By Thomsom Hook, USA
The World Bank Group has applauded Tanzanian unique approaches to contain the COVID-19 pandemic.
Thanks President John Magufuli for not duplicating policies implemented in advanced countries and some middle – income as pasted by some African countries in the region.
The Africa’s Purse report titled as “assessing the economic impact of COVID-19 and Policy Responses in Sub-Saharan Africa” released today has commended Tanzania as one of the best examples for its strategic approaches that considers the best of its political economy and well-being of the society.
With 32 COVID- 19 confirmed cases, 3 deaths and 5 recoveries, Tanzania unlike other African countries has not locked down businesses and its citizens. The country has not also closed its borders but initiated strict testings and 14 days quarantine to all arrivals.
The WB report warns catastrophic consequences to sub- Saharan countries that have copied and pasted anti COVID- 19 policies.
“Facing a fast-changing situation with great uncertainty and so many unknowns, most governments around the world have resumed to similar approaches to contain the COVID-19 pandemic”, the report states.
The report mentions South Africa, Ghana, Rwanda, Kenya, who have reacted quickly and decisively to curb the potential influx and spread of the COVID-19 virus very much in line with emerging international experience.
The report warns these countries that as the situation evolves, there are more questions about suitability and likely effectiveness of some of these policies such as strict confinement.
It advises African governments deploy a series of emergency measures and structural features of African economies that shape the policy responses that are designed and implemented to fend-off COVID-19.
The World Bank has given multiple reasons why economic policies implemented in Sub-Saharan Africa should be different from those adopted in advanced countries and (some) middle-income countries.
First, informal employment is the main source of employment in Sub-Saharan Africa, accounting for 89.2 percent of all employment (ILO 2018). Excluding agriculture, informal employment accounts for 76.8 percent of total employment respectively.
Based on the number of entrepreneurs (own-account workers and employers) who are owners of informal economic units, the vast majority of economic units in the region are informal (92.4 percent).
Informal workers lack benefits such as health insurance, unemployment insurance, and paid leave.
Most informal workers, particularly the self-employed, need to work every day to earn their living and pay for their basic household necessities.
A prolonged lockdown will put at risk the subsistence of their households.
Additionally, the majority of workers hired are in a precarious situation, and most of these jobs are temporary and with low remuneration, do not offer social security, and put workers at a greater risk of injury and ill health.
Second, small and medium-size enterprises (SMEs), an important driver of growth in economies across the region, account for up to 90 percent of all businesses and represent 38 percent of the region’s GDP.
Access to finance is one of the main challenges facing SMEs in normal times with the majority of these firms lacking the finance needed to grow.
Prior to COVID-19, the finance gap for SMEs in the region was estimated at US$331 billion (IFC 2018).
Third, concerns about the negative economic impact of the COVID-19 outbreak prompted interest rate cuts in several African countries in line with monetary policy actions around the world.
However, this type of monetary stimulus may not be effective for two reasons: (1) the prevalence of supply effects at the height of the containment measures (i.e. reduced labor supply and closed businesses, especially in contact-intensive sectors), and (2) the weak monetary transmission in countries with underdeveloped domestic financial markets.
African economies still need to design policy pathways to achieve sustainable growth, economic diversification, and inclusion.
The economic sustainability of African economies depends on their ability to transform their depleting stock of natural wealth into other reproducible capital assets such as physical capital, infrastructure, and human capital.
The findings on the impact of Covid-19 on African economies drew on two economywide models: a macro structural model, the World Bank Macroeconomic and Fiscal Model, “MFMOD,” and the World Bank global dynamic computable general equilibrium (CGE) model, “ENVISAGE”.
The analysis built on two scenarios.
The first an optimistic scenario which is based on the assumptions that the pandemic peaks in advanced economies such that containment measures are gradually removed in the next two months, the pandemic fades in China, and outbreaks are contained in other countries and in Sub-Saharan Africa.
The second is a downside scenario that assumes that the COVID-19 outbreak continues to weigh on the economy in the third and fourth quarters of 2020 and into 2021, as some social distancing measures are required to keep the spread of the virus at manageable levels.
