Wacha1
JF-Expert Member
- Dec 21, 2009
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Report ya WB -
1.5. POLICY RESPONSE: WHY COPYCAT MAY NOT WORK IN SUB-SAHARAN AFRICA
Facing a fast-changing situation with great uncertainty and so many unknowns, most governments around the world have taken similar approaches to contain the COVID-19 pandemic. Some African countries, including but not limited to South Africa, Ghana, Rwanda, and Kenya, have reacted quickly and decisively to curb the potential influx and spread of the COVID-19 virus very much in line with emerging international experience. As the situation evolves, there are more questions about the suitability and likely effectiveness of some of these policies’ such as strict confinement.
As African governments deploy a series of emergency measures, the structural features of African economies should shape the policy responses that are designed and implemented to fend off COVID-19. There are multiple reasons why economic policies implemented in Sub-Saharan Africa should be different from those adopted in advanced countries and (some) middle-income countries.
First, informal employment is the main source of employment in Sub-Saharan Africa, accounting for 89.2 percent of all employment (ILO 2018). Excluding agriculture, informal employment accounts for 76.8 percent of total employment. Based on the number of entrepreneurs (own account workers and employers) who are owners of informal economic units, the vast majority of economic units in the region are informal (92.4 percent).
Informal workers lack benefits such as health insurance, unemployment insurance, and paid leave. Most informal workers, particularly the self-employed, need to work every day to earn their living and pay for their basic household necessities. A prolonged lockdown will put at risk the subsistence of their households. Additionally, the majority of workers hired are in a precarious situation, and most of these jobs are temporary and with low remuneration, do not offer social security, and put workers at a greater risk of injury and ill health.
Second, small and medium-size enterprises (SMEs), an important driver of growth in economies across the region, account for up to 90 percent of all businesses and represent 38 percent of the region’s GDP. Access to finance is one of the main challenges facing SMEs in normal times—with the majority of these firms lacking the finance needed to grow. Prior to COVID-19, the finance gap for SMEs in the region was estimated at US$331 billion (IFC 2018).
Third, concerns about the negative economic impact of the COVID-19 outbreak prompted interest rate cuts in several African countries in line with monetary policy actions around the world. 30 However, this type of monetary stimulus may not be effective for two reasons: (1) the prevalence of supply effects at the height of the containment measures (reduced labor supply and closed businesses, especially in contact-intensive sectors),31 and (2) the weak monetary transmission in countries with underdeveloped domestic financial markets. In this context, there is the need for a different type of central bank intervention, one that provides liquidity support— through direct credit lines or guaranteed commercial loans—to formal and informal businesses that can continue producing in the future.
30 In February, the Central Bank of The Gambia lowered its benchmark interest rate by 50 basis points. In March, the Bank of Mauritius cut its policy rate by 50 basis points, and the Central Bank of the Democratic Republic of Congo slashed the benchmark interest rate by 150 basis points, while the Bank of Ghana, the South African Reserve Bank, and the central banks of Eswatini, Kenya, and the Seychelles lowered their policy rates by 100 basis points, respectively.
For Kenya and South Africa, it was the second straight rate cut this year, amid growing uncertainty over the impact of the coronavirus crisis on already slowing economic growth. Meanwhile, at its March meeting, the Central Bank of Nigeria left its monetary policy rate unchanged despite rising inflation. 31 Macroeconomic stimulus measures such as the ones adopted during the 2008–09 global financial crisis may not work in the short term this time around, as some sectors of the economy are shut down—especially those that are contact-intensive (Guerrieri et al. 2020).
Report hiii inapatikana hapa chini ….. .... ukurasa wa 64.
Africa's Pulse, No. 21, Spring 2020 : An Analysis of Issues Shaping Africa’s Economic Future
Wapinzani hawapendi kusikia maneno haya ''Why copycat … …… … ''
1.5. POLICY RESPONSE: WHY COPYCAT MAY NOT WORK IN SUB-SAHARAN AFRICA
Facing a fast-changing situation with great uncertainty and so many unknowns, most governments around the world have taken similar approaches to contain the COVID-19 pandemic. Some African countries, including but not limited to South Africa, Ghana, Rwanda, and Kenya, have reacted quickly and decisively to curb the potential influx and spread of the COVID-19 virus very much in line with emerging international experience. As the situation evolves, there are more questions about the suitability and likely effectiveness of some of these policies’ such as strict confinement.
As African governments deploy a series of emergency measures, the structural features of African economies should shape the policy responses that are designed and implemented to fend off COVID-19. There are multiple reasons why economic policies implemented in Sub-Saharan Africa should be different from those adopted in advanced countries and (some) middle-income countries.
First, informal employment is the main source of employment in Sub-Saharan Africa, accounting for 89.2 percent of all employment (ILO 2018). Excluding agriculture, informal employment accounts for 76.8 percent of total employment. Based on the number of entrepreneurs (own account workers and employers) who are owners of informal economic units, the vast majority of economic units in the region are informal (92.4 percent).
Informal workers lack benefits such as health insurance, unemployment insurance, and paid leave. Most informal workers, particularly the self-employed, need to work every day to earn their living and pay for their basic household necessities. A prolonged lockdown will put at risk the subsistence of their households. Additionally, the majority of workers hired are in a precarious situation, and most of these jobs are temporary and with low remuneration, do not offer social security, and put workers at a greater risk of injury and ill health.
Second, small and medium-size enterprises (SMEs), an important driver of growth in economies across the region, account for up to 90 percent of all businesses and represent 38 percent of the region’s GDP. Access to finance is one of the main challenges facing SMEs in normal times—with the majority of these firms lacking the finance needed to grow. Prior to COVID-19, the finance gap for SMEs in the region was estimated at US$331 billion (IFC 2018).
Third, concerns about the negative economic impact of the COVID-19 outbreak prompted interest rate cuts in several African countries in line with monetary policy actions around the world. 30 However, this type of monetary stimulus may not be effective for two reasons: (1) the prevalence of supply effects at the height of the containment measures (reduced labor supply and closed businesses, especially in contact-intensive sectors),31 and (2) the weak monetary transmission in countries with underdeveloped domestic financial markets. In this context, there is the need for a different type of central bank intervention, one that provides liquidity support— through direct credit lines or guaranteed commercial loans—to formal and informal businesses that can continue producing in the future.
30 In February, the Central Bank of The Gambia lowered its benchmark interest rate by 50 basis points. In March, the Bank of Mauritius cut its policy rate by 50 basis points, and the Central Bank of the Democratic Republic of Congo slashed the benchmark interest rate by 150 basis points, while the Bank of Ghana, the South African Reserve Bank, and the central banks of Eswatini, Kenya, and the Seychelles lowered their policy rates by 100 basis points, respectively.
For Kenya and South Africa, it was the second straight rate cut this year, amid growing uncertainty over the impact of the coronavirus crisis on already slowing economic growth. Meanwhile, at its March meeting, the Central Bank of Nigeria left its monetary policy rate unchanged despite rising inflation. 31 Macroeconomic stimulus measures such as the ones adopted during the 2008–09 global financial crisis may not work in the short term this time around, as some sectors of the economy are shut down—especially those that are contact-intensive (Guerrieri et al. 2020).
Report hiii inapatikana hapa chini ….. .... ukurasa wa 64.
Africa's Pulse, No. 21, Spring 2020 : An Analysis of Issues Shaping Africa’s Economic Future
Wapinzani hawapendi kusikia maneno haya ''Why copycat … …… … ''
