Tag: crisis

Where next for Africa: a new vision for new development policy

As Africa continues to battle the public health crisis and the socio-economic impacts of the COVID-19 pandemic, I have been amazed, befuddled and despondent all at the same time at the responses we have seen. How African medical professions have responded and coordinated with resources and budgets that are tiny in comparison to their international counterparts. How nations like Togo have moved to cushion their citizens and the ingenuity and innovation shown by individuals and companies have all given me hope. The hope that we have the imagination, drive, and generosity to confront and overcome any challenge. However, the police brutality and human rights abuses and in some cases the outright denial of the virus by some has also given me pause for thought and reminded us how easy it is for our demons to take advantage of a crisis.  

Like many, in both my work and my writing I have been preoccupied with, as Dr King once put it “the fierce urgency of now”. How do we stop the virus, protect livelihoods, and reignite our economies? These are all valid concerns that deserve significant thought and effort. However, it strikes me that we also could and should be thinking beyond the pandemic. Crafting a vision for our continent that takes advantage of the extraordinary opportunity before us.  

The global pandemic has broken norms, systems, and preconceptions, which had limited the range of possible actions and policies we were able to pursue. Out of crisis comes opportunity. 70 years ago, Europe used the devastation of a world war to remake itself as a bastion of social democracy and regional cooperation. That required vision. People who recognised that despite the devastation, there was an opportunity to break with the past and reimagine what Europe could be. And went on to sell those visions to politicians, and people to create a shared vision that could be worked towards. Today the member states of the EU may squabble, but they do not plunge into periodic globally destructive wars and their citizens enjoy a near border-less continent with broad strong social safety nets. 

What is our vision for our countries, regions, and continent? What can we rally around, work towards and achieve for us and our children? There is an opportunity to build a better Africa out of this global disaster and we must seize it.  

The system is broken, and the opportunity is open 

The global Coronavirus pandemic has fundamentally broken or changed a number of aspects of global politics, economics, and policy norms that Africa can take advantage of.  

1. Capitalism is being questioned  

Markets are powerful things that can do a lot of good. However, this pandemic has reminded us that when markets are skewed and inequalities exist those will be amplified by crisis, and, more fundamentally that markets cannot do everything. Public goods and services, like public health, cannot be privatised and subjected to market efficiencies without consequence. Markets must have limits. Out of their failure during this crisis, we can remake them, to be fairer and draw boundaries around where the logic of markets ends and the public good takes precedence and we can remake the social contract to have fair markets and strong public services reinforcing each other.  

2. Social safety nets are possible.  

Before the crisis things like basic income, housing for all, or UHC were all dismissed as too expensive, too unwieldy (especially for African governments) and potentially undermining hard work and personal responsibility. In a crisis that was no one’s fault, we have seen governments design and deploy large scale social safety nets like cash transfer programs and rapidly expand public health systems to protect the most vulnerable and deal with the crisis. This is can also be a reality beyond the pandemic, Basic incomes and universal health coverage can be done and will be powerful tools for ending poverty.  

3. We can make things  

The pandemic disrupted global supply chains and across the continent things that were once easy to import suddenly had to be made here. Lo and behold we have discovered that we can make things like Personal Protective Equipment, Ventilators and even our own tests. If we can make things, we must make sure we never end up in a situation where we cannot produce the medicines and medical supplies we need, where we cannot supply our construction industries or stock our shop shelves. In short, there is an opportunity to rethink our industrial policies (as I have previously written about) around industries and businesses that now recognise the need for resilient local supply chains.  

4. Corporate tax is cool again  

With all the government spending that is going on around the world, it will eventually have to be paid for somehow, and there are few better sources of revenue than the multinationals adept at gaming the system. As countries around the world clamp down on tax avoidance and evasion Africa can do the same. Reshaping its tax systems (as I have written about previously here) to tax profits where they are made. An Africa that can replace aid and debt with sustainable revenue is an Africa with her destiny in her own hands.  

