(Ecofin Agency) - In a report issued March 18, US rating agency Standard & Poor’s indicated that the existing social and macroeconomic weaknesses in Africa will be heightened due to the current coronavirus pandemic, especially since there is no indication of the exact time needed to stop the virus.
According to Mohamed Damak, Credit Analyst at S&P Global Ratings, the sharp deterioration in financing conditions could hurt African countries with high current account deficits and dependence on external capital flows for financing. Thus countries with a significant amount of debt in international currencies or those needing external revenues would be the most affected.
The reports identify three major ways the pandemic’s effects could be felt. First, on the global level, commodities prices have dropped drastically. In the copper sector, for example, lower growth in China has resulted in lower prices, a situation that is immediately touching the Democratic Republic of Congo (DRC) and Zambia, the main producers of this mineral on the continent.
The second way is tourism. Many countries in Africa have closed their borders to the entry of non-residents, with a risk to tourism revenues, either business or leisure. This is particularly the case in South Africa, Morocco, and Algeria, where tourism revenues can reach 15% of total exports. This risk is higher as the bulk of Africa's tourists come from Europe, the new epicenter of Covid-19.
Finally, the report says the pandemic will make it difficult to access the international money market. Stock prices in South Africa and Nigeria have already plunged with a strong wave of divestment by investors. This is more felt in Nigeria, whose currency stability depends in part on foreign investment in local treasury bonds.
More than 25 African countries have already confirmed cases of coronavirus. Burkina Faso has reported one death, the first in sub-Saharan Africa.
Experts fear that if the virus were to spread as quickly across the continent as it did in Europe, Africa would not be able to resist because of the fragile public health systems in many countries in the region.