Capital Economics: The indirect coronavirus fallout is ‘battering’ Africa economies
The indirect economic fallout from the coronavirus outbreak is hitting Africa, with the sharp decline in commodity prices “battering” economies across the continent, said Capital Economics on Tuesday.
Much of the international ripple effect from China’s mass shutdowns has been concentrated in sectors like tourism and manufacturing, which have been roiled by a ban on outbound tour groups and supply chain disruption arising from factory closures.
Yet, port closures in China are causing oil importers to cancel purchases and forcing sellers to look elsewhere, John Ashbourne, senior emerging markets economist at Capital Economics, said in a note on Friday.
In Angola, state-owned petroleum and natural gas company Sonangol has already been driven to re-sell at a discount at least one shipment which was already en route, said Ashbourne.
“While the price effect will hit all of Africa’s commodity exporters, these trade disruptions will mostly affect West African oil exporters,” Ashbourne added.
Brent crude prices have been in steep fall since the outbreak hit the headlines, declining 16.96 percent since the turn of the year, and was trading at just over $54 a barrel on Monday afternoon.
Other base metals heavily relied upon by the African export market, such as iron ore and copper, have also seen deep depreciations over recent weeks.
In terms of economic exposure, industrial commodity exports from Republic of the Congo reached almost 70 percent of GDP with exports to China standing at more than 50 percent of total GDP. Angola depends on Chinese industrial commodity exports for more than 20 percent of GDP. Other countries with dramatic exposure include Zambia, the Democratic Republic of the Congo, Nigeria, and Ghana.
Although coronavirus itself has not yet been diagnosed on the continent, experts have warned that the subcontinent is susceptible given its strong relations with China.
Last week, upon declaring the virus a global health emergency, World Health Organization (WHO) Chief Tedros Adhanom stated that the body’s “greatest concern” was the potential for it to reach countries with “weaker health systems.”