The economic lagging of Africa in the global market can be easily seen through the major gap between its contribution to the world’s population (17%) and the world’s GDP (3%). The failure to optimally use the continent’s existing resources contributes to the gap. Unless the massive growth opportunities and risks involved are explored thoroughly, Africa will never be able to realize its true potential.

Past Challenges

The economic and social exploitation of the continent’s resources for decades along with horrendous violence and poor administration by corrupt leaders leading to widespread poverty and untimely deaths, which could have been prevented, has greatly contributed to its present economic scenario of Africa. Africa has witnessed one of the biggest cruelties of humanity, slavery. African slaves were supplied to American plantations which not only led to the loss of welfare due to denial of basic Human Rights but also hindered progress due to scarcity of labour in Africa. The anti-slave legislation solved the problem of scarcity and brought about a major change in the continent that led to the expansion of tropical agriculture in the economy.

However, that did not guarantee good days for Africa because, soon, they came under Colonial Control. The colonizers plundered their resources, worked them to death, impeded growth and development, and projected Africa as an economically weak continent in the global economy. They employed Africa’s necessary resources in the production and export of cheap primary commodities and raw materials only, which forced them to import the expensive manufactured goods which caused unequal trade transactions and greatly increased the trade deficits. The colonial rule has had serious long-term consequences on the economy of Africa and has greatly contributed to the underdevelopment of the continent.

Africa’s commendable growth potential is evident from the way it has bounced back from decades of torture and exploitation and maintained a somewhat average growth rate of 5% since 2000 in the Sub-Saharan region. This shows that Africa has the capability to increase and sustain its growth despite facing adverse conditions.

Present Scenario Due to the Pandemic

Despite not achieving the desired growth in 2019, forecasters were hopeful about the acceleration of growth at a stable rate, with an increase to 3.9% in 2020. However, due to the sudden onset of the pandemic, all prior forecasts have been rendered futile. New predictions state a sharp contraction in the Real GDP by 1.7% in 2020, indicating a 5.6% fall from the previous forecasts. These predictions are valid only for the short-term impact of the virus. If it were to last beyond the first quarter of 2020, then GDP would contract by 3.4%, i.e., a 7.3% fall from the previous predictions. This fall in GDP is accompanied by a 5% sharp rise in headline inflation due to supply-chain disruptions, thus, putting the economy in a state of stagflation. However, there is scope for the internal stability of the inflation rate due to immense fall in aggregate demand.  

Challenges Being Faced

Effect on Fiscal Deficits

The pandemic will lead to a great cyclical increase in fiscal deficits in Africa. It will happen in a two-fold process of decreasing government revenues and increasing fiscal expenditures to boost demand in the economy. In 2020, the deficits have been predicted to rise to 8% – 9% of the GDP, depending on the severity of the situation.

From the pandemics and other crises of the past, it has been noted that government revenues fall more rapidly than economic activity. Situations are more likely to worsen and be volatile to COVID-19 shocks due to the ineptitude of the administration in successfully implementing proper policy reforms to ensure smooth flow of government revenue.

Effect on Poverty

If there is a continuation of the prevailing trends, Africa will not be able to do away with extreme poverty by 2030, as planned before.  Taking into account the current scenario, there have been estimations that poverty will only fall to 24.7% in 2030 from 33.4% in 2018, which is still way above the 3% Sustainable Development Goal Target. Figures in the Economic Outlook of Africa (2020) indicate that the number of poor people will merely fall by 8 million, from 429.1 million in 2018 to 421.2 million in 2030. Only North Africa is expected to somewhat meet the 3% target by 2030.

However, the process of eradication can be sped-up by accelerating growth and development in the continent and taking measures to increase the social well-being of the people. Aggregate personal consumption needs a massive boost, of about 10% per annum, to help achieve the target by 2030. If these measures are not implemented properly then poverty eradication will remain a distant unachievable dream for the continent.

Other Challenges

There are other challenges being faced by Africa at the moment like increases in the debt burdens and fall in remittances and Foreign Direct Investment (FDI). Several countries in Africa have high debt-to-GDP ratios which are projected to drastically increase in the onset of COVID-19 and possess the risk of transforming to a sovereign debt crisis if not dealt with properly. In addition to it, remittances and FDI which constitute a dominant financial flow to Africa have been falling during the pandemic. This poses serious threats to the African economy and makes it vulnerable to economic instability.   

Policies to Ensure Stability

The African Economic Outlook (2020) suggests a few actionable policies to not only improve the quality of growth in Africa but also combat the impact of the pandemic. They are as follows:

  • The government should ease the main constraints to productivity like poor infrastructure, uneducated and unskilled labour, poor administration, and others. Relaxing these constraints through adequate policy will guarantee growth revival.
  • Governments across the continent should take adequate measures to not only stop the spread of the coronavirus but also economic stability by formulating and implementing a variety of combined fiscal and monetary policies.
  • The fiscal and monetary policies should work hand-in-hand to collectively help in the revival of the economy. The fiscal policy should keep the debt buildup in check and provide a massive boost to aggregate demand and the monetary policy should work towards maintaining a stable inflation rate and minimizing exchange rate fluctuations. 
  • There must be a shift from low-productivity informal sectors to high-productivity formal sectors which would help utilize the untapped resources of the economy.
  • Despite the moderate growth of Africa over the past few decades, the quality of growth has been far from inclusive. Only a combination of rigid structural reforms by policymakers can accelerate Africa’s growth and improve its quality and inclusiveness. 
  • Even if there is reduced scope for increased gains, policymakers should implement measures to sustain the gains already achieved in the past few years including macroeconomic stability, minimum fluctuations in exchange rates, and others.
  • The government should increase the welfare of the people amidst the pandemic by providing proper healthcare benefits to labourers in the form of paid sick leaves and ensure income safety to those sick or quarantined and ensure job security to all who are suffering to check the increase of unemployment.
  • The government should also facilitate Universal access to financed health services for everyone irrespective of their sector or employment status.


The Global Health Security (GHS) Index shows that 33 African countries are inadequately equipped to deal with the threats of the pandemic from a clinical perspective. However, Africa might stand a chance to stay strong in this adversity if proper arrangements can be made for rampant testing across the continent at affordable costs.

The future conditions of the economy depend on the competency of the governments to deal with the issue at hand. If the economies can uphold their resilience at this time, there is hope for a speedy revival and acceleration of the growth of Africa. This resilience can be maintained via effective structural reforms, to keep high debts and deficits in check, and minimal vulnerability, in the form of external reserves, to be able to finance imported advanced medical consumables and to make them available to the public. Thus, there has emerged an urgent need for policymakers to implement drastic reforms to strengthen resilience to be able to withstand shocks at all levels, be it macroeconomic, microeconomic or household levels.

Soumili Basu

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