Writing in this column back in March at the start of the global phase of the coronavirus outbreak, I predicted that COVID-19 would stop globalisation dead in its tracks and reverse half a century’s worth of supply chain internationalisation and international cooperation. Like many commentators at the time, I saw a global economic shutdown as a Black Swan event that would fundamentally change the global economy as we knew it.
My submission was that Africa needed to very rapidly find a way to streamline its internal market for pan-continental trade so as to protect itself against nosediving export revenues due to Asian and Western shutdowns. Along with other commentators at the time, I could only see the loss of such revenue as a complete and unqualified disaster, which would send Africa reeling into state failures and new conflicts.
Instead, what happened was pretty much the exact opposite of what I predicted. While South Africa did record an annualised GDP contraction of 51 percent in the course of 2020, it turned out to be very much the outlier on the continent. Despite its ill-advised and disastrously-executed 5-week nationwide lockdown, Nigeria only recorded a 6 percent contraction in Q2 – terrible and avoidable, but by no means the apocalypse that many predicted. So what happened in 2020 and what should Africa’s takeaway be from it?
The obvious and unpleasant truth that can be deduced from 2020 in fact, is that in both economic and health terms, the vast majority of Nigeria runs as a black market. This black market is out of the government’s control
We have no idea what is going on
The short answer to the “what happened to the doomsday predictions” question is quite simply, “nobody has a clue.” Seriously, nobody knows. Not African governments, not Economics PhDs, not me – nobody. I have several theories and postulations, but I cannot say for definite why an annualised double-digit GDP shrinkage across the Western world did not cause Sub Saharan Africa to implode economically.
Thinking about it rationally, Nigeria’s two largest sources of foreign income are remittances and oil and gas exports in that order. In a year when the Nigerian diaspora’s ability to send money home was heftily curtailed by the global economic shutdown, crude oil demand literally fell off a cliff at a point and FDI inflows practically fell to zero, the logical expected outcome is total economic carnage and chaos back home. This simply did not happen.
This does not mean that people did not suffer of course. As has been exhaustively established, Nigerians are much worse off in December 2020 than they were in December 2019. The net effect of hare-brained policies like the now-reversed border closure, the CBN’s counterproductive capital restrictions and Nigeria’s out-of-control insecurity problem has been to drive food inflation to double-digit levels and make interstate trade and travel a physically dangerous proposition. NBS data revealed in September that up to 60 percent of Nigerian households now borrow to pay for food. Clearly the situation is bad.
However, it is statistically nowhere near as bad as it was supposed to be. This could be for a number of reasons – it could be that we vastly overestimated the dependence of Nigeria and other SSA economies on foreign revenue and its multiplier effects. This would appear to be corroborated by the experience of South Africa – the African economy most integrated with the global economy. Its annualised GDP shrinkage of 51 percent was at least twice as much as any other country on the continent. In other words, it is possible that Sub Saharan Africa has a (tiny and underdeveloped) economic base that does not necessarily correlate with events in the global economy. This is supposition – we do not have the granular data to say for certain.
What we do know is that where Africa was expected to suffer COVID-19 deaths in the millions, it has been by a very long distance the least proportionally affected continent on earth. Where Africa was expected to suffer at the grinding face of reversed globalisation, this simply did not happen. Global trade did not come close to dying, despite a few initial shouty headlines about Japanese manufacturers onshoring their value chains after taking them out of China. Africa’s export revenues dropped significantly, but Africa’s economies did not suffer proportionally.
Is this good news?
The answer unfortunately, is no. The fact that the world’s most poorly governed continent has somehow made it through the biggest global crisis in a couple of generations without recording a new large-scale conflict or significant social disruption beyond Nigeria’s #EndSARS protests and Uganda’s pre-election dramatics will be taken as validation by Africa’s political elite. To them, this is proof that their governance style is working and is perhaps even tailor made for Africa’s realities.
We have already seen multiple African politicians attempt to take credit for the better-than-expected economic results their countries recorded in 2020. Kenyan president Uhuru Kenyatta for example, made a point of crowing about Kenya’s 4 percent Q2 expansion at a time when most of the world was recording huge contractions. Nigeria’s government made sure to point out that even the 6.2 percent contraction in Q2 was significantly better than the UK’s 19.8 percent contraction.
Several social media loudmouths even attempted to place Nigeria’s alleged COVID-19 response on a pedestal above that of countries like the U.S. Technically, judging by the widely divergent health and economic outcomes, the U.S. indeed fared much worse than Nigeria, but it would be most egregious and disingenuousness to claim this was due to some intentional and competently-executed action on the part of a country that has no idea how many of its citizens currently exist.
The obvious and unpleasant truth that can be deduced from 2020 in fact, is that in both economic and health terms, the vast majority of Nigeria runs as a black market. This black market is out of the government’s control and thus Nigerians are able to find their own ways to survive and protect their interests. If Nigerians survived COVID-19 in numbers that they were not expected to, the only feasible explanation is that some sort of inadvertent immunity exists – as Nigeria’s age distribution statistics strongly suggest.
If Nigeria made it through 2020 without suffering a 30 percent annualised GDP contraction, we can be sure that it is not because Nigeria’s government did not try its level best to make that happen. We performed as we did simply because the bulk of the economy – 60 percent of it according to official figures – is off the books. In other words, shutdown or not, Nigerians found ways to conduct their business and make a living. Remittance or not, FDI or not, oil revenue or not, Nigeria’s humongous black market economy has figured out how to keep itself afloat in spite of – and not because of – government action.
Ultimately, the takeaway for Africa from 2020 should not be that the continent achieved something admirable. We were in effect saved by a mixture of factors beyond state control and the state’s own severe incompetence. The “Afrocalypse” did not end up happening, thank God.
Hopefully now we don’t just wait for this scenario to recur.
