By Annisa Essack
The announcement of the Coronavirus deaths in China saw global stock markets rattled as growing investor anxiety over the fallout from the rapidly escalating coronavirus crisis in China.
The fallout was felt more acutely in South Africa as the JSE plunged by as much as 2.6%, leaving investors clearly worried about the exposure that many South Africans have to China. It is after all the source of the deadly viral disease that threatens to slow economic growth in the world’s second-largest economy.
Concerns are mounting, as the death toll rises and thousands are being infected, that China will not be able to halt the spread of the virulent coronavirus in the short term.
The potential impact on human life and health will be significant, if not devastating, however, the virus will also have severe economic consequences across the globe. Especially vulnerable is Africa with its dependency on exporting commodities.
The possible economic ramifications for Africa
- As was the scenario during the 2003 SARS crisis, China will turn inwards as it becomes consumed by the crisis. Issues, particularly those that are not core national security interests, will be pushed down the list of priorities. China’s state-owned enterprises will either batten down the hatches until the crisis passes or turn their full attention to the domestic crisis.
- The sell-off on Monday in South Africa gives a hint of what the continent may have to face as global investors look at Africa’s reliance on the Chinese market as a liability, thus putting many African currencies under significant pressure, particularly in Nigeria, Kenya and South Africa.
- Prior to the outbreak, the Chinese economy was already experiencing a slowdown and now with millions of consumers quarantined in their homes and concern for their health and potential health costs, consumer spending is widely expected to further decelerate. The impact will be felt immediately on the demand for African agricultural exports like Rwandan coffee, Kenyan tea, Namibian beef, and South African citrus and wines.
- With so many travel restrictions being placed on the already hunkered down Chinese citizens, flying during the outbreak is hampered or just too terrifying to contemplate. Leisure and business travelers will be among the first to stop all but essential trips, which will most likely prompt a downturn in airline traffic between China and Africa. This could place several African airlines who have built sizeable businesses transporting workers, students and tourists to and from could be in jeopardy, at least for the remainder of 2020.
While the economic impact of the virulent virus is felt in several African sectors, we don’t know to what extent African governments will have to battle the virus in their own countries and the impact this will have on Sino-African economics ties.
But the positive spinoff could be the impetus that could prompt forward-thinking policymakers to create or expedite plans to diversify trade and investment relationships.