5. Global political space 

Global geopolitics, for so long defined and defended by the USA is fragmenting. With the USA becoming more insular, China on the rise but untrusted, a Europe busy trying to hold itself together, Africa has an opportunity. To reject the notion that we are a playground for global power games and redefine ourselves as a leader on issues like climate change, tax and trade that have for so long befuddled others and negatively affected Africa. Even forge a new alliance with emerging and middle powers around the world who do not hold ambitions of domination but of shared prosperity and calm. 

6. We are young and hungry  

Millennials around the world are despondent cohort, our working lives defined by recessions, pandemics and polarising politics. However, in Africa, this is not necessarily the case. I am constantly amazed by the determination and refusal to give up that the continents young people display. Young African’s are inventing, innovating, and breaking barriers in culture, business, science, and politics. Rather than being depressed like our western counterparts we can be Generation Hope. We must harness the hustle, embrace the creativity, and nurture the deep yearning for a better tomorrow. A crisis of the magnitude we are experiencing now opens the door for us to experiment, to leap into the unknown led by a generation of hope.  

That vision thing  

In these opportunities, brought about by an unprecedented crisis, I see the space to construct a new development vision for our continent. A vision anchored in the dignity of our people. A vision that looks to achieve our own moon shots of ending poverty, disease, and desperation, where our fates are decided in our capitals rather than those in foreign lands. And where prosperity Is not built by climbing over the backs of others but through our innovation and drive that allows us to stand on the shoulders of each other.  

My writing usually addresses dry development policy subjects like budgets, trade, and labour policy, but fundamentally development policy is anchored in a vision of a better future. For the last 30 or so years, those visions in Africa have been stunted by uninspiring inhuman aims such as achieving middle–income status or industrialisation. The pandemic allows us to once again centre our development visions on the dreams of our people. Visions that we can identify with, rally around, work towards together and proudly proclaim our individual roles however small in achieving those goals.  

Without an underlying inspiring vision, our development policy is lost. It is misdirected into white elephant projects, filled with other people’s priorities, and spelled out in consultant gobbledygook and buzzwords. The crisis of the pandemic offers an opportunity to reclaim and reframe Africa’s development vision, let us seize it.  

Core features for African Post-Covid-19 economic stimulus packages.

The global coronavirus pandemic has not only put public health and health systems under threat it has undermined livelihoods, businesses, and economies across the continent. As a result, many policymakers are turning their attention to how to get those economies started again, as they shift from the public health response. Some countries such as South Africa and Kenya have already released details on their stimulus packages. Each African country will need to come up with a package that works for them specifically. However, as diverse as these packages may be there are some core features and opportunities that I think apply to most if not all African states. That will not only aid in jumpstarting their economies but lay a foundation for long-term growth through tax reform, building social safety nets, and putting money in the right places. African states may not have the financial firepower that the developed world has deployed to keep their economies alive, but with some creative and bold policymaking African governments can not only jumpstart their economies out of the Coronavirus malaise but also lay the foundations for long term growth.

Investing in the right places

There are two sectors, agriculture, and the informal economy, that define sub-Saharan African economies, and will require specific focus in any form of stimulus.

Agriculture is the foundation of the African economy. At least 60% the population of sub-Saharan Africa are smallholder farmers, and about 23% of sub-Saharan Africa’s GDP comes from agriculture. Stimulus measures aimed at the agriculture sector are critical. This should include

  • Subsidies for inputs (fertiliser, seed, pesticides, etc.) for farmers, that will ease the cost of farming in a tough year.
  • Heavy investment in small farmer training and education that will enhance the skills and productivity of small farmers.
  • Investment in rural infrastructure such as warehouses and rural roads that improve farmer incomes cut the cost of storing and moving goods from farm to market, making those goods cheaper for consumers.
  • Facilitating through guarantees the provision of credit to businesses along the agricultural value chain that provides services to farmers, move agricultural goods or process agricultural goods.

Boosting agricultural incomes, productivity, and efficiency, will not only help drive growth out of the crisis but also help make food cheaper and more plentiful for consumers. In short, an agriculture targeted stimulus could be the foundation for long term food security

The second critical sector is the informal sector. The IMF has estimated that on average the informal sector contributes between 25% and 65% of GDP in Sub-Saharan Africa with Mauritius and South Africa at the low-end under 25% and Tanzania (over 50%) and Nigeria (over 60%) at the other end, and that the sector accounts for between 30% to 90% of non-agricultural employment.

