This article is from WeChat public account: Cultural Aspect (ID: whzh_21bcr) , author: Cheng Cheng

Introduction

While most reports of the new crown epidemic are still concentrated in Europe and the United States, Africa has reported worrisome data: the number of diagnoses has increased fourfold in two weeks. When developed countries and emerging economies isolate the epidemic prevention by suspending the economy and hedge the impact of the epidemic through fiscal and monetary means, African countries are extremely lacking in the ability to resist risks. A fragile public health and fiscal system, unreasonable industry and employment structure, the identity of the net food importing country and the impact of the locust plague on the harvest, plus its own insurable Western aid countries … The epidemic has affected sub-Saharan Africa Words are tantamount to a “perfect storm.”

This article has a forward-looking perspective and systematically analyzes the three potential crisis faced by Africa in the epidemic. The author finally pointed out that China should not only provide unilateral assistance to fight against the epidemic in Africa, but also promote mutual benefit and win-win results. The epidemic will impact the international payment capabilities of sub-Saharan African countries, and the RMB already has international currency functions, which can help it conduct international transactions. As the largest trading partner and the most economically close country in sub-Saharan Africa, China can explore the feasibility of expanding the scale of currency swaps in Africa in a short period of time and promoting Chinese financial institutions to provide RMB financing services in Africa in the medium and long term. After all, China is also a “global factory” for anti-epidemic materials. Improving the international procurement capacity of sub-Saharan Africa will also help China weather the economic recession caused by the epidemic.

New Coronavirus Outbreak: Sub-Saharan Africa is ushering in a “perfect storm”?

At the beginning of 2020, a new coronavirus outbreak broke out in the continent. By the beginning of April, nearly 200 countries had infected more than 1.3 million cases. After China finally achieved basic control of the epidemic, other major economies in the world, especially Western Europe and North AmericaThe situation in the district has turned sharply. Italy, Spain, and the United Kingdom have seen the largest cases of infectious diseases since World War II. The number of infections in the United States has since come to top, and New York has become the center of the global epidemic. Relevant agencies predict that the death of new crowns in the United States is likely to exceed 100,000.

At present, the areas most affected by the new crown epidemic are mainly developed countries and emerging market countries, but with the passage of time, the epidemic has begun to spread rapidly in developing countries and low-income countries, especially in South Asia and Africa. The fragile public health system and medical capabilities of these areas mean that once the epidemic spreads, it will definitely lead to serious infections.

However, compared to other regions, the risk of economic shocks and social unrest may be more urgent for low-income countries. The simple barrel theory tells us that, in general, it is the “shortest plank” that determines the carrying capacity of a system. The most violent and direct impact of global economic activity and the stagnation of the international industrial chain will be felt first by the most vulnerable sub-Saharan Africa in this system.

If the international community cannot quickly form an effective coordinated intervention, the new crown epidemic may form a “perfect storm” that plunders most sub-Saharan African countries, resulting in serious medical system crises, socio-economic turmoil, and even humanitarian Catastrophe. And the first wave of this perfect storm is in the public health and finance fields.

First Storm: Public Health and Fiscal-Economic Crisis

Like other regions, the impact of the new crown epidemic on Africa first occurred in the field of public health. According to the African Centers for Disease Control and Prevention, as of April 5, 51 countries in Africa have reported confirmed cases of new crowns. The cumulative number of diagnosed cases is 8,736, and the cumulative number of deaths is 399. Only 3 countries have not reported confirmed cases. And two weeks ago, the cumulative number of diagnoses in Africa was only 1654, which means that within two weeks, the number of diagnoses in Africa has increased by 4 times. Due to the uneven levels of detection methods in African countries and the presence of asymptomatic people with new crowns, the actual scale of infection is difficult to estimate.

Unlike other regions, the economic impact caused by the epidemic in Africa may not lag behind for a period of time like other regions, but it will almost “join” with the epidemic and form a double impact. This is determined by Africa ’s own economic structure and status in the world economy. At present, the vast majority of developed and emerging market countries have adopted measures such as large-scale suspension of flights, closure of borders, restrictions on residents ’outing activities, and maintenance of social distances, which first triggeredProblems such as unemployment and deflation, but these countries have strong financial strength and a sound economic foundation, and can use fiscal and monetary measures to hedge the impact of the epidemic.

