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V, U and L: How states will rise after pandemic

By Leonard Khafafa | April 22nd 2020 at 09:47:44 GMT +0300

William Shakespeare’s Hamlet presciently explains the current state of the world vis-a-vis the novel coronavirus: “If it be now, ‘tis not come. If it be not come, it will be now. If it be not now, yet it will come - the readiness is all.” Covid-19 has come to many parts of the globe. There are still others it is yet to reach, but it is certain that no country will be left unscathed. Is humanity ready?

Without doubt, no country was prepared for the onslaught of the pandemic. Western governments, slow, erratic, and disjointed, exposed the Global North’s pandemic responses as being little better than those of developing countries. The learning curve is steep and will, at the end, have exacted a huge toll on human lives and other resources.

It is a foregone conclusion that the world is about to experience a recession perhaps comparable only to the Great Depression of the 1930s. Forecasts point to a lengthy period of significant decline in income and employment. Actions taken presently and in the near future will determine the impact of these Covid-19-induced anomalies on economies. Because stock markets are directly dependent on the performance of the economy of a country, their recessions or recoveries reflect that of countries.

There are common recoveries characterised by the letters V, U and L.

V-shape recovery occurs when, after a sharp fall in the economy, a strong and sharp rebound follows. Board of Innovation, a global strategy and business consulting firm, paints out the ideal V-type scenario. It talks of a six-month period in which a country engages in effective pandemic control with all appropriate economic stimulus. There is usually no impact on consumer spending or income after the fall. China best exemplifies this scenario.

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For starters, Covid-19 has its origins in Wuhan, a city in China’s Hubei province. Once it became evident that this was no ordinary epidemic, the Chinese government took immediate action in stemming the spread of the virus through lockdowns of the city. Less than six months later, China is slowly emerging from its shutdowns by restarting production at factories and resuming some flights.

A U-shaped recovery is longer than the V-type. According to Board of Innovation, the impact period is up to one and a half years. Covid-19 countries that will experience this are those that initiate such measures as social distancing coupled with prolonged economic stimulus. Although there is a drop in consumer spending, there is no impact on the income of the consumer. America best exemplifies this scenario. Terms like social distancing, contact tracing and staying at home are now commonplace. In addition, a $2 trillion (Sh214 trillion) economic package has been rolled out to put money into the hands of citizens.

The L-shaped recovery comes after a severe recession. Typically, it takes time, according to Board of Innovations, three years. It is a worst-case scenario characterised by failed pandemic control, widespread bankruptcies and credit defaults. There is a severe impact on consumer spending and income. Global South countries risk falling into this category. Some have been slow to respond to Covid-19 through enforcement of social distancing, stay-home initiatives and outright lockdowns. Further, an acute shortage of personal protective equipment (PPEs) and the brain-drain of the best physicians exacerbates what is already a deplorable situation.

Africa, as part of the Global South, must start getting ready to confront what could potentially be intractable economic challenges. A new world will emerge out of this pandemic whose pecking order will be determined by how different nations overcome the crisis. A key to survival and ascendancy on the global stage is an African renaissance. The continent needs to hit reset on its foreign and economic policies. Currently, they do not flatter. How do innocent Africans in China get evicted from their houses without much protest from the diplomatic corps? How does a continent responsible for close to 50 per cent of the world’s commodities contribute a paltry 0.1 per cent of global trade?

Africa's success can only come from a willingness to unite for two reasons: To actuate the Africa Continental Free Trade Area that will boost intra-Africa trade by 52 per cent in the next two years; and for the continent to take a united stand in the review of agreements with extractive capitalists or usurious international lenders at terms that are unfavourable to African states.

Mr Khafafa is a public policy analyst

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