For the informal sector, the key to a stimulus lies in cheap credit (or grants if the government can afford it). Many informal businesses have been subjected to weeks or months of low business volumes (or none at all) due to restrictions put in place to control the virus. This means they do not have working capital, to reopen and restart they will require this capital, and cheap credit is a quick and effective means of providing it. Governments can provide credit to Micro and small enterprises (as most informal businesses are) through existing channels that the informal sector already uses, such as mobile lending, cooperatives, savings groups, and microfinance institutions. Restarting the informal sector is critical to ensuring that people have jobs and incomes, livelihoods that do not just keep the economy turning but the food on tables and kids in school.

Combined the agriculture and the informal sector account for at least 40% of most African economies and are the primary providers of employment. The design of any African economic stimulus must have a significant focus on these two sectors if it is going to have any significant impact.

Tax reform

Some countries have introduced a set of tax cuts to ease consumer pain and help save businesses money. While tax relief will help a bit, outside of South Africa the tax base of most African countries is simply not big enough for tax cuts to have a big simulative effect.

However, taxes are a problem across the continent. African governments, do not collect enough taxes relying on a narrow base of taxpayers paying into a system riddled with tax loopholes, breaks and exemptions. Furthermore, the crisis will put millions out of work and cut the revenues of businesses significantly. However, as the American saying goes, never let a good crisis go to waste. This crisis presents a perfect opportunity for African governments to pursue genuine tax reform, that will help broaden the tax base and mobilize domestic funding for development rather than debt.

We can do this by reforming the tax system to make it, simpler. Make it easy to pay, easy to track and hard to confuse, this can be done through a combination of.

  • Removing existing individual and corporate tax breaks and exemptions while bringing down headline corporate tax rates.
  • Removing transfer pricing loopholes that allow large corporations to avoid paying local taxes.
  • Put in place new frameworks that will assess the proposed and existing tax breaks based on their verifiable impact. In other words, the impact of existing tax breaks should be clearly evident in the data and the justification for a new tax break should also include clear indicators on if it is working. This would prevent the myriad of loopholes creeping back into the system

Getting more companies in the tax net, on an evening playing field while doing away with all the complexity that enables the avoidance of taxes will broaden the tax base. This can be accompanied by a marginal lowering of headline rates as there will be more people and companies paying taxes. A smaller burden on more people will result in less stress on consumers and companies and higher tax revenue when the post-crisis recovery starts.

Safety Nets

One thing the crisis has done is put severe stress on the safety nets and support systems that most Africans rely on. Those with jobs, both formal and informal, often support their immediate and extended families. Foreign remittances (migrant workers sending money back home) has grown by ten times in the last 2 decades. This is a critical source of income and support for millions around the continent and in many countries is one of the largest sources of foreign currency and inward investment. Domestic and international transfers which essentially form our social safety nets are being ravaged. As the domestic economy sheds jobs and opportunities, incomes whether formal or informal will be cut or lost entirely. Internationally, as we have already seen job losses will be immense, and African migrants will be part of that and the World Bank expects international remittances to fall by 23%. Millions around the continent will be without vital support from struggling friends and families and governments must step in. This can take one of two forms:

  1. Give people money. Cash transfers (as I laid out in a previous post) are simple and effective and in a crisis potentially lifesaving. In Togo the government has deployed a cash transfer program called Novissi targeted at people whose daily income is no longer guaranteed due to disruptions caused by the Coronavirus crisis, using existing mobile money platforms. The cash transfer does not fully replace people’s incomes, but it does provide a lifeline, ensuring that people do fall into desperation. It also shows that a mass cash transfer program is possible and need not break the bank.

 

  1. The second option is to invest heavily and quickly in the provision and delivery of key services. Ensure that critical needs such as power, healthcare, sanitation are provided cheaply or free as widely as possible and that critical income-generating venues such as food markets can run with social distancing and sanitary measures in place, that would ensure income generation but also keep people safe.