At the summit at the end of last month, the G20 reached a relief measure of more than 5 trillion US dollars. This scale is unimaginable for low-income countries, especially African countries. Directly face the economic impact of the epidemic, especially the severe impact on the national finance.

In most African countries, the industrial foundation is poor, the poor occupy the majority, the domestic tax base is extremely weak, the finance is highly dependent on international funds, and it lacks sufficient foreign exchange reserves and foreign exchange generation capacity. For a long time, Africa has mainly relied on commodities (industrial raw materials) exports, overseas remittance income, tourism and international assistance to obtain US dollars and euros to maintain the necessary international receipts Balanced, Africa ’s financing in the European bond market has also grown rapidly in recent years. During the epidemic, the anti-epidemic measures of countries in the world directly impacted the foreign exchange sources of African countries, which may shake the stability of the fiscal and financial systems.

  • Commodity price shocks. The international commodities represented by copper, aluminum, steel and crude oil have experienced severe cooling since 2014. After the outbreak, the futures prices of these commodities fell, and the price of crude oil remained at around US $ 60 at the end of February, but it has recently bottomed out to US $ 25. Due to the decline in global economic activity and the unpredictable development of the epidemic, the prices of these means of production cannot rebound for a long time. This has fundamentally shaken the stability of the fiscal and financial systems of resource-exporting sub-Saharan African economies, especially Nigeria, Congolese and Angola.


  • Tourism (including transportation industry) and overseas remittance income are expected to decrease significantly. African countries are rich in tourism resources, and tourism can directly generate foreign exchange income, providing more than 3% of GDP for sub-Saharan Africa. Remittance income has become an important source of foreign exchange for many low-income countries in recent years, providing many countries in Africa with GDP growth ranging from nearly 20% to 8%. And With the travel ban and the stagnation of domestic economic activity in developed countries, these two important foreign exchange sources may be close to “zeroing” in the long run, which will have a severe impact on the balance of payments of African countries.


  • African countries have high levels of external debt, and the dollar shortage and the rise in the dollar index caused by the epidemic will further undermine the debt sustainability of these countries. More than one-third of African countries are on the brink of unsustainable debt, and most of the debt they borrow is denominated in US dollars and repaid using national sovereignty guarantees. The risk aversion caused by the epidemic has caused the international currency market to rapidly push up the dollar index, which has now exceeded the multi-year high of 100. The rising exchange rate of the US dollar will in disguise lead to the rapid increase in the interest rate of US dollars that African countries need to pay in the short term. Coupled with the inability to earn foreign exchange, fiscal vulnerabilities will continue to deteriorate. Once a breach of contract occurs, the originally low sovereign credit of the defaulting country will be further downgraded, resulting in a vicious circle of more difficult international financing.


  • Second Wave: Social-Economic Crisis and Humanitarian Disaster

    On April 4th, McKinsey released an impact analysis report on the increasingly severe new crown epidemic in Africa. The report analyzes four hypothetical situations. Even in the optimal situation, Africa ’s GDP growth rate will plummet from 3.9 in 2019 to -0.4, with losses exceeding US $ 90 billion; and in the worst case, Africa ’s GDP It will fall by eight percentage points to -3.9, with a loss of more than US $ 200 billion. The second wave of impact of the New Crown Storm mainly affects the macroeconomic field. The result will be borne by African people, and unemployment will bear the brunt.

    The impact of the epidemic on the economy is mainly from the perspective of countries around the world. It is the impact on the service industry. In the tertiary industry structure of most African countries, the service industry occupies the majority, and the proportion of service industry employment and informal employment exceeds (see picture below) With the epidemic prevention measures in place, the service industry in all countries is limited to a standstill, and large-scale unemployment is inevitable. The speciality of Africa lies in that, apart from high-end service industries, such as the financial industry, the vast majority of service industry employment, such as servants, waiters, and construction workers, are paid on a weekly or even daily basis.

