The ongoing coronavirus outbreak is hitting Africa’s economy much harder than anticipated, with business activity plummeting to record lows, according to the latest surveys and expert opinions.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI), which covers the East African country’s private economy, plunged to 37.5 in March from 49.0 in February, a report from global information provider IHS Markit revealed Friday.
The reading was the second-lowest recorded in the survey’s history, signaling a sharp deterioration in business conditions in Kenya. Readings above 50 indicate expansion, otherwise meaning contraction.
“Employment was lowered for the first time in 11 months, as companies reported less pressure on both current workload requirements and backlogs,” said IHS Markit.
Jibran Qureishi, a regional economist for East Africa at Stanbic Bank, said the tourism and floriculture sectors, Kenya’s two main sources of foreign exchange, have been hit the hardest due to global cross border travel restrictions and waning luxury spending in Europe.
Kenya is one of the biggest flower exporters in the world, with the European Union its biggest market, importing 70 percent of its flowers. According to the Kenya Flower Council, movement restrictions in Europe have led to sharply slashed flower orders, with Kenyan flower farms drastically reducing export volumes by 80 percent.
The coronavirus impact on the economic output this year will be significant amid supply chain disruptions and negative demand shocks, said Qureishi, adding that “the longer the duration, the more acute or severe the impact will be.”
Gerrishon Ikiara, senior economics lecturer at the University of Nairobi, told Xinhua that Kenya’s GDP growth rate could slump to about 2 percent by the end of 2020, depending on how long the coronavirus epidemic takes to be brought under control at the global, regional and individual country levels.
The IHS Markit survey also showed that business performance of South Africa’s private sector dropped at the quickest pace in the survey’s history to a record low, as the private sector faces its deepest contraction in new orders against a backdrop of the rapidly evolving coronavirus pandemic alongside the ongoing power cut problem.
IHS Markit South Africa PMI fell from 48.4 in February to 44.5 in March, the lowest level seen in the survey’s history since July 2011. The reading has remained below the level of 50 that separates expansion from contraction for the 11th consecutive month, suggesting that South Africa’s economy is on the edge.
The most industrialized economy on the African continent confirmed its first coronavirus case on March 5, and by far has the largest number of COVID-19 infections on the continent. South African Health Minister Zweli Mkhize said on Friday that densely populated areas have reported COVID-19 cases, giving the pandemic a “new dynamic.”
“March data captured the period before the total lockdown at the end of the month, signalling we may be at the precipice of an even deeper recession than currently predicted by the PMI,” said David Owen, an economist at IHS Markit.
According to the IHS Markit survey, March data was collected from March 12 to 27, while the government imposed a 21-day national lockdown starting from March 26.
South African employment has decreased marginally since February, but Owen warned there may be a much larger round of job losses in April as lockdown measures take effect.
Credit rating agency S&P Global Ratings said in a report on March 31 that South Africa’s economy is forecast to contract by 2.7 percent in 2020, as the COVID-19 pandemic spreads globally.
Businesses in Ghana, one of the world’s top-ten fastest growing economies, are also facing tough times with declines in output, new orders and employment far worse than expected, as the government intensified efforts to contain a further spread of the virus.
IHS Markit Ghana PMI slid to 41.4 in March from 52.6 in February. The reading was the lowest in more than six years of data collection and represented a substantial deterioration in business conditions, the Friday’s survey results showed.
“The outbreak comes at a time when the (Ghanaian) private sector had been in a run of solid growth. The extent of the overall damage to the economy will depend on how long it takes for COVID-19 to be brought under control,” Andrew Harker, economics director at IHS Markit, said in a news release.
Ken Ofori-Atta, Ghana’s finance minister, said in a statement on March 30 that a preliminary analysis showed the country’s economic growth could decelerate to 1.5 percent from 6.8 percent this year due to the coronavirus pandemic. The rate could be the lowest in almost four decades.
Since March 30, several major cities in Ghana have been under partial lockdown. The minister warned the growth rate could be further lowered if the country goes into full lockdown.
To deal with the COVID-19 outbreak on the continent, African finance ministers held a second online meeting earlier this week following the first meeting on March 19, calling for immediate emergency financing of 100 billion U.S. dollars, of which 44 billion dollars will go towards debt relief for all African countries, according to a statement from the United Nations Economic Commission for Africa on March 31.