Impact of vaccine famine on Africa’s economic growth

We are about to start a third year of living with Covid-19.

The world’s humanity and solidarity are now at its 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.

As the pandemic ravages on, with Omicron on the scene, the futility of 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 per cent of the population in the US and 76 per cent in Canada are fully vaccinated, in Africa – a continent that is home to 1.3 billion people – the number barely reaches eight percent.

Many have argued that vaccines’ short shelf life, hesitancy and logistic challenges weigh in. Granted. But the main issue remains the absence of global solidarity – where the rich hoard and the weaker economies deal with vaccine famine – awaiting their turn…

Vaccine Inequality is also manifest in vaccine affordability. For high-income countries to vaccinate 70 per cent 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 per cent, on average — to do the same.

Vaccines delayed is development denied. Estimates show that vaccine delays cost Africa up to $14 billion in lost productivity each month and make recovery more challenging – and drag 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 Africa had the second-fastest-growing tourism sector in the world, contributing 8.5 per cent of the continent’s GDP.

However, with the pandemic, tourism has come to a standstill, and the continent recorded a 2.1 percent decline in economic growth in 2020. Other accompanying challenges have included general exchange rates depreciations, food insecurity and increased job losses.

Vaccine delays will cost Sub-Saharan Africa three percent of the region’s forecast GDP in 2022-25. 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 early 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 deficit widens 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 jeopardising 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. Below are some ideas on how to get there fast – building on a consensus that emerged from the recently concluded 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 be applied: by, for instance, re-directing 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 are critical. Resources like energy, oil, natural gas, coal, and uranium are worth between $13-14.5 trillion and $1.7 trillion of potential wealth.

Further resources can be harnessed from production in six key sectors: agriculture, water, fisheries, forestry, tourism and human capital. Mobilisation of these resources requires governments to seriously address deficiencies in banking and governance systems to stem illicit financial flows out of the continent.

Central banks have a key role to play in unlocking idle resources and channelling 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 SDR issued by the IMF to its country members 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 SDRs 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 mobilisation and better allocation of savings to productive investments by shifting incentives for the banking system toward 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 revitalising 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 the marginalised population usually excluded by the formal financial systems.

However, digitisation 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 the advantages of its natural resources, by leveraging blue-carbon markets and green financing mechanisms.

Climate risk-sensitive investment, de-risking, impact investment, environmentally sustainable projects, sustainable energy investment are among critical issues for sustainable financing development.

Thus, the financial sector has a key role to play in 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 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 industrialisation of both goods and services.

Investment in trade facilitation reforms and using Regulations as a Stimulus will bring even greater dividends, saving governments money inefficiencies while placing billions directly in the hands of intra-African women and youth-led exporting enterprises.

2022 must be a year where collective global action prioritise vaccine equity and ensure a shot for all. Omicron has reminded us that there is just no other way to build forward better.

Eziakonwa is UN Assistant Secretary-General, UNDP Assistant Administrator and Director, Regional Bureau for Africa.