 95% to employment. These activities are often low-productivity, poorly mechanized, and highly labor-intensive. This means that promiscuity is their dominant characteristic. Promiscuity in dugout canoes which engage in artisanal fishing, in vegetable and fish markets, slaughterhouses and other open-air markets, buses, taxis, and other public transport systems, small restaurants and other eateries, processing units for fish and other primary products among many others.

In this context, any policy of social distancing will result in many productive activities sharply contracting or even stopping. Which is not without posing a certain number of risks.

Economic Ramifications of the Quarantine

As many African countries are locking down in a reaction to rapid Coronavirus spread, there is growing concerns that staggering disruptions might result in the production and distribution chains of major staples. Which, in turn, could bring about social unrests, especially in urban settings, given the very sensitive nature of these food items in African cities. Furthermore, the livelihoods of the overwhelming majority of African people are at threat with confinement. For example, in Senegal, only less than 500,000 people out of a working age population of about 9 million are employed in the formal public and private sector, leaving the bulk of the remaining labor force in precarious, and often dangerous jobs. The situation can even get worse since confinement may combine loss of livelihoods for the vast majority of people coupled with increase in general price levels as production and distribution of staples are adversely affected. Under these circumstances, recession is a very likely outcome. Needless to say, that given Africa’s weak track record of efficiently managing disaster response interventions, all these factors might spiral up, to culminate in a situation of political instability. Our estimates based on the Armed Conflict Location and Event Data (ACLED) database indicate that a 10% change in the prices of staple is associated with a 1.2 percentage points increase in the probability of social unrest in the Sahel countries. Added to this, a chronically struggling economy can spur opportunistic attacks, including from Jihadist movements, like has been recently the case in Mali, Niger, and Burkina Faso.

Strategic Public Spending to support livelihoods

To deal with Covid 19 dire impact on African economies and societies, most African governments have announced response programs intended to limit its effects on the poor. In West Africa, for example, President Macky Sall (Senegal), Alassane Ouatara (Côte d’Ivoire), Mahamadou Issoufou (Niger), to name but a few, have all pledged important support to the private sector and the poor. Most such measures encompass tax exemptions or moratorium for bigger enterprises, and direct transfers, in the form of food or cash transfers to the poor, including waiving water and electricity bill payment for a month or two. For example, Senegalese government has pledged to support up to 1 million of poor households by providing each with CFA 66,000 (about 110 USD) worth of food. While important in relieving poor in situation of distress, direct transfers by food or cash suffer important limitations. First and foremost is the huge financial cost associated with them. For example, should the Senegalese government make direct payments to all 38% of the poor Senegalese living on less than 1.9 US dollars per day, the total annual cost would greatly exceed the estimated budget of CFA 1000 billion response fund announced by President Sall. Moreover, identifying the poorest people who need help the most is not an easy task and public spending

targeting in general is found to be usually very weak in Africa, even more so spending targeting the poor. Direct transfer could, therefore, be combined with support to the livelihoods of the poorest. In this case, it is the activities that provide income to the most disadvantaged that would be targeted (i.e. the informal sector in the broad sense, including both urban informal and agriculture), which is overwhelming in Africa. For example, Senegal alone has around 1.2 million informal workers working in industry, commerce, and services. Assuming that the average number of people in a household is 10, which is in line with ANSD estimate, the number of people reached directly and indirectly by supporting these actors could be as high as 10 million. Of course, a precondition to such an approach is that activities whose development would be compatible with the objective of social distancing are duly identified and closely supervised. Indeed, it is imperative that activities that can continue without presenting major risks to public health can be supervised and continue. Since it would be impossible to confine people whose livelihoods are hardly earned in daily activities, which also are essential elements of the production and distribution chains, it would be better supporting them, to make sure they comply with public health requirement while operating. State support should primarily target small production and distribution activities of staple foods, such as those involved in agriculture and agri-business, horticulture, distribution and transportation. This would boost national production, contain inflation, and at the same time support low incomes.

For these small informal activities, it would also be necessary to combine such a support from the State with the establishment of an institutional mechanism enabling their being closely monitored. Which would ultimately allow for more state control, with the goal of modernizing them, and later being able to broaden the tax base. Such an organization could also be to their advantage because it could include a social insurance and pension insurance component, according to methods applicable to the status of the self-employed entrepreneurs successfully implemented in certain countries such as Turkey.