By Abdul Banya Braima
The effect of Covid-19 has had negative Socio-Economic impact on the global stage, with the African continent and my country Sierra Leone not been spared the venom of the virus. The key findings presented here represents a tip of the iceberg of the effect of the virus on the hospitality sector, prices of foodstuffs, and fuel products globally, in Africa and Sierra Leone.
The global economic crisis sparked by the corona virus pandemic has ramifications stretching well beyond one of the deepest world recessions in modern history. The post-crisis landscape will see a sharp intensification of the inequality debate, accelerating economic nationalism and pressures on the institutions of macro-economic policymaking.
At the start of 2020, the World Bank projected that the global economy would grow by 2.5 percent. By June of 2020, that projection had changed to -5.2 percent. Tourist-focused economies in Africa were projected to be particularly hard hit, including that of the Seychelles, which was originally projected to grow at 3.3 percent and is now projected to decline by 14.4 percent.
Countries reliant on oil exports suffered from the plummeting price of oil (dropping from $67 per barrel to $30 a barrel between December 2019 and March 2020). South Sudan, which relies on oil for 90 percent of its exports, was projected to grow by 10.3 percent in 2020, but is now projected to see a 4.3 percent decline. In response to the recent COVID-19 outbreak, several major rice exporting countries implemented policies to ensure adequate domestic supply. Vietnam suspended new contracts for rice exports for the month of April 2020.
In India, mobility and logistics challenges due to social distancing regulations reduced availability of rice on the country’s domestic market and contributed to lower export volumes.
As during the world price shocks of 2007 and 2008, rice export prices rose sharply, increasing by 25% for A1 Super in Thailand, and by 30% for 5% broken in Vietnam between December 2019 and May 2020, threatening the food security of countries dependent on rice imports. Although rice export restrictions eased and quarantine measures were loosened across the globe, Thai and Vietnamese rice prices remained relatively high in the subsequent months and were on average 22% and 28% higher, respectively, from March through September compared to December 2019
TOURISM AND
HOSPITALITY
This sector is the hardest hit so far. With the closure of borders a significant there reduction in tourist numbers and even a complete halt is expected. This will negatively affect occupancy rates, turnover and income of hotels, restaurants, tour operators, small businesses and other sectors that are linked to the hospitality sector. It will also reduce the volume of foreign exchange earned in the sector. Although not significant in the first place but will nevertheless be a loss in foreign exchange earnings that otherwise would help to cushion the pressures on the exchange rate as well as be a loss in tax revenue from the sector.
Impact on Women
The assessment confirms that women suffer more than men in almost all respects at the household levels, ranging from food insecurity to receipt of cash grants, from job losses, to revenues earned, and dips into savings where these exist. Notwithstanding the limited data on Sexual Violence, reports from other countries in Africa as well as local anecdotal reports, suggest that there has been an increase in sexual violence including rape at the household level particularly during lockdowns.
Private sector
The story of the private sector is more nuanced in view of the marked differences in effects by category of businesses; ranging from foreign businesses to local, from formal MSMEs to significant informal MSMEs, from import and trading houses to exporters. The differential COVID effects need to be tracked at the micro level of categories of the private sector in forthcoming surveys.
Job losses
Job losses have been observed in almost all sectors except for health providers. The resulting increase in the newly unemployed, especially among the youth, is a dangerous addition to the triggers of instability. Clashes that appear unrelated to COVID tend to increase as already observed here. The cumulative effect of income reductions – including internal transfers within families and lower remittances, job losses, closed businesses and food insecurity will all contribute towards an increase in income poverty as those just above the poverty line fall under, and as the relatively better off are forced to help out and go into debt thus increasing their vulnerability in other dimensions of poverty.
Trade and Tourism effects
Businesses dependent on global trade and tourism are hit directly by these international measures as shown earlier. However, there is also the possibility of opportunities opening for new enterprises, or expansion of old ones, to substitute for unavailable imports. Key among such enterprises are technology oriented enterprises. Also, there may be possibilities of openings in the subregion to substitute for markets that were closed due to COVID –( UNDP Covid Assessment).
Food Insecurity
The number of people who were food insecure in 2019 was estimated to be 135 million. With the spread of COVID-19 in 2020, this figure is projected to nearly double to 265 million.
Oxfam estimates that 12,000 additional people per day could die of hunger by the end of 2020. There are various reasons why food insecurity and hunger have risen with the spread of COVID-19, including the lack of access to agricultural inputs (including seeds and fertilizer), restrictions on imports and exports, and an inability to move products to domestic markets (due to lockdowns that restricted domestic trade).
