Last week, the Africa Trade Policy Centre (ATPC) of the United Nations Economic Commission for Africa (ECA) in collaboration with the UK-based Overseas Development Institute (ODI) has released a working paper entitled “Africa trade and COVID-19: The supply chain dimension”.

The paper investigates the impacts of the pandemic on trade and value chains in Africa, with a special focus on Ethiopia and Kenya, and the pharmaceutical sector. It also makes specific policy recommendations on how the African Continental Free Trade Area (AfCFTA) can be reconfigured to reflect the new realities and risks of the 21^st century.

In this article, we focus on Chapter 2, which examines the impact of the lockdown and social distancing policies – in response to the COVID‑19 crisis – on trade volumes, commodity prices, services and investment.

I. Impact on cross‑border trade

In the fight against COVID‑19, almost all African countries, albeit to a differing degree, have now suspended international flights, introduced a14‑day quarantine for entrants into the country and closed land and/or maritime borders.

A total of 38 of Africa’s 54 countries have now announced land closures of some form, and 17 countries have announced the closure of maritime borders. Typically, these closures are targeted at the movement of people, and there are exemptions for the movement of emergency and essential freight supplies under very strict conditions, including mandatory testing, the sanitisation of trucks, limited crew members on trucks and designated transit resting areas.

This has led to an abrupt slowdown and delays in cross‑border trade, often characterised by disputes between neighbouring countries, long lines of trucks awaiting clearance and the divergence of trade to less safe unofficial routes. Informal cross‑border trade, which requires traders to cross the border to sell their goods and services on the other side, has been particularly hard hit. Disruptions to cross‑border trade present significant challenges for Africa’s fight against COVID‑19 and broader socioeconomic development, as elaborated as follow.

Inadequate or delayed access to emergency COVID‑19 supplies: Most African countries and/ or regions have introduced guidelines and rules to prioritise and facilitate interstate flows of essential goods, including medicines, fuel and food. Yet broader border disruptions related to new requirements or disputes will undeniably also slow down the smooth flow of essential supplies. This risks exacerbating the impact of COVID‑19 on fragile economies that are reliant on the timely importation of supplies by road. ‘Green lanes’ for super‑fast clearance of medical supplies can help.

Increased food insecurity: According to World Vision, the number of Africans suffering from hunger has declined to 20%, but COVID‑19 risks reversing these gains

through compounding other adverse shocks such as drought, extreme weather and the locust invasion in East Africa. COVID‑19 border disruptions are having impacts on various stages of food VCs, from input supply and production through to food distribution and consumption. COVID‑19 border restrictions and regulations make it difficult to move food from areas of surplus to deficit regions. This amplifies risks leading to negative impacts on food and nutrition security.

Escalation of prices along key corridors and in cities: Cross‑border trade also provides a lifeline for local communities and cities along entire corridors. In East Africa, many farmers have not been able to move their produce to border markets, which has cut off a vital source of cross‑border trade. Much of the food crossing borders typically ends up in East Africa’s cities, which are now experiencing worrying price hikes that threaten nutrition and food security. For example, the average price of maize in Nairobi for April 2020 was $343/metric tonne (MT) compared with $312/MT the same month in 2019; the average price of rice in Kampala for April 2020 was $1,013/MT compared with just $950/MT a year earlier. In West Africa, at the Aflao–Kodjoviakope border between Ghana and Togo, large trucks transporting bulky consignments are allowed to cross outside of curfew hours (8pm–6am) but informal cross‑border trade by foot has come to an abrupt halt. Since COVID‑19, there has been an increasing trend of small‑scale traders joining forces, aggregating their goods and paying fees to truck drivers for transportation and clearance. For this reason, prices of key staples such as rice, tomatoes and peppers have jumped by about 50% in border towns in Ghana.

Loss of income for small‑scale cross‑border traders: Cross‑border trade provides an important source of income for cross‑border communities, and vulnerable groups including women and smallholder farmers. These communities typically live subsistence existences and require weekly trade across the border in order to purchase essentials to survive. The majority of informal cross‑border trade consists of perishable agricultural products such as tomatoes, peppers, cassava, fish and eggs. Since informal traders typically received only a couple of days’ notice to prepare for border closures, much of their stocks have spoiled, resulting in hefty losses. For instance, in Kenya, the cessation of movements in and out of cities was announced abruptly as farmers were en route to markets with truckloads of produce. These farmers were not allowed to pass police barriers and were forced to abandon their harvest of a full season and return home.

Increased financial stress: Most cross‑border traders are unbanked and sometimes rely on expensive informal loan sharks for bulk stock purchases, such as mashonisas in South Africa and shylocks in Kenya. Many of these traders borrow money early in the morning to acquire merchandise and repay in the evening of the same day once they have sold their goods. Losses from unsold stock owing to COVID‑19 home directives and travel restrictions may quickly escalate into a spiral of debt.

Reversing gains in women’s economic empowerment: The majority of informal cross‑border traders are women, who can rely on this modality for an independent source of income which can further their empowerment in traditionally male‑driven households and communities. Removing this income source, coupled with increased confinement at home, risks raising the rate of gender‑based domestic violence. Women’s rights organisations across the continent are raising this concern. In light of these challenges, it is crucial that African countries cooperate to overcome border disputes, and harmonise COVID‑19 border requirements and regulations in order to reduce hold‑ups and delays, while not undermining the safety of trade. COVID‑19 has magnified challenges related to border operations, customs cooperation and trade facilitation and automation. This highlights the importance of fast‑tracking implementation of the World Trade Organization (WTO) Trade Facilitation Agreement and the AfCFTA Annexes on trade facilitation, customs cooperation and transit trade.

