Short-term impacts of the Covid-19 crisis on the African manufacturing sector

In spring 2020, initial reports published by the IMF, the World Bank and the United Nations show that most African countries remain relatively unaffected by the health impacts of the crisis. This can be explained by the fact that they are not as well integrated into the global economy, a younger population and lower population density than in other continents, and more rapidly deployed preventive measures (IMF, 2020 and World Bank, 2020). For example, as of 1 April, 28 out of 50 African countries for which data was available had introduced at least local restrictions, and eight countries were encouraging their populations to self-isolate (UNECA, 2020).

So in the first few months at least, the economic fallout appears to be greater than the health impact. International demand for the raw materials exported by Africa is down, domestic production and supply chains requiring imported inputs have been prone to disruption, and income originating outside the country (i.e., investment, international aid, migrant remittances, etc.) is expected to decline. Governments ultimately have less money to help businesses suffering from the effects of health restrictions.

While the crisis has hit nearly all areas of the economy, manufacturing appears to be less affected than services - especially tourism and transport - or raw materials. In April, using an economic simulator for Sub-Saharan Africa, the World Bank (2020) even estimated that the impact of this crisis on value added would be positive in 2020, with a 5% gain in manufacturing output – due to the substitution of local products for imported products – while agriculture would contract by around 3%, services by 6% and the energy sector by 21%. However, this positive impact needs to be kept in perspective given the lesser role of manufacturing in the African economy. It undeniably exports less (especially to Chinese and European markets), is less integrated within value chains and is more informal than elsewhere, even though the Continent is characterized by considerable diversity in this respect (Contemporary Africa, 2018).

Various business surveys provide us with information on the most severely affected manufacturing sub-sectors by country. In Morocco, surveys conducted in 2020 by the General Business Confederation (Confédération générale des entreprises) and the High Commissioner for Planning (Haut-commissariat au Plan) (2020) show that the textiles, metallurgy and mechanical engineering sectors (i.e., export-driven), together with construction, were hardest hit. The UNDP-Tunisia development programme reports that the most severely exposed sectors in Tunisia are tourism, transport and textiles and that micro-businesses have become more vulnerable financially. In Cameroon, while research conducted by an inter-employer body, Groupement inter-patronal (2020), points to a negative impact for industrial businesses, this is not as pronounced as for service companies. The Togolese Chamber of Industry and Commerce survey (2020) reports on the many difficulties being experienced by industrial companies, mines and the construction and civil engineering sector. In Burkina Faso, the “Covid-19 Impact” study carried out by the Chamber of Industry and Commerce (2020) stresses that the industrial sector has been just as badly affected as services and the “Forge Afrique” research unit (2020) demonstrates how the textile sector has been the most severely affected manufacturing activity. Although UNECA (2020) and UNIDO (2020) reports unsurprisingly reveal that large export-driven companies have suffered most, analyses also indicate that many small businesses (especially trades and crafts) have been badly hit, and – just as importantly – that these appear less resilient than much larger structures. This mirrors the findings of the studies conducted by the Ivorian Ministry for Economic Planning and Development (2020) into the formal and informal sectors. To round out these findings, we surveyed African experts, economists from academia and senior managers in government departments via the network of CERDI alumni. The questionnaire was designed to flesh out their analyses concerning the short-term impact of the crisis on their country’s manufacturing industry. Between 14 May and 13 June 2020, 86 African experts from 19 countries¹ replied to this questionnaire (see graphs 2a and 2b).  

The responses generally bear out the trends observed previously while also highlighting the variability in findings together with the complexity and context specificity (Goujon and Mien, 2020). While the experts generally considered the impact on manufacturing output to be negative, it was much more marked for export-driven production. Moreover (and although the trend is less clear-cut here), output has been hardest hit in urban areas, in the formal sector and in very large businesses. The most severely affected sub-sectors are “food, beverages” and “machines, equipment and transport vehicles”, followed by “construction materials, cement” and “textile, clothing and leather.” The experts believe that government restrictions and interruptions to production chains are the main negative factors affecting production - even before the decline in non-domestic demand is factored in.

While Africa faces an uncertain health outlook, the economic consequences could well be drastic as they are driven by specific context-related factors, namely, economic or even political vulnerability, the proportion of the population living below the poverty line, high under-employment rates, and limited financing resources, etc. Based on IMF estimates from June 2020, African growth in 2020 is expected to fall by around six percentage points year on year, equivalent to the decline being recorded in the Middle East, Central Asia, and in developing Asian countries, but less than that being reported by Latin American, Caribbean and developing countries. It remains to be seen whether the African manufacturing sector will prove resilient in the medium term in the face of a crisis of an unprecedented nature and size. Maybe there is even a possibility that it will be able to reap some of the benefits of replacing imports by locally produced goods. 

