The business closure rate in Africa was high due to Covid-19 while businesses owned by women suffered the most and those working in the non-formal sector reduced effectiveness, as there was not much to do, an official with the United Nations Development Programme (UNDP) has said.
According to the Chief Economist and Head of the Strategy, Analysis and Research Team at the Regional Bureau for Africa UNDP in New York, Dr Raymond Gilpin, said job losses in the formal sector across the continent went as high as 40 percent.
“Countries that have economies based on oil exports and whose economies are based on tourism and associated service industries were most affected. Formal job losses ranged from 20 percent to 40 percent,” he told Sub-Saharan journalists last week.
Dr Gilpin noted female owned businesses suffered the most due to socio-expectations that required women’s attention.
“In Ghana, for example, the closure of business was high averaging from 34 percent to 35 percent of business not currently operational due to Covid-19. Closure of women owned businesses was worse than male,” he said.
“Looking beyond data – the closure of women owned businesses doesn’t mean their businesses are less resilient, it may mean women are at home addressing social impacts so they can’t be in two places at the same time. Looking at the social fabric as a whole, women are unable to be independent breadwinners and that is a huge challenge.”
The survival of the non-formal sector, which accounted for as much as 80 percent in some African countries, was also directly affected by Covid-19, said Dr Gilpin.
“A lot of people in some countries account as much as 80 percent of the labour force, in other countries it’s a little less. We’ve not seen much losses of jobs in the non formal sector but a reduction in effectiveness of those jobs because there is not much to do,” he indicated.
“But in many cases, the survival economy and so on has been affected directly because business is down in the country and also indirectly, because quite a number of those non formal jobs were sustained by remittances from abroad and remittances in 2020 were down by 20 to 25 percent conservatively. I think it’s a little bit more but that’s the data we have and that’s a lot in African countries.”
The chief economist noted that adverse social impacts felt by people required a coverage of social protection and labour programmes where governments addressed challenges from a number of perspectives if there were to be impactful
“If we have socio problems, we need social and labour protection, but these are not necessarily sufficient because they have a linear approach to problem solving and we can’t solve challenges by doing one thing,” he explained.
“Two things jump out from these social programmes. First it’s not an integrated approach, it’s not a cash transfer within job recovery and environmental or institutional reform but discreet cash transfers to the vulnerable. It’s good but hardly speaks to the complexity of the problem we are facing.”
Dr Gilpin highlighted social programmes are limited and in some aspects limiting.
“We need to go beyond 10 000 or 100 000 people to address the totality of households that are in the country,” he noted.
According to the UNDP official, 80 percent of low income African countries, had no institutionalised social protection and in comparison to the rest of the world, Africa is lagging behind regarding receipt of global loans.
Therefore, in a pandemic, Dr Gilpin advised African governments and developmental partners to facilitate retaining investors.
“On average 40 percent of businesses have been closed. We can do a lot more to make sure businesses on the brink don’t close. Africa is now very aid dependent and the private sector is not as effective as it should be. We should be focusing more on making economies resilient over the long run and attract investment,” he said.
But, the UNDP Chief economist lamented that in the first four month of Covid-19 last year, US$400 million left the continent because of capital flight.
“Bringing all of that back will require a lot in terms of reassurances. By building one block at a time, we can build and recover. Focus on investment in human capital, get good education grades up and make health care statistics a lot more positive,” Dr Gilpin said.
“The two decades before Covid-19, Africa’s growth rate was phenomenal in real terms. Gross Domestic Product was growing but when you break it down it was jobless growth. There was a lot of productivity and exports but not sufficient jobs -jobs that matter. We must focus on having a labour force that’s fit for the 21st century as that’s where investment comes in.”
He added Africa needed to address “non tariff issues that made it difficult, expensive or fiscally suicidal to do busines” otherwise there would be no progress.
“Governance is most important and managing resources well at every level of society.
We have to make sure there’s contract enforceability that’s not left to the vagaries of corruption. That will re-instill confidence, enabling us to move forward.”
Source: Centre for Innovation and Technology (CITE)