II.Trade volume

Trade volumes for Africa are projected to decrease by 8% for exports and about 16% for imports for 2020, compared with previous historic trend estimates. As a result, Africa is expected to be hit particularly hard, as 17% of the world’s ‘COVID‑induced’ poverty will be located on the continent, second to East Asia, the continent with the highest concentration of ‘new poor’ (20%). Fears of a roll‑back on Sustainable Development Goal achievements have been at the fore, with some estimates reporting that 40–59 million more people could be pushed into extreme poverty in Africa, adding to the current 455 million people. The UN Economic Commission for Africa (UNECA) estimates that up to 19 million jobs could be lost on the continent. Ultimately, country‑level economic shocks are tied to the country’s level of trade openness, its diversity of exports in terms of sector and destination and its relative competitiveness. Given the African context of low export and low sectoral diversification, the continent is expected to experience significant fallout. According to a vulnerability index by ODI, African economies most vulnerable to the pandemic are Kenya, Zambia, Rwanda, Sudan and Ghana due to a combination of high exposure and low resilience.

III. Fall in commodity prices due to production and transport restrictions

The restrictions put in place to contain the virus have led to a substantial decrease in most commodity prices. These low prices are an additional shock to the economies as they constrain the resources that countries need now to tackle the current crisis as well as affecting the future recovery growth. Fuel prices have reduced drastically, hitting a relative average low price in April of $32 per barrel of crude oil. This has affected fuelexporting countries with little economic diversification, such as Angola and Nigeria, the hardest. Global prices of minerals and metals have also fallen. The economic slowdown had less of an effect on less priceelastic commodities such as raw materials and fertilisers. Trade restrictions put in place by exporter countries (e.g. Vietnam for rice and Russia for wheat) combined with excess buying by some countries (e.g. Egypt and Saudi Arabia for wheat and Philippines for rice) could destabilise markets and potentially further food insecurity where it already exists. In particular, African net food importer countries would be vulnerable to an increase in commodity prices, supply chain disruptions and any export ban put in place by other countries. So far, global prices for food and beverages

have decreased slightly (from January to May), which could help ease the decreased domestic purchasing power that is to be expected. But for African countries such as Malawi, Guinea Bissau, Ethiopia and Côte d’Ivoire, which depend for more than 60% of their export earnings on agriculture, itself concentrated on very few food commodities of low value, a continued decrease in global prices would leave them particularly vulnerable. As a result of the fall in commodity prices, Africa could lose between $36 billion and $54 billion in export revenue. In countries such as Republic of Congo and Libya, the full price effect of a fall in value could represent more than 15% of GDP. Even in large countries such as Nigeria, export income could fall by more than 20%, representing nearly 3% of GDP.

IV. Services

In 2018 Africa imported about 3% of the world’s traded services and contributed to about 2% of the world’s exports. While this is a modest proportion relative to the total volume of traded services, this sector has been expanding since 2016 and driving national GDPs, with a recorded export growth of 9.4% in 2018 for the continent. For many African countries, services represent a growing share of total exports. For Ethiopia, Mauritius, Kenya, Morocco and Uganda, services represent more than 40% of exports on average for the period 2014–2018. In particular, exports of travel and transportation services represent more than 10% of GDP in Mauritius and Morocco. Services related to transport and tourism – which cannot go digital and which account for the highest share in traded services in Africa – have been hit hard by the crisis. Tourism arrivals are expected to decline by between 60–80% this year. Globally, projections estimate a 20–30% decline in tourism exports. On the continent, traded tourist services are estimated to fall by 9% compared with the baseline. Indeed, in the case of the nonstorable services of the hospitality and tourist industry, revenues lost as a result of lockdowns are potentially gone forever. The effect of the lockdown policies on countries’ service trade can differ depending on the capacity of services to go digital. The digital economy could offer a route to mitigate the effect of the loss of revenues from services that cannot respect physical distancing. Economic opportunities could include an increased offer of digital services (e.g. cloud computing) and digitally deliverable services (i.e. that can be carried out online, e.g. legal services), ecommerce and online work. Early evidence shows that African services firms are adapting. A firm survey across sectors and sizes in Africa shows that, to maintain their activities, businesses have adapted as much as possible and pursued new opportunities via ecommerce, among others, with 80% of surveyed large firms reporting having done so and 57% of micro firms reporting such a change. Similarly, the online labour index reports a one point increase in online work contracting since the beginning of the crisis for Africa. In Kenya, gross merchandise value of one national ecommerce platform has reportedly tripled since the start of the pandemic, showing adaptive supply.

V. Investment

The pandemic is affecting foreign direct investment (FDI) across the world. The United Nations Conference on Trade and Development estimates that global FDI flows could fall by 40% because of the spread of COVID-19. This is on account of the rapid deterioration of global prospects, adverse demand shock to sales and global supply chain disruptions. The negative effects of FDI will be concentrated in countries hit severely by COVID-19, but the effects will extend to other countries as a result of demand shocks and supply chains connections. As a result of COVID-19, the continent’s overall FDI inflows are estimated to shrink by 25–40%. Investments affected most are those in energy and primary industries, because of the oil price drop, and the airline and tourism industries, given travel cancellations and bans. According to UNCTAD’s latest projections, Africa will also experience foreign capital outflows as a result of COVID-19.

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