African Reserves

Corrected version: the vaccine famine and its impact on African economies

By Ahunna Eziakonwa

We are about to start a third year of life with COVID-19. Humanity and world solidarity are now at a new test – and yet the implications of the lack of solidarity keep us all in the boat of mutations, lockdowns, quarantines and delayed SDGs – prosperity for all is denied . 2021 has exposed a new expression of global inequalities: “vaccine nationalism” – itself competing with socio-economic downturns, jobless growth, the climate crisis and rising poverty.

As the pandemic takes its toll, with Omicron on the scene, the futility of hoarding takes center stage, as even the large supply of boosters in advanced economies has not shielded them from the vicious cycle of pandemic life. . While about 60 percent of the population in the United States and 76 percent of that in Canada are fully immunized, in Africa — a continent home to 1.3 billion people — the number is just 8 percent. Many have argued that the short shelf life, hesitation and logistics of vaccines

The Republic of Congo received just over 300,000 doses of COVID vaccines through the COVAX facility in August 2021. Credit: UNICEF/Aimable Twiringiyima

The humanity and solidarity of the world are now being tested – and yet the implications of the lack of solidarity keep us all in the boat of mutations, lockdowns, quarantines and the delayed SDGs – prosperity for all Refused. 2021 has unearthed a new expression of global inequality: “vaccine nationalism” – which itself competes in strength with socio-economic downturns, jobless growth, the climate crisis and rising poverty.

Vaccine inequality also manifests itself in terms of affordability. In order for high-income countries to be able to vaccinate 70% of their population, their health expenditures will have to increase by 0.8%. Low-income countries need to increase health spending by more than 50% on average – to keep up.

Delayed vaccines are a denied development. Estimates show that vaccine delays are costing Africa up to $14 billion in lost productivity each month, making recovery more difficult and leading to the first recession in a generation facing the continent.

African governments have reacted quickly to contain the spread of the virus – but the success is overshadowed by the socio-economic consequences of the pandemic. In 2019, Africa saw record growth in various sectors: such as tourism; where the continent had the second fastest growing tourism sector in the world, contributing 8.5% of Africa’s GDP.

However, with the pandemic, tourism has come to a standstill. Africa recorded a 2.1% decline in economic growth in 2020, accompanied by other challenges including general exchange rate depreciation, food insecurity and increasing job losses.

Vaccination delays will cost sub-Saharan Africa 3% of the region’s projected GDP in 2022-25. UNDP research finds that recovery rates are strongly correlated with immunization capacity – with a $7.93 billion increase in global GDP for every million people immunized. Low-income countries that are being hit hard by the pandemic lack the fiscal and financial space that rich countries have.

They risk enduring the pandemic longer if they do not have early access to COVID-19 vaccines. This places an inordinate burden on national budgets at a time when the pandemic has decimated tax revenues and greater spending is needed by governments to protect their people and cushion the socio-economic shock caused by the pandemic.

The key question today is: can the world afford such glaring inequality in the face of a pandemic that spares no region?

The road to recovery will remain long and uncertain unless we take urgent action to overhaul the current system of vaccine production, distribution and financing. Below are some ideas on how to get there quickly – building on a consensus that emerged from the recently concluded African Economic Conference in Sal, Cabo Verde.

• Financing for development in Africa requires a plug-and-play architecture. Africa will need an additional $425 billion in external financing by 2025 to fully recover from the pandemic. It’s daunting, but not impossible. This equates to the amount that African countries lose to illicit financial flows over a five-year period. Economic governance and creativity can also be applied, for example by redirecting investments from pension funds, sovereign wealth funds and similar institutions.

• The exploitation of the continent’s natural resources is urgent. Africa’s financial presence in the international system does not reflect its true wealth. Better management and use of extractive industries is essential. Resources such as energy, oil, natural gas, coal and uranium are worth between $13 and $14.5 trillion in potential wealth. Other resources can also be tapped from production in six key sectors: agriculture, water, fisheries, forestry, tourism and human capital. Mobilizing these resources requires governments to seriously address deficiencies in banking and governance systems to stem illicit financial flows out of Africa. Central banks have a key role to play in unlocking idle resources and channeling them into productive investments. Over $1 trillion in excess reserves could be used to finance Africa’s development.

• International financial systems could be reviewed to become fairer. Concessional financing should take into account the multidimensional vulnerabilities of countries beyond what is reflected in their income levels. The allocation of a record $650 billion in SDRs issued by the IMF to its member countries in August 2021 is a step in the right direction. But more can be done to better support the countries most in need of funding. Africa received only $21 billion of SDRs from the total envelope. Such international mechanisms could be reviewed to redress current inequalities.

• Reform of the African financial system. The COVID-19 pandemic has highlighted the essential role that financial systems must play in supporting Africa’s development. Improving the quality, quantity and efficiency of financial systems is crucial for Africa’s sustainable development. More efficient financial systems across the continent can promote resource mobilization and better allocation of savings to productive investments by shifting incentives from the banking system to core functions and advancing the financial inclusion of individuals and microenterprises.

• Digital innovations are a game-changer for financing Africa’s development. Financial systems that harness digital technologies and free and fair competition will be fundamental to revitalizing African economies. The pandemic has proven that digital technologies present huge opportunities for Africa. They stimulate innovation, economic growth and job creation in critical economic sectors by enabling better interconnection of African markets with the rest of the world. They can also increase market access and finance for the marginalized population typically excluded from formal financial systems. However, digitalization also has the potential to exacerbate inequalities and we must ensure that the means are sufficiently inclusive so that no one is left behind.

• Sustainable funding will be essential. African financial institutions have a role to play in enabling Africa to transform its natural resource advantages, leveraging blue carbon markets and green financing mechanisms. Climate-sensitive investments, risk reduction, impact investments, environmentally sustainable projects and sustainable energy investments are some of the key issues for sustainable financing for development. Thus, the financial sector can contribute by redirecting investments towards more sustainable technologies and businesses and by promoting low-carbon, climate-resilient and circular economies.

• Boosting intra-African trade is a gateway to recovery. The transformative power of the AfCFTA must be harnessed to meet the needs of 1.3 billion people. If implemented effectively, the AfCFTA will accelerate the continent’s path to structural economic transformation through value-added industrialization of goods and services. Investing in trade facilitation reforms and using regulation as a stimulus (RaaS) will pay even greater dividends, saving governments money while putting billions directly into the hands of businesses intra-African exporters led by women and youth.

2022 must be a year where collective global action prioritizes vaccine equity and ensures immunization for all. Omicron reminded us that there is simply no other way to build better.

Ahunna Eziakonwa is the United Nations Under-Secretary-General, UNDP Deputy Administrator and Director of the Regional Bureau for Africa.