Sadly, Africa and other developing economies face dangerous risks from these accelerated disruptions of the global economy. In the short term, one of the major risks to developing countries is access to critical health equipment. Chronic supply constraints are emerging for goods that are critical to containing and managing COVID-19. While some countries are cooperating around managing and sharing inventory, the smash-and-grab activities of others appear to be incentivizing profiteering and supply shocks. The dramatic rise in demand for surgical masks, goggles, gloves, and gowns has depleted stockpiles, prompted significant price increases, and led to production backlogs of four to six months in fulfilling orders. Frontline health workers and other early responders in countries most vulnerable to the spread of the coronavirus need critical PPE products—that is the most immediate and significant challenge.
Somewhat farther out but of equal concern is the risk posed by the general disruption to global trade. The pandemic has created a supply shock across the markets, causing severe supply-chain chaos that exceeds anything we’ve seen, including the negative demand during the 2008 global financial crisis. Such is the extent of collapse in economic activity and demand, South Africa has run out of storage facilities for oil, a growing problem globally.
The world’s largest economies are blowing up their deficits with unprecedented stimulus packages—it feels like every country for themselves. In that scenario, what kind of help can developing countries realistically expect? In response, there is a rising movement calling for global coordination. Developed economies, the reasoning goes, need to see global coordination with the developing world less as helping the poor or the less fortunate and more as self-preservation.
On April 26, Erik Berglof, from the London School of Economics, Gordon Brown, the former British Prime Minister, and Jeremy Farrar, the director of The Wellcome Trust, wrote a letter that was signed by a number of current and former heads of state calling on the G20 to take more decisive action. They argued that “….if we do nothing as the disease spreads in poorer African, Asian, and Latin American cities and in fragile communities which have little testing equipment, ventilators, and medical supplies, and where social distancing and even washing hands are difficult to achieve, COVID-19 will persist there and re-emerge to hit the rest of the world with further rounds that will prolong the crisis.”
They have also argued that there is a real risk of a global depression if the world fails to act in concert to help Africa, Latin America and Asia. Consulting firm McKinsey estimates that “The jobs or incomes of 150 million Africans, across the formal and informal sectors, are vulnerable in the crisis; this is equivalent to one-third of the entire labor force.” More precisely, the firm says that 9 million and 18 million formal jobs in Africa could be lost or made redundant due to the COVID-19 crisis and that a further 30 million to 35 million formal jobs are at risk of reductions in wage. The remainder of the workforce—as many as 300 million people—is in informal employment disrupted by social distancing strategies. For South Africa’s informal economy, the national lockdown has quickly and sharply impacted food security to the extent that the threat of hunger has dwarfed people’s concerns about the virus—a phenomenon that will only feed the virus and prolong the crisis.