Covid-19, foreign aid and the ‘new poor’ in Sub-Saharan Africa

The Covid-19 pandemic has transformed the world around us. It has weakened institutions, devastated economies, and is potentially changing the world of medicine forever. The ongoing crisis has also opened a window of opportunity for international institutions to re-organize and present a coordinated and effective response to the challenges facing the developing world. Continued assistance from the IMF, the World Bank, and World Health Organization (WHO), especially to low-income countries, is essential for the development needs of poor and developing countries[1] including those in sub-Saharan Africa.

The Covid-19 pandemic has also exposed the vulnerabilities of sub-populations, both directly and indirectly. Nations categorized as developing are experiencing challenges due to regional and global factors. The crisis has aggravated inequality and poverty among their population and made them more dependent on social and health safety nets. The region, just like the rest of the world, has never faced such an enormous operational and policy challenge in such a short timeframe. There are also possibilities of new and previously unknown threats emerging as the pandemic continues to unfold.

The economic burden of sustenance and development is already high in this part of the world, and the pandemic has only worsened the situation. According to the World Bank,[2] the Sub-Saharan Africa region needs an emergency economic stimulus of $100 billion, including an estimated $44 billion waiver for interest payments this year as the pandemic could cost the region between $37 billion and $79 billion in terms of output losses for 2020. The World Bank also estimates the remittance flows to Sub-Saharan Africa to decrease by 23 percent in 2020.[3] This decline in remittances, which are a crucial source of income for many families in poor Sub-Saharan African countries, will further challenge their countries’ ability to manage the economic and social repercussions of the pandemic.

This insight highlights the significance of foreign aid for the survival and upkeep of impoverished regions such as sub-Saharan Africa. It analyzes how the pandemic’s outbreak has directly impacted the flow of assistance to these countries and the repercussion of its discontinuation on the aid-recipient countries. The insight lends emphasis on “the new poor” as a segment of the population that are the direct victims of Covid-19. It also recommends policies to facilitate humanitarian and other aid forms to the poor and developing countries.

The spread of the coronavirus worldwide has raised concerns about the growing number of infections in Africa, Eastern Europe, Latin America, and Asia. Development challenges, coupled with impoverishment, had impacted most of these countries’ populations even before the pandemic. The situation in sub-Saharan Africa is of particular concern. Vulnerable countries in the region need urgent funding to avoid significant Covid-19 outbreaks, which may compound existing instability and fuel armed conflicts. Given these challenges, the effects of foreign aid – or the lack of it – on poor and developing countries in Sub-Saharan Africa are worth a more in-depth analysis.

Life before Covid-19

Developing countries – including Sub-Saharan Africa, Asia, and India – have received significant foreign aid since World War II. The aid was provided as part of a process to reduce poverty and promote economic growth. However, despite continually receiving a large share of foreign aid, Sub-Saharan Africa is still considered one of the poorest regions. Countries in this region received an average of 23 percent of the total of official development assistance during 2017 and 2018.[4] Aid effectiveness has been of particular interest to researchers as it is essential for the functioning of poor and developing countries in the region. Without additional support, countries in this region cannot provide for the everyday needs of their people.

However, humanitarian and medical assistance from the United Nations (UN) and international humanitarian organizations have been limited. Before the spread of Covid-19, humanitarian aid targeted business development, health and education, water supply systems, HIV/AIDS control, and other needs. But, considering the current situation, an increased proportion of aid is now directed toward supporting medical centers and the homeless.

While European and American donors have tried to revitalize the region through their trading partners’ links, China has mostly provided humanitarian aid. Aside from the Covid-19 crisis, humanitarian aid has eased the region’s dire economic conditions. But, as the economic recovery of Sub-Saharan Africa continues at a slower pace than expected, foreign
aid remains the major component of capital inflows.[5]

Figure 1 – GDP growth (%) – Sub-Saharan African Countries[6]

The post-Covid-19 aid flow

As the Covid-19 pandemic pushes millions into extreme poverty, it is not surprising to find Sub-Saharan Africa registering a large proportion of these numbers. According to the World Economic Forum, even though Sub-Saharan Africa so far has been hit relatively less by the virus from a health perspective, projections suggest it will be among the hardest-hit in terms of increased extreme poverty.[7] As many as 23 million people are projected to be pushed into poverty in Sub-Saharan Africa.

