COVID-19 and Trade in SSA: Impacts and Policy Response

“COVID-19 will have a severe economic impact in Sub-Saharan Africa: Trade is the Key Channel The COVID-19 pandemic is first and foremost a public health crisis. However, measures adopted to curtail the spread of the virus have led to a sharp contraction of the global economy and an even larger decline in global trade, with significant implications on the livelihoods of people in Sub-Saharan Africa (SSA). To date, the number of confirmed cases of COVID-19 has been relatively low in Africa (Figure 1) when compared to other regions. However, nowhere will the pandemic hit harder, or with greater adverse impacts on the economic, social, and political life of people, than in SSA, mainly due to the inherent vulnerabilities in the region. Economic growth in SSA is expected to decline to between -2.1 and -5.1 percent in 2020, the first continent-wide recession in a quarter of a century.1 The economic impact will be hardest felt through trade, due to the rare mix of global shocks in demand and supply. Trade is also key to the solution, both in the direct measures to control the spread of the virus and in minimizing the economic fallout. This brief focuses on trade impacts and policy responses with respect to the latter.”

Question 1 (20 Marks)

“Though Africa accounts for a very small share of global trade (three percent), the share of trade in the national income of most economies in the region is relatively large, compared to other regions.”
The above statement highlights the importance of trade to African economies. Evaluate the arguments made against the expansion of African trade through the establishment of an African Free Trade Area (AfCFTA ).
Question 2 (20 Marks)

“Given the region’s high dependence on commodities, the collapse in commodity prices is expected to have very severe impacts, further reinforcing the existing economic vulnerabilities due to lack of diversification.”
Analyse the challenges posed to Nigeria’s economy by the slump in commodity prices and the government’s response to these.
Question 3 (20 Marks)

“The supply shocks introduce direct supply disruptions in African countries that are increasingly becoming more integrated into Global Value Chains (GVCs).”
Provide an appraisal of various means/ ways that African countries can use to mitigate these supply shocks
Question 4 (20 Marks)

“The garment industry, a budding manufacturing sub-sector in the region accounting for a large share of the sector’s employment and exports, is hard hit by worldwide retail closures and furloughs coupled with the collapse in consumer confidence.”
Discuss the possible solutions that economies in the East African regions can use to address the challenges faced by their garment industry

Question 5 (20 Marks)

Appraise the policy responses that the Reserve Bank of Zimbabwe (RBZ) adopted for their exchange rate and balance of payments due to the Covid 19 lockdown.

Answers to Above Questions

Answer 1: International trade is highly essential for the growth of an economy. The situation with respect to Africa indicates that its share is very small in the overall global trade, and its expansion is highly essential but the establishment of an African free trade area to expand the African trade is questioned on many grounds. Some of the major issues include appropriate infrastructure support for international trade expansion in Africa, and there is lack of Government support as well because of conflict across some of the important African countries, that restrict or create uncertainty in the growth of international trade.