Covid-19 has impacted nations all
across the globe, but it is across Africa where experts believe the effects may
be felt the hardest, says Simon Buchler of Bryan Cave Leighton Paisner.
Due to the fragile health systems
of many African countries, a pandemic could have a disproportionately worse
outcome. As a result, a number of African governments have effectively shut
down large portions of their economies and closed borders to travel and trade.
The World Bank’s recent (April
2020) report on the impact of Covid-19 in sub-Saharan Africa, projected that
economic growth in sub-Saharan Africa will decline to between -2.1% to -5.1% in
2020; the first recession in the region in 25 years.
According to the World Food
Programme, one of the biggest impacts will be on food security, seen through
limited access to food, restrictions on labour and imports and price
fluctuations.
AGRICULTURE PRE-COVID-19
Africa contains 25% of the global
landscape suitable for crop cultivation which is more than sufficient to drive
the continent’s economic development and adequately feed its own population.
Yet since the 1980s, Africa has been a net importer of agricultural goods. This
over-reliance on imports is driven by increasing urban demand and compounded by
weak infrastructure and inefficient farming methods. Critically, it places much
of Africa at significant risk of exposure to global economic shocks such as
Covid-19.
EFFECTS OF COVID-19
According to the World Bank
report, agricultural production is likely to contract between 2.6% - 7% with
food imports declining substantially by up to 25%. There are four key effects
of this pandemic on Africa’s agricultural industry that will likely impact food
security:
The first is labour and supply
shortages. The majority of sub-Saharan Africa’s food production and processing
is labour intensive with informal and smallholder farmers making up more than
60% of the population. Therefore, government restrictions on travel and
movement, as well as the health impacts of the virus, will likely lead to a
shortage of labour, raw materials and infrastructure. This in turn may
significantly impact the supply chain across Africa.
Restrictions on imports and
exports is another concern. With local food supply chains disrupted, many would
naturally rely on imports but many governments around the world have closed
their borders. This has prevented farmers from being able to distribute their
foods both nationally and internationally, making it harder for farmers to
support their operations.
Last mile disruptions are another
factor. Local food markets are the backbone of the informal economy of many
African countries; supplying the majority of food to Africans. City and
nationwide lockdowns, and government policies closing markets and restricting
public gatherings, could prove disastrous not just for the traders but for the
public.
Finally, price fluctuations are
an issue. Prices of food are likely to rise due to disruptions to the agriculture
supply chain, reduced imports and closures of many informal markets. Ghana has
already seen a 7.9% increase on the average cost of food. On the other end of
the spectrum, the cashew nut, a major export crop for countries such as Ghana,
has dropped in price by 63% between January and March this year as China and
India have slashed imports. This has severely reduced the income of farmers and
increases the risk of many farms going out of business.
POSSIBLE SOLUTIONS
Africa undoubtedly faces many
challenges that require significant action if the risk of food shortages is to
be mitigated.
Although each country has
differing infrastructure, government policies and trade links, there are three
possible solutions.
Legal and political frameworks
offer one solution. It is critical that governments across sub-Saharan Africa
take action to minimise disruptions in food supply chains, keep logistics open
and reduce trade barriers. Rather than closing all food markets, governments
may consider: allowing them to operate with reduced capacities; staggered
entries; and better hygiene practices.
Countries that have closed their
borders may need to consider opening the country up to imports of certain food
products that cannot be supplied through local systems, and to exports of
domestic products.
With sufficient controls and
security measures, these countries could protect themselves from food shortages
while still limiting the spread of Covid-19.
Global Coordination is another
avenue. It is vital that the efforts and strategies put in place to tackle
Covid-19 are implemented on a global rather than national scale; where action
from developed countries and development finance institutions (DFIs) can help
protect the most vulnerable countries.
The World Bank is deploying up to
USD 160 billion in financial support for developing countries over the next 15
months. The African Development Bank USD
10 billion to African governments and the private sector under a new Covid-19
Response Facility and a USD 3 billion bond.
However, some aid organisations
have sadly had to go the other way, with the United Kingdom Prosperity Fund
temporarily pausing all tenders, including those where funds were due to be
invested into Africa.
Further funds are needed from
other development financial institutions, donors and institutional impact
investors. Injecting cash into the African food economies is likely to be the
most effective short term solution to alleviate food shortages whilst stemming
the pandemic.
Foodtech and agritech may also
provide a solution. Many believe that technology has a vital role to play in
improving efficiencies in the supply chain.
Investments in agritech can
enable farmers to use water, pesticides and fertilizers much more efficiently,
significantly reducing operating costs whilst also being more environmentally
sustainable. Online platforms like WeFarm have taken advantage of the rapid
spread of mobile phones across Africa to create a network of small-scale
farmers who can help each other to increase productivity.
It is not just farmers who are
benefitting from tech start-ups. Namibian start-up E-bikes4africa, has entirely
shifted focus towards the home distribution sector to take advantage of the
surge in demand for home food deliveries since the containment measures adopted
by the government.
There is a clear opportunity for
both technology companies and investors to not just help revolutionise Africa’s
agricultural industry and food supply systems but tap into a potentially
lucrative market.
Simon Buchler is a senior
associate in the energy and natural resources practice at Bryan Cave Leighton
Paisner
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