    (2017 sub-Saharan Africa ’s major economies ’service industry share of GDP / source CIA world fact)

    In addition to the service industry, African countries generally have a large number of informal sectors (informal sector), which means that economic entities that are not registered with government agencies and do not pay taxes are mostly small vendors. This part of economic activity has basically stopped with the implementation of anti-epidemic measures. The service industry (including tourism and transportation industry) combined with the informal sector, in Africa, basically account for the majority of GDP, Hundreds of millions of jobs have been provided to Africa, and the loss of this part of employment will cause a serious unemployment.

    Informal employment groups with daily salary or self-employment have almost no savings themselves. Once they lose their jobs, they will lose their rations and can only rely on relief, which in turn will further increase the financial pressure on the African government. In addition, women and minors account for the majority of employment in the informal sector. This group is itself the most vulnerable group in society. How to protect them is harder for African governments.

    “People take food as the sky” is a true portrayal of people’s lives in low-income countries. If the new crown epidemic is not controlled, destroying the African government’s finances and causing a lot of unemployment, it may lead to a humanitarian disaster represented by the food crisis. Contrary to most people ’s experience, because technology and capital investment improve the unit production efficiency of agriculture, most of the exporting countries of global agricultural products are developed industrial countries, while most of the southern countries are in the status of importing countries.

    For many reasons in history, geography, economy, culture and society, since the 1980s, most countries in sub-Saharan Africa have become net food importers. A severe famine broke out in the early 1930s, which shocked the world. By 2016, sub-Saharan Africa had paid more than US $ 35 billion for food imports, and it is expected to reach US $ 110 billion by 2025. Most African countries not only need to import large amounts of cereal grains, but also import large amounts of animal feed, pesticides, fertilizers and agricultural machinery.

    Since twenty-firstAt the beginning of the era, as commodity prices entered the “super cycle” and the influx of large-scale infrastructure funds, the economic growth rate of sub-Saharan Africa has maintained its leading position in the world. Ethiopia, Ghana, Rwanda and other countries have maintained global growth for a long time Among the fastest countries, per capita income is also at a steady growth level, and Africa has entered a “golden development period.” Correspondingly, the food supply problem in Africa has gradually eased, and the proportion of imported food to GDP per capita has remained below 5%.

    However, the mitigation of Africa ’s food import problems is a fragile balance formed in the context of high economic growth. Once economic growth is problematic, it will be quickly reflected in the food problem : Sub-Saharan Africa ’s Although the annual growth rate of food imports has remained at a low level of 3.4%, the natural population growth has remained at a high level of 2.6%, that is, once there is a problem with international payments, Africa ’s huge population base and high-speed new population will Immediately face the problem of ration security.

    As mentioned above, the first impact of the new crown epidemic is on the finances of the sub-Saharan African government, especially the international payment capacity. At present, the new crown epidemic has not caused damage to agricultural production, that is, the supply side of grain. On the contrary, global food prices also fell in March due to sluggish aggregate demand. The problem is that if the epidemic cannot be quickly resolved, sub-Saharan African countries, as net food importers, may lack the purchasing power and purchasing means in the international market due to the economic downturn and the decline in foreign exchange.

    Africa already has more than 1.3 billion people, most of whom are young and middle-aged. They need both employment and food, and they also have high per capita demand for basic nutrition. Unemployment will directly affect the people ’s ability to buy food. Unemployment surges stack up with food security problems, and the already fragile African government may also have a crisis in power and social unrest and other unpredictable crises.

    Even worse, from the fall of 2019, severe locust plagues have ravaged Northeast Africa, which has already destroyed the 2020 harvest. Many countries in Africa need to control the locust disaster, but pesticides and spraying machines need to be imported, prevention and control experts need international traffic to reach Africa, and locust control drugs require large-scale manual spraying. These are full of variables in the epidemic. All in all, the combination of various unfavorable factors may eventually put pressure on the supply of food and daily necessities in Africa and may cause a humanitarian disaster.

    Third Storm: International Development Finance Depletion Affects Mid- and Long-Term Development of Sub-Saharan Africa

    The new crown epidemic is a huge disaster and challenge for all mankind, but sub-Saharan AfricaDue to its special economic, political and social structure, Chau is not only unable to fight back against the impact of the epidemic, but is also likely to become the first group of victims of the epidemic and economic recession. Not only that, from the perspective of mid- and long-term development, if the epidemic cannot be completely resolved within a year or two, it will shake the prospects for the mid- and long-term development of sub-Saharan Africa.