Neither of these two solutions (or a combination of both) should be short term solutions. Building viable social safety nets is a key need across the continent and if included in a stimulus package, they could be the basis for long term remaking of the social contract across the continent. Without putting in place viable safety nets to replace the informal ones that are being worn thin by the pandemic we may see more people forced into desperate poverty, which would set endanger millions more lives and threaten social stability.

Speed is key

 

The primary goal of any stimulus plan is to move an economy out of a crisis or recession. To do so the stimulus must be deployed quickly before too many businesses and consumers go broke or permanently change how they do things. In deploying their stimulus programs, African governments must ensure that they are deployed quickly. Businesses need credit before they go bankrupt, farmers need inputs before the next planting season and people need to eat today not next quarter. Getting a stimulus package out of government treasuries and into the economy as quickly as possible will amplify its effectiveness.

The right type of stimulus

 

No two stimulus programs will be the same, African economies are diverse and the priorities of each government differ. However, there are common features across the continent that will need to be addressed. With limited resources, we must be smart and bold. That requires putting our resources where the majority of African’s earn their livelihoods in the agricultural sector and informal economy. Making sure that vulnerable communities whose livelihoods have been decimated or support systems undone, get adequate support. And it is an opportunity to reset a tax system that is not fit for purpose to one that can raise the resources we need to fund our long-term development.

African economies need a jumpstart out of what the IMF is calling “an unprecedented threat to development”. As we design our stimulus programs, we must do so in a way that does not just tick the boxes of orthodox economic thinking but addresses the realities of our economies and looks to the future.

 

 

Making it through the crisis: Africa’s crisis response policy

A few weeks ago I wrote a piece on what Africa can do to kickstart its economy and drive long term growth after the coronavirus crisis has ended. What’s becoming clear is that the crisis will be longer and deeper than many had first thought. This poses the question, what policies do we need to put in place so that when it ends, we are in a position to kickstart a recovery.

African governments do not have the financial firepower or operational capability that developed countries have deployed. But I do not believe that means we are hobbled. As policy responses around the world are showing, what was previously thought impossible, too expensive or too complex is doable. The same applies to Africa. To make it through the crisis we must abandon the art of the possible and attempt the impossible. This crisis presents critical obligations to African policymakers, that we must be bold and creative to save lives, livelihoods and possibly the state itself. This crisis also presents policymakers with an opportunity, to redefine what policy in Africa can do, particularly when health, wealth and well-being of its people are at its centre.

The Nature of the crisis

This crisis is unlike anything Africa has seen before. Its effects are multiple, simultaneous and intense.

First, this crisis will last longer than many of us thought. Until there is a widely available vaccine or cure, we will continue to see outbreaks, travel restrictions, social distancing, quarantines etc. In various parts of the world and Africa as governments try to avoid a second wave. Considering the staggered way in which the virus has spread across the world, it’s estimated that the most severe restrictions will continue for the next 3-6 months and various restrictions could remain in place for up to 18 months until medical solutions are widely available.

Economically the World Bank predicts the continent could lose between $37 billion and $79 billion in output and face a recession of –5.1% (negative 5.1%). Furthermore, agricultural production (the most important sector in terms of output and employment on the continent) could contract by between 2.6% and 7%. This is an economic disaster for the continent. The formal sector will be defined by falls in productivity, revenues and severe job losses. In the informal sector which accounts for 89% of employment on the continent, its traders, farmers, vendors, MSME’s, tradespeople who rely on daily incomes are facing disaster if those incomes are disrupted endangering their ability to afford food and shelter not just for them but also the people who rely on them.

This crisis will also stretch our healthcare systems, in many cases past their breaking points. Endangering, the lives of those with Covid-19 and the lives of those who need medical attention for things other than Covid-19 (expectant mothers, HIV-AIDS patients, cancer patients, malaria patients etc.).

Internationally, help (financial or technical) from the traditional donor/development aid community will not be as forthcoming, as it has been during previous crises, as they try to deal with the crises within their borders. Thus, Africa cannot rely on the international community as we have become accustomed to doing.