Afrique contemporaine, 2018. Les trajectoires incertaines de l’industrialisation en Afrique. Numéro 266.

Chambre de commerce et d’industrie du Burkina Faso, 2020. Évaluation de l’impact des mesures de lutte contre le Covid-19 sur l’activité du secteur privé au Burkina Faso. En ligne : http://www.cci.bf/sites/default/files/Rapport_impact_%20COVID-19_sur_l%27activite_economique_VF_MAI_2020.pdf

Chambre de commerce et d’industrie du Togo, 2020. Effets de la crise sanitaire liée au Covid-19 sur les activités des entreprises du secteur privé togolais. En ligne : http://www.ccit.tg/sites/default/files/Rapport_Impact%20Covid19%20CCIT_compressed.pdf

Confédération générale des entreprises du Maroc, 2020. Quels sont les impacts de la pandémie COVID-19 sur votre entreprise ? – Résultats préliminaires de l’enquête, version 3.0 du 24/04/20. En ligne : https://drive.google.com/file/d/1rKP4r_koBl1vM5Eu23OiAJDsReSQf5tV/view

Haut-commissariat au Plan du Royaume du Maroc, 2020. Principaux résultats de l’enquête de conjoncture sur les effets du Covid-19 sur l’activité des entreprises. En ligne : https://www.hcp.ma/Principaux-resultats-de-l-enquete-de-conjoncture-sur-les-effets-du-Covid-19-sur-l-activite-des-entreprises_a2499.html

Goujon et Mien, 2020. L’impact à court terme de la crise Covid19 sur l’industrie manufacturière en Afrique: la parole aux experts africains. Études et Documents CERDI, à paraitre. Groupement inter-patronal du Cameroun, 2020. Covid-19, impacts sur les entreprises au Cameroun. En ligne : https://www.legicam.cm/index.php/p/covid-19-impact-sur-les-entreprises-au-cameroun

Fond monétaire international, 2020. Regional Economic Outlook. Sub-Saharan Africa. COVID-19: an unprecedented threat to development. Washington, D.C. En ligne : https://www.imf.org/en/Publications/REO/SSA/Issues/2020/04/01/sreo0420

Fond monétaire international, 2020. World Economic Outlook Update. A Crisis like no other, an uncertain recovery, Washington, D.C. En ligne : https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020

Ministère du Plan et du développement de Côte d’Ivoire, PNUD et Institut national de la statistique, 2020. Évaluation de l’impact du Covid-19 sur l’activité des entreprises du secteur formel et Evaluation de l’impact du Covid-19 sur le secteur informel en Côte d’Ivoire. En ligne : https://www.ci.undp.org/content/cote_divoire/fr/home/library/mesure-de-l_impact-socio-economique--du-covid-19-sur-les-conditi.html

Ouedraogo, I. M., Kinda, S. R. et Zidouemba, P. R., 2020. Analyse économique des effets du Covid-19 au Burkina Faso. Forge Afrique, Policy Brief. En ligne : https://static.blog4ever.com/2016/06/819965/Policy-Brief_FORGE-Afrique_Impact-COVID-19--1-_8647116.pdf PNUD-Tunisie et Ministère du Développement, de l’Investissement et de la Coopération internationale, 2020. Impact économique du Covid-19 en Tunisie, analyse en termes de vulnérabilité des ménages et des micro et très petites entreprises.

Purchasing Managers’ Index (PMI), 2020. https://tradingeconomics.com/country-list/manufacturing-pmi United Nations Economic Commission For Africa (UNECA), 2020. Covid-19 Lockdown Exit Strategies for Africa. En ligne : https://www.uneca.org/sites/default/files/PublicationFiles/ecarprt_covidexitstrategis_eng_9may.pdf

United Nations Industrial Development Organization (UNIDO), 2020. COVID-19 effects in sub-Saharan Africa and what local industry and governments can do. En ligne : https://www.unido.org/news/covid-19-effects-sub-saharan-africa-and-what-local-industry-and-governments-can-do

Banque mondiale, 2020. Africa’s Pulse. Assessing the Economic Impact of COVID-19 and Policy Responses in Sub-Saharan Africa, Vol. 21, Washington, D.C. En ligne : https://olc.worldbank.org/system/files/Exec%20Summary%20-%20COVID-19%20IN%20AFRICA%20IMPACT%20AND%20POLICY%20RESPONSES.pdf