    From the perspective of development economics, without effective accumulation of capital, any economic growth and well-being improvement are passive water. Sub-Saharan Africa’s own accumulation capacity, if it relies heavily on international development financing for a long time to increase development funds, is mainly manifested in the vast majority of official development assistance and loans from Western developed countries and emerging market countries.

    However, At present, the new crown epidemic is hitting the hardest, it is precisely the traditional aid countries such as the United States, Japan and Europe and the emerging aid countries represented by China, Russia and the Gulf countries. These countries are currently facing serious domestic epidemics and severe economic downturns. Not only will the government have no time to take care of it in the short term, it may also be difficult to continue to provide sufficient development funds to help Africa in the medium and long term.

    Worse still, the current international development field lacks leadership. As the undisputed leader in the field of international development funds and operations since World War II, the United States has reduced the scale of development assistance since Trump’s election, and isolationism and the principle of “American priority” have fully penetrated and eroded international development cooperation.

    In the international development system, on the one hand, traditional aid countries are still in absolute dominance in terms of resources and experience, and have not yet “shifted”. Emerging aid countries represented by China do not talk about experience and potential. Mobilizing supplies is difficult to meet the needs of the entire developing world, and it also faces the risk of repeated outbreaks. At present, the possibility of coordinating at the international level and organizing large-scale international humanitarian cooperation to help Africa fight the new crown epidemic and its economic and social impact is bleak.

    Hope and suggestion

    In English, there is a saying “Every dark cloud has a silver edge”. In the face of the catastrophe, the glory of humanity still shines. Despite facing serious domestic difficulties, emerging aid countries still maintain a good spirit of international cooperation, and China, Cuba, and Russia have all extended their helping hands to Italy. In particular, China is doing all it can to help Africa fight the epidemic: On April 6, Chinese medical supplies arrived in Ghana, containing 180,000 medical masks, 36,000 N95 masks, 36,000 sets of medical protective clothing, 9,000 sets of temperature guns, 36,000 medical isolation goggles, 180,000 pairs of medical gloves, 180,000 pairs of shoe covers and ventilator. These materials will use Ghana as a transshipment center,Urgent storage channels will be further distributed to 17 other Central and Western African countries to relieve the urgent need to fight the epidemic.

    On the other hand, global civil society organizations have also contributed enormously in the fight against epidemics. The international charity organization represented by the Melinda Gates Foundation invested US $ 100 million at the beginning of the outbreak to support the research and development of new crown vaccines and drugs. China ’s Ma Yun Charity Foundation and Alibaba Charity Foundation said on March 16 that they would donate 100,000 masks, 1,000 pieces of protective clothing, 1,000 protective masks, and 20,000 test kits to each of the 54 countries in Africa. It will also cooperate with medical institutions in African countries to provide online training materials for clinical treatment of new coronavirus. As of April 6, more than 50 African countries have received these Chinese private donations, greatly supporting Africa’s efforts to prevent and control the epidemic.

    For the economic impact of the epidemic, perhaps China can also provide effective support while further promoting China-Africa mutual benefit. As mentioned above, the epidemic will impact the international payment capacity of sub-Saharan African countries. In the past two years, the renminbi has been equipped with an international currency function, which can help these countries to conduct international transactions. As the largest trading partner in Sub-Saharan Africa and the country with the closest economic development, China can study plans to further expand the level of RMB internationalization in Africa under the epidemic, for example, to expand the currency swap in a short period To promote the feasibility of Chinese financial institutions providing RMB financing services in Africa in the medium and long term. After all, China is also a “global factory” for anti-epidemic materials. Improving the international purchasing capacity of sub-Saharan Africa will also help China weather the economic recession caused by the epidemic.

    Globalization is not a theoretical assumption, but a basic reality that has ensured the rapid development and financial appreciation of human society for decades. Therefore, no country, big or small, rich or poor, can stand alone in the face of the new crown epidemic. We have no choice but to join hands and help the weak first.

    This article is from WeChat public account: Cultural Aspect (ID: whzh_21bcr) , author: Cheng Cheng paper as” epidemic change China and the World”Cultural Cross-section” Special Feature