Vaccine famine and its impact on African economies
Vaccines delayed is development denied
Posted January 26, 2022
We are starting a third year of living with COVID-19.
As the pandemic ravages on, with Omicron on the scene, the futility of vaccine hoarding takes centre stage as even the heavy supply of boosters in advanced economies has not shielded them from the vicious cycle of pandemic living. While about 60 percent of the population in the US and 76 percent of that in Canada are fully vaccinated, in Africa – a continent home to 1.3 billion people – the number barely reaches 8 percent.
The world’s humanity and solidarity now face further test – and yet the implications of the absence of solidarity keep us all in the boat of mutations, lockdowns, quarantines and delayed SDGs – denied prosperity for all. 2021 has unearthed a new expression of global inequity: “vaccine nationalism” – which itself competes high with socioeconomic downturns, jobless growth, the climate crisis, and rising poverty.
Vaccine inequality is also manifesting in terms of affordability. For high income countries to vaccinate 70 percent of their population, it will take raising their health care spending by 0.8 percent. Lower income countries must increase health care spending by over 50 percent, on average, to do the same.
Vaccines delayed is development denied. Estimates show that vaccine delays cost Africa up to US$14 billion in lost productivity each month – making recovery more challenging, and dragging out the first-in-a-generation recession the continent is facing.
African governments have responded quickly to contain the spread of the virus – but success is overshadowed by the pandemic’s socioeconomic consequences. In 2019, Africa was witnessing record growth numbers in various sectors: like tourism, where the continent had the second-fastest growing tourism sector in the world, contributing 8.5 percent of Africa’s GDP.
However, with the pandemic, tourism has come to a standstill. Africa recorded a 2.1 percent decline in economic growth in 2020, with other accompanying challenges including general exchange rates depreciations, food insecurity and increased job losses.
Vaccine delays will cost sub-Saharan Africa 3 percent of the region’s forecast GDP in 2022-2025. UNDP research reveals that recovery rates are strongly correlated to capacity to vaccinate – with a $7.93 billion increase in global GDP for every million people vaccinated. Low-income countries that are severely impacted by the pandemic do not have the fiscal and financial leeway available to wealthy countries.
They risk enduring the pandemic longer if they do not gain swift access to COVID-19 vaccines. This places an inordinate burden on national budgets at a time when the pandemic has decimated fiscal revenues and when higher spending is needed from governments to protect their people and cushion the socioeconomic shock caused by the pandemic.
There is a risk of seeing African countries’ budget deficits widen, and it is urgent for us to support countries in developing alternative financing sources. Vaccine famine is putting millions at risk of infection, constraining economic productivity and jeopardizing socioeconomic progress.
The key question today is: Can the world afford such blatant inequality in the face of a pandemic that is sparing no region?
The path to recovery will remain long and uncertain unless we take urgent measures to overhaul the current system of vaccine production, distribution and financing. Here are some ideas on how to get there fast – building on a consensus that emerged from the recent African Economic Conference in Sal, Cabo Verde.
Development financing in Africa requires an out-of-the-box architecture.
Africa will need an additional $425 billion in external funding between now and 2025 to fully recover from the pandemic. It is daunting, but not impossible. It is equivalent to the amount African countries lose to illicit financial flows over a five-year period. Economic governance and creativity can also be applied by, for instance, redirecting investments by pension funds, sovereign wealth funds and similar institutions.
Leveraging the continent’s natural resources is urgent.
Africa’s financial presence in the international system does not reflect its real wealth. Better management and use of extractive industries is critical. Resources like energy, oil, natural gas, coal and uranium are worth between $13 trillion and $14.5 trillion of potential wealth. Further resources can also be harnessed from production in six key sectors: agriculture, water, fisheries, forestry, tourism and human capital. Mobilization of these resources requires governments seriously addressing deficiencies in banking and governance systems to stem illicit financial flows out of Africa. Central banks have a key role to play in unlocking idle resources and channeling them into productive investments. Over $1 trillion of excess reserves could be used to finance Africa’s development.
International finance systems could be reviewed to become more equitable.
Concessional financing should consider countries’ multidimensional vulnerabilities beyond what is reflected in their income levels. The allocation of a record amount of $650 billion in special drawing rights (SDR) issued by the IMF to its member countries in August 2021 is a step in the right direction. But more can be done to better support countries that need financing the most. Africa only received $21 billion of SDR from the total envelope. Such international mechanisms could be reviewed to redress current inequalities.
Reforming Africa’s financial system
The COVID-19 pandemic has highlighted the critical role that financial systems have to play in supporting Africa’s development. Improvements in the quality, quantity and efficiency of financial systems are crucial for Africa’s sustainable development. More effective financial systems across the continent can promote resource mobilization and better allocation of savings to productive investments by shifting incentives for the banking system towards the core functions and advancing financial inclusion for individuals and microenterprises.
Digital innovations are a game changer for Africa’s development financing.
Financial systems that harness digital technologies and free and fair competition will be fundamental in revitalizing African economies. The pandemic has proven that digital technologies present enormous opportunities for Africa. They stimulate innovation, economic growth and job creation in critical economic sectors by allowing better interconnection of African markets with the rest of the world. They can also increase market access and financing for marginalized populations usually excluded by the formal financial systems. However, digitization also has the potential to exacerbate inequalities, and we must ensure that the means are sufficiently inclusive for no one to be left behind.
Sustainable financing will be key.
African financial institutions have a role to play in enabling Africa to transform its natural resources advantages, by leveraging blue-carbon markets and green financing mechanisms. Climate risk-sensitive investment, de-risking, impact investment, environmentally sustainable projects and sustainable energy investment are among the critical issues for sustainable financing development. Thus, the financial sector can contribute by re-orienting investments towards more sustainable technologies and businesses and fostering low-carbon, climate-resilient and circular economies.
Boosting intra-African trade is a gateway to recovery.
The transformative power of the African Continental Free Trade Area (AfCFTA) must be brought to bear in servicing the needs of 1.3 billion people. If effectively implemented, the AfCFTA will accelerate the continent’s path towards structural economic transformation through value-addition-based industrialization of both goods and services. Investment in trade facilitation reforms and using Regulations as a Stimulus (RaaS) will bring even greater dividends, saving governments money in efficiencies while placing billions directly in the hands of women and youth-led enterprises trading within the continent.
2022 must be a year where collective global action prioritizes vaccine equity and ensures a shot for all. Omicron has reminded us that there is just no other way to build forward better.
This article was originally published by InterPress Services.