Ecobank Group has recently contributed US$3mn to the fight against Covid-19 in Africa. The pan-African bank has focused its support on the efforts of governments, the World Health Organization as well as the private sector in alleviating the effect of the pandemic on the most vulnerable on the continent.
“Our contributions are aimed at enabling society to respond to the pandemic and to support the continent in ultimately getting itself out of the situation,” the group’s CEO, Ade Ayeyemi, tells GTR, speaking from his base in Lomé, Togo.
According to the International Monetary Fund’s latest Regional economic outlook for Sub-Saharan Africa, Covid-19 is likely to cause an acute economic crisis across the continent. The report projects that the region’s economic growth will shrink by an unprecedented 1.6% in 2020 amid tighter financial conditions, a sharp decline in key export prices and severe disruptions to economic activity as a result of the pandemic.
Financial support measures introduced thus far include a new US$3bn Pandemic Trade Impact Mitigation Facility (Patimfa), launched in March by the African Export-Import Bank to help its member countries weather the economic and health impacts of the pandemic.
“At a time like this, when society is on its knees, it’s important for all of us to step up and participate, given that the coffers of African governments are not as robust as the coffers of the governments outside the continent,” says Ayeyemi.
He speaks to GTR about the effect that the coronavirus is likely to have on African trade, banking and the future of the African Continental Free Trade Area, and what African countries can do to restart the economies when the time comes.
GTR: What has been the effect of the pandemic on African trade?
Ayeyemi: From a macro point of view, as society primarily focuses on health, rather than the economy, economic activities have gone down significantly. Only essential items are being brought in these days. We don’t see the level of trade we did before Covid-19 because the borders have closed and demand itself has gone down. We think that some import and export activity will come back, but not at the same level it used to be. Remember that a large component of the imports into the continent are petroleum products – and now, with planes not flying and cars not running, consumption has gone down significantly.
GTR: Is Africa getting the support that it needs now from the rest of the world?
Ayeyemi: We’ve seen many institutions and individuals stepping in – from the East and the West – and they’ve gotten approvals on support measures much faster than could have been imagined.
But we are still at the beginning. We need to deal with the health crisis. And we need to deal with the consequent economic crisis, which will come. There’s still more work to be done, and we need to work together as a community of nations.
I also think that African countries are realising that there may be some services that they can create themselves and domesticate. I’ve seen conversations around healthcare, for example, and the need to improve the quality domestically. Likewise, with some level of manufacturing, resources would also have to be allocated to that.
Depending on the smart choices we make, the economies can actually restart faster after we overcome the pandemic. We may end up domesticating the production of some of the things that we’ve become used to importing from other places.
GTR: What will be the impact of coronavirus on the African Continental Free Trade Area (AfCFTA)?
Ayeyemi: The fundamentals of why the AfCFTA was signed remain the same: we need to have a large internal market that can attract industries. I think the implementation of the AfCFTA will probably be delayed by a year, but the need is still there. I believe that it would kick-start once we get a ‘new normal’.
GTR: We’ve heard that global banks are focusing on their home markets; what is the future of international banks’ involvement in Africa?
Ayeyemi: It differs from one institution to another. Ultimately, once there is a good return, and credible counterparties, the global financial institutions will come to the party because they have capital, which they need to put to work. We continue to have conversations with our correspondent banks, even through this lockdown.
It is important that African countries make the right choices to be able to restart their economies. They need the right policies and the right institutions. Central banks need to be supportive of financial institutions to ensure that the economies are able to restart. Financial institutions will then need to work through whatever the balance sheet consequences are, and have conversations with debtors, instead of running away and declaring bankruptcy. It’s better to work with debtors to restructure loans so that they can repay them over time.
GTR: How does this crisis differ to that of 2008?
Ayeyemi: The 2008/09 crisis was a financial crisis. Now, in 2020, we don’t have a financial crisis – yet. This started as a health crisis. It’s very difficult because the world has prided itself on being a global village. And now we’re having to distance ourselves. All of the necessary measures that have been implemented – and rightly so – to slow the spread of the pandemic are, no doubt, bad for business.
The ‘fear factor’ that exists today between people was not there in 2008/09. Until we find a vaccine to deal with this virus, there will be a lot of friction in trading, movement across countries and dealing with each other.
We’re lucky though that we now have a level of technological advancement that allows business to be executed remotely – which we didn’t have with the last crisis. So there will be speed to accelerate the use of digital technology as a means of continuing trade. We will have new business models to allow us to restart our economies. Technology allow us to minimise the impact of the crisis.
GTR: What kind of technology will transform banking in Africa?
Ayeyemi: Technology that allows us to deliver services into the customers’ hands without the need to physically come into the bank, is critical. That technology existed before the pandemic. But the rate of adoption had not been as good as the availability of the technology. Everybody who owns a mobile phone can do almost all kinds of banking and payments on their phones. But people still go to a bank and they still use credit cards, debit cards and cash.
As we go forward, there is also a lot of technology that is available in servicing customers through artificial intelligence and natural language processing, which can now be brought to bear. This is now our opportunity to rapidly scale them up.