As farmers have been unable to sell agricultural products, the farmers’ purchasing power has declined, resulting in further food insecurity and starvation.
Poverty
According to the World Bank, COVID-19 could push up to 150 million people globally into extreme poverty by 2021. For many African families, economic progress is determined in large part by changes in income. Are families earning more or less than they were the previous year? This question was asked as part of telephone surveys of households conducted in various African countries since the start of the pandemic.
The results appear to indicate significant losses in income. For example, in Kenya, only 3 percent of respondents indicated they were earning more than they were the year before the pandemic (2019), while 42 percent indicated they were earning less. In Nigeria, only 5 percent of respondents were earning more than a year ago, compared to 48 percent who were earning less.
In Kenya, 36 percent of families reported missing at least one meal in the previous seven days, while 61 percent of people in Nigeria indicated missing a meal. These data are worrying, as they suggest that already impoverished households in these countries may be incurring impacts that are pushing families further into poverty.
Food Prices in Sierra Leone
The price of local rice has increased by 12% from Q1 (Jan-Mar 2020) to Q2 (Apr-Jun 2020) and is 56.7% higher than the same month last year (Jun 2019); imported rice increased by 7% between Q1 and Q2 of 2020, with a 47.5% year-on-year increase by June. Cassava, as a close substitute for rice, usually tracks price increases seen for rice.
Households are resorting to more extreme livelihood coping strategies to survive, with the proportion of households adopting “emergency” measures increasing from 14% in January 2020 to 20 %in June 202039.
The proportion of households spending over 65% of their household expenditure on food increased from 58.5% in January 2020 to 60% in June 2020. By June 2020, the price of cassava has remained relatively stable due to fall in demand of cassava related products foofoo and garri as a result of border closure in Guinea and Liberia
FUEL PRICES
The double blow of Coronavirus (COVID-19) and the oil price shock is hitting oil-exporting developing countries particularly at a time when the fossil fuel industry is facing a process of structural decline.
Countries that are net exporters of oil are experiencing an unprecedented double blow; a global economic contraction driven by the COVID-19 pandemic and an oil market collapse with the benchmark price for United States crude oil, the West Texas Intermediate, briefly going negative for the first time in history (in April 2020). Based on an oil price of USD 30 per barrel, the International Energy Agency projects that oil and gas revenues for a number of key producers will fall by between 50 to 85% in 2020, compared with 2019, yet the losses could be larger depending on future market developments (IEA, 2020[1].
First, the dependence of many of these countries on a single commodity for their exports and revenues renders them extremely vulnerable to market volatility. Although the largest share of commodity-dependent countries globally are in sub-Saharan Africa, oil and gas make up the majority share (over 60%) of total merchandise exports in a range of developing countries, including Algeria, Islamic Republic of Iran, Iraq, Libya, and Timor-Leste (UNCTAD, 2019)
Second, many of these countries were in vulnerable positions already before the current crisis, and further deterioration may exacerbate existing fragilities. Over half of low and lower middle-income countries dependent on oil and gas for their exports and revenues are classified as ‘fragile’. Decision makers in resource-rich countries have frequently struggled to translate resource wealth into poverty reduction and sustainable development, performing poorly across a number of development metrics, including on economic growth (Sachs and Warner, 1995[7]), democratic governance (Ross, 2012[8]), and conflict prevention (World Bank, 2011[9]).
Many oil producing developing countries are non-diversified, sector-dependent economies, with oil contributing the majority of their exports and government revenues. The current fall in oil prices is limiting the ability of these countries to respond to the multidimensional domestic pressures produced by COVID-19, at a time when more money is needed to finance service delivery, mitigate health risks and ease macroeconomic pressure. In March of this year, the IEA estimated that key oil producing countries, including Iraq, Nigeria and Angola, would likely see a drop in their net income for 2020 of 50%-85% compared with 2019 (IEA, 2020[1]).
The above analysis with back-up figures are self explanatory to prove that the current economic crisis hitting Sierra Leone is not a peculiar one but has far reaching effects negatively on the global economy because of the COVID. Several other African countries are going through the same economic shock, negatively affecting the prices and availability of foodstuff, oil products( Fuel) and almost all other necessities.
Africa has to re-think and start growing its own food and refining its own oil, or else anything something similar to COVID or worse hits the global economy, the continent will certainly be the worst hit, being dependent on imports for almost everything.
Sierra Leone like other countries on the continent is currently reeling under after shock of the covid, resulting in the hike in prices of basic foodstuff, fuel and other necessities not because of poor governance, but its import of staple food and fuel products from countries that are worse hit by the virus makes the logical connection about what is actually panning out.