COVID-19 in Africa – Gabriel Chan ECO01

The coronavirus, COVID-19, has been for the past few weeks been hitting economies all over the globe. We constantly hear news on how our, Australian, economy is doing, as well as the American and Chinese. However, there is one place that is seemingly kept out of most people’s sight, and that is the continent of Africa.

While Africa may not have been feeling the full panic of the coronavirus pandemic, they have definitely been feeling the effects of it on the economy. As China is Africa’s largest trading partner, once they closed most of their ports, the demand of the natural resources coming out of Africa heavily fell. Furthermore, Africa’s access to industrial components and manufactured goods also decreased by a significant margin.

Over three-quarters of exports from Africa to the rest of the world is heavily focused on natural resources, so any slight decrease of exports will have major impacts on the economies of the continent. Countries such as The Democratic Republic of Congo, Zambia, Nigeria, and Ghana are the ones that are the most at risk as they mainly export industrial commodities such as oil, iron ore, and copper to China.

To add on to that, because many of the factories within Africa are chain branches off of companies in China, with a shortage of orders from their main factories, many of the factories are at risk of being closed. As well as that, manufacturing and transport equipment constitute to over 50% of their combined needs, and as these mainly come from China, they have been facing a small crisis with a lack of these resources.

China is one of the prime investors in Africa’s mining operations, as in 2018, they controlled at least 24 different mining operations being held in Africa. This is mainly because of China’s exponential infrastructure growth in recent years. However, as many companies have been closing factories within China, the demand of natural minerals from Africa has also reduced exponentially. African mining companies have already noted decreasing demand for lithium, cobalt, copper and iron ore. There is also a sharp decline in demand for steel from within Africa. This all stems from the China’s production shutdowns and their global supply chains.

Many people have probably already realised that oil prices have been dropping quite recently, and that is because of China’s closed ports and travel restrictions causing oil importers from China to cancel purchases of African oil. This forces the African oil suppliers to have to seek out new buyers to buy their oil, at often discounted prices. This means that the money that comes in from Africa’s oil exports will be marginally than other years. While the demand has decreased in China for now, there are speculations that once this crisis is over, the demand of oil from China will be much higher than before.

Because of the coronavirus, COVID-19, economies all over the globe have been taking a hit for the worse. This even includes the already unstable and uncertain continent of Africa. With demand for their natural resources waning, the economy within Africa is not looking that great, but only time will tell what is to become of the economies after the coronavirus pandemic has come to a close.

Bibliography

https://www.bakermckenzie.com/en/insight/publications/2020/03/the-impact-of-covid19-on-key-african-sectors