With all these effects, in responding to this crisis we have to have a core goal. That we have to keep our people fed, healthy and secure livelihoods as far as is possible. Which means designing and implementing a mechanism to enable people to keep themselves fed and secure. Providing lifelines to the informal and formal sectors, so that people have livelihoods to sustain themselves in the long run. Restructuring how our governments communicate with the public to ensure that the measures taken are as effective as possible and provide a foundation for re-forging our societies.

Keeping people fed and secure

This is probably the biggest headache facing African policymakers in their response to the crisis, and many will default to what they know, distributing foodstuffs. However, what we need in a situation like the current crisis where millions of people who were ok now fall into vulnerability, is a solution that is big, simple and fast. One solution that encapsulates all three is cash transfers. Give vulnerable populations money and trust them to know how best to use it. As I have previously written, cash transfers are effective, and people are rarely irresponsible with them. With innovations like mobile money which has permeated across much of the continent, it is possible to get money where it needs to go and to do it quickly. And, it avoids the mess of corruption and delays associated with government procurement. Finally, it puts money where the economy needs it. In the hands of consumers who buy their food and other essentials from the informal economy, keeping those value chains alive.

How do we pay for this? Simple, print money. The UK is doing this. Those afraid of inflation should note that the money would be replacing depleted economic activity, thus limiting the inflationary impact.

Reinforcing health systems

First, African countries need to devote more resources to public health. For decades we have let public health fall into a state of disrepair and underfunding. Over the short term, this needs to be remedied by immediately ramping up funding, and resourcing over the short term to fund the immediate Covid-19 response. As well as thinking through how to implement public health measures in an African context. Rather than lockdowns, how can we make markets which are critical nodes of the food system sanitary and credibly social distant? How do we make informal settlements where people share multiple spaces as safe as possible?

But it also represents an opportunity to start long term investment in community health. If we want to keep hospitals free to treat Covid-19 we need to deliver care to people in their communities. This means public health communication and education, provision of basic care at a grassroots level and investing in preventative infrastructure (sanitation, water, clean cooking etc). That could over the long-term form the basis of a viable universal healthcare system.

Paying for this will require shifting resources for normal noncritical spending (non-salary and critical operations) to the health systems, delaying or freezing development projects and tapping into capital markets (borrowing) where possible.

A lifeline to the economy

Through no fault of their own, businesses across the continent are suffering as demand falls, export markets go into lockdown, their supply chains are disrupted, and their consumers stay at home. To save jobs, livelihoods and in some cases whole industries. Many governments have already put in place tax holidays and encouraged banks to renegotiate loans with businesses. However, in a recession predicted to be deep, more is needed, and this could consist of several measures such as:

  • The utilisation of domestic private sector capacity by the government as part of the crisis response. Using streamlined public procurement to buy goods and services (e.g. Masks, logistics and transport, beds etc.) that are needed by the government to respond to the crisis. This will help keep some local businesses alive and build local capacity.
  • An SME loan program divided into two tranches. The first tranche would be given now, to keep SME’s alive and the second tranche would be given when the WHO declares the crisis over to enable SME’s to quickly restart their operations. This can be done by the banking sector backed by a guarantee given by the central bank in case of defaults. The guarantee would have 2 conditions: low-interest rates and a 6-12-month grace period before the loan payments start to give SME, breathing room. This would have the effect of giving SME’s working capital and keeping the credit system alive.
  • Safe business programs. Many businesses require social interaction such as open markets, salons & barbershops, restaurants bars and clubs, etc. We should be developing guidelines and rules for safe interactions in these businesses that integrate sanitary measures and social distancing (where possible) to enable these businesses to reopen as early as possible without endangering public health.
  • Utility bill and commercial rent holidays to ease pressure on businesses with reduced cash flows. Utility providers and commercial landlords can be provided with tax credits to offset the reduced revenue. I