 

Figure 2: Number of people pushed into poverty due to Covid-19 [8]

The World Bank estimates indicate that the Covid-19 pandemic and other related economic crises could drive 71 to 100 million people into extreme poverty worldwide.[9] Although the virus hasn’t yet significantly infected the Sub-Saharan Africa, it could still be the hardest hit region in terms of the rise in extreme poverty than the number of cases across the globe.

The pandemic has also changed the nature of the humanitarian aid given to governments in Africa. By March 2020, a total of 45 African countries reported Covid-19 cases[10]  even as the pandemic pushed the region into its first recession in 25 years. While vulnerabilities remain over Covid-19 across Africa, estimates suggest anything from $29 billion to $120 billion may be wiped off the region’s economy as a result of the pandemic.

Aid donating countries have tried their best to continue their support. Over the next 15 months, the World Bank will direct up to $160 billion to help more than 100 countries protect the poor and vulnerable.[11] The humanitarian aid to the continent during the pandemic has focused on medical supplies and financial support to help poor countries provide their citizens with basic necessities. Africa receives most of its aid from the United States and Europe, and the overall aid volumes to the region increased even before the Covid-19 outbreak. Now, with the virus knocking on its doors, the UN plans to use the funds to purchase coronavirus test kits, medical equipment, and mobile handwashing stations. This is part of the aid campaigns for Africa, Asia, and Latin America and new programs to alleviate hunger.

Recently, the Russian government has also taken an increased interest in sending aid to Africa. Since the Covid-19 outbreak, Moscow has been sending humanitarian aid to countries in the region, including a wide range of medical equipment, ventilators, test kits, personal protective equipment (PPE), and disinfectants. Russia identifies countries in urgent need to send aid even though Moscow lacks the financial resources to match aid levels from some of the other countries. Russia has expressed keenness to help in the following ways: (i) sharing experiences in the fight against the pandemic; (ii) promoting coronavirus research; and (iii) providing humanitarian assistance. Russia’s approach is focused on building a good foundation for future relations with countries in the region.

Humanitarian aid and assistance to Sub-Saharan Africa also depend on the condition the donor countries find themselves in. According to OECD, “the level of official development assistance (ODA) Africans will receive may depend in part on how the pandemic affects donor countries and to what extent the fiscal response to the crisis in OECD countries and beyond will impact aid budgets.”[12] According to the report, beyond health risks, the COVID-19 shock to African economies is coming in three waves: (i) lower trade and investment from China in the immediate term; (ii) a demand slump associated with the lockdowns in the European Union, and OECD countries; and (iii) a continental supply shock affecting domestic and intra-African trade.

 

Figure 3: Evolution of official development assistance net flows

Flow of aid notwithstanding, these are worrying signs for poor countries worldwide, especially those in Sub-Saharan Africa. A Council on Foreign Relations report says the number of undernourished people is growing faster on the African continent than anywhere else in the world. “Approximately 22 percent of people in the sub-Saharan region were undernourished in 2019, according to the FAO, and that proportion is now projected to jump to nearly 30 percent by 2030,” says the report.[13]

Figure 4: EU Initial Humanitarian Aid for 2020 [14]

The ‘new poor’

As the coronavirus influences the global economy, it is creating new inequalities in society that see shifts of the non-poor into a new segment called the “new poor.” The Global Monitoring Database (GMD) uses the GDP growth forecasts of January 2020 and June 2020 (baseline scenario) to create poverty profiles for 110 countries before and after Covid-19, and then combining them into a global profile to create the “new poor” segment. The figure compares the world before Covid-19 and how the virus has transformed societies.[15] It is evident that before the pandemic, the proportion of the poor was projected to decrease. However, due to the effects of the current crisis, the total number of the global “new poor” could increase by up to 30 percent compared to the current 20 percent.  This existing group is a mixture of those who would have escaped poverty in the absence of Covid-19, but remain poor, and those who fell into poverty because of Covid-19.