Communicating with the public

I have written previously on the need for effective and persistent communications strategies to be built into policy design. This is critically important during a crisis, where not only do the public need to know what is happening, they need to buy into it, trust what their governments are saying and understand that it is being done for the public good. For that to happen governments have to change how they communicate with their publics from talking at them to engaging with them, this means:

  • Be honest. Now is not the time for bluster or false assertions. If governments lie and people die as a result, trust will be fundamentally broken, and people will be unwilling to listen again. Thus, governments must lay out the truth to their people, what this crisis will do to every one’s health, livelihoods and general welfare and why they are implementing exceptional measures.
  • Explain your thinking. Governments will be implementing measures that will affect people’s lives in a multitude of ways. As the heavy hand of government, intervenes in people’s lives in unprecedented ways, the government must explain why, what drove the thinking, and what they are hoping to achieve
  • Accept and respond to criticism. No policy response will be perfect. Being able to acknowledge where something has not gone as planned or was not implemented properly and communicating real action taken to fix it, will build trust and support.
  • Communicate often. This is a constantly evolving crisis; people need to be updated regularly. In times like these, there is no such thing as talking too little.
  • Engage across channels. To reach everyone, you must go where they are, which means going beyond traditional media onto social media, and breaking language barriers. If information is inaccessible, then it may as well not exist.

Communicating, honestly, effectively, and openly will help reshape the relationship that has been characterised by a lack of trust between opaque African governments and populaces that have long been indifferent to whatever pronouncements and declarations those governments make. Rebuilding trust can be the basis for rebuilding the sense of community and society that too many African countries have lost, reinforced by genuine efforts to assist people.

A pan-African response

Though the international community may be pre-occupied, it does not mean the pan-African community cannot respond. Though we may not have the money or the resources that the developed world can deploy, we can cooperate to ease the pain of the crisis. Critical areas of cooperation would be:

  • Sharing data and information on how the pandemic is evolving in each country. providing public health officials and policymakers valuable data on the epidemiology of the virus within similar demographics that can help every country fine-tune their response.
  • Sharing policy responses. What measures have implemented in other African states, how effective have they been, can they be adopted elsewhere.
  • Sharing resources. If the crisis has eased in one country but is ramping up in another, they could provide resources (equipment, personnel, money) to help in that fight.
  • Buy Africa first. Stimulating the African private sector by encouraging African governments to buy what they cannot find at home (e.g. if there is a food shortage) in other African countries before looking abroad.
  • Engage the world as one. While African states do not agree on everything, this crisis will bring us together on various things. One of the most important of those things is Debt. Africa needs debt relief to give it the fiscal space to pay for the virus response and a post-crisis stimulus. Rather than have each African country go to its bilateral and development partners on its own to beg for debt relief or a payment pause. The message will be much more powerful if the continent speaks and negotiates with one voice, increasing its bargaining power and the momentum behind the issue.

Unprecedented crisis – an unprecedented response

This crisis is unlike anything Africa has ever seen before. Even the Ebola crisis of 2014 did not threaten the whole continent and had significant international assistance. It is hampering our health systems, economies and socio-cultural way of doing things on a scale we have never had to deal with.

This is by no means a comprehensive look at the policies that can or should be implemented. The policy interventions I have presented are a few among many that a lot of talented and clever people are thinking of across the continent. What I have tried to lay out in this piece is that this dual health and economic crisis is a threat to us all. And responding to this crisis requires a multi-pronged approach that is big and bold. That will need African governments to get out of their comfort zones and implement measures such as cash transfers which they have termed too expensive or too hard,  shift money from cherished infrastructure and other projects to the health system, invest in the private sector especially SME’s in new ways and talk to the public in a more genuine way.

If we do not respond in a big and bold manner, many African nations will emerge from this crisis hobbled, suffering extended socio-economic aftereffects and much more likely to suffer civil and political unrest. If we can respond with boldness then we could lay the foundations for a genuine recovery after the crisis, a public health system that isn’t an oxymoron, a reset of the relationship between private enterprise the and public good and a  much more positive relationship between the government and its peoples. I’m hopeful that maybe, this time, African leaders and policymakers will recognise this crisis for the threat it is and start thinking big and acting boldly.