Figure 4: Identification of the new poor[16]

International cooperation and humanitarian assistance are needed worldwide, especially amid the current global pandemic. Moreover, in health emergencies (especially epidemics), Africa’s most frequent risks are the suspension of essential prevention and treatment health services.[17] The current pandemic is not the root cause of inequality, but it exacerbates discrimination and injustice in systems and communities. To overcome the epidemic quickly and effectively, resource-rich countries must provide the necessary means to countries where infectious disease outbreaks occurred.[18] International and regional organizations and donors should hence continue to work together to meet the needs of each poor country. More information and research are needed to ensure that humanitarian assistance is better targeted at those regions in need.

The International Monetary Fund (IMF) has warned that the decades-long declining global poverty trend is being pushed into reverse, with as many as 90 million additional people falling into extreme poverty, mostly in sub-Saharan Africa, and South Asia.[19] “Without necessary action, this group of about 70 countries, representing more than 1 billion people, faces unprecedented human and economic devastation,” says the IMF.

Conclusion

The Sub-Saharan Africa region has frequently suffered as a result of armed conflicts and poverty. The pandemic has only increased the need for more robust governance as a prerequisite for effective aid distribution to mitigate the pandemic’s effects. Continued support is also needed from major external donors, particularly in Europe (Chart 2), the United States of America, Russia, and China. Sub-Saharan Africa’s inability to grow quickly enough to lessen poverty rates, and provide improved living conditions to its population, fundamentally depends on factors such as corruption, system fragility, and administrative nature. Governments and aid givers to Sub-Saharan Africa should hence take measures the region stays on its feet.

In order to ensure sustainable recovery in Sub-Saharan Africa, new approaches are needed to convert aid spending into more robust social support and healthcare mechanisms. This approach can increase the region’s resilience against potential future shocks. Most importantly, existing relationships between donors and countries in the region should be focused on long-term development strategies that build and diversify economies, ensure comprehensive public education, and offer better social protection for populations that remain highly vulnerable to instability and extreme poverty.

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References

[1] John Letzing, The plight of Peru illustrates the danger of COVID-19 to developing countries, World Economic Forum, June 17, 2020 https://www.weforum.org/agenda/2020/06/the-plight-of-peru-illustrates-the-danger-of-covid-19-to-developing-countries/

[2] For Sub-Saharan Africa, Coronavirus Crisis Calls for Policies for Greater Resilience, The World Bank, April 9, 2020, https://www.worldbank.org/en/region/afr/publication/for-sub-saharan-africa-coronavirus-crisis-calls-for-policies-for-greater-resilience

[3] World Bank Predicts Sharpest Decline of Remittances in Recent History, The World Bank, April 22, 2020, https://www.worldbank.org/en/news/press-release/2020/04/22/world-bank-predicts-sharpest-decline-of-remittances-in-recent-history

[4] “Aid at a glance charts”, OECD, accessed on October 5, 2020,

http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a-glance.htm#donors

[5] Africa’s Pulse in Five Charts: Boosting Productivity in Sub-Saharan Africa, October 3, 2018, The World Bank, https://www.worldbank.org/en/region/afr/publication/africas-pulse-in-five-charts-boosting-productivity-in-sub-saharan-africa

[6] “World Economic Outlook Update – A Crisis Like No Other, An Uncertain Recovery”, IMF, June 2020, https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020

[7] Daniel Mahler and Christoph Lakner, “This is the effect COVID-19 will have on global poverty, according to the World Bank”, World Economic Forum, May 11, 2020, https://www.weforum.org/agenda/2020/05/impact-of-covid19-coronavirus-economic-global-poverty/

[8] Ibid

[9] “Projected poverty impacts of COVID-19 (coronavirus)”, The World Bank, June 8, 2020, https://www.worldbank.org/en/topic/poverty/brief/projected-poverty-impacts-of-COVID-19

[10] Carl Ab Pearson et al., “Projected Early Spread of COVID-19 in Africa through 1 June 2020,” Euro Surveillance: Bulletin Europeen Sur Les Maladies Transmissibles = European Communicable Disease Bulletin 25, no. 18 (May 1, 2020), https://doi.org/10.2807/1560-7917.ES.2020.25.18.2000543.

[11] Degena Bahrey Tadesse et al., “The Burden, Admission, and Outcome of COVID-19 in Africa: Protocol for a Systematic Review and Meta-Analysis,” Emerging Microbes & Infections 9, no. 1 (January 1, 2020): 1372–78, https://doi.org/10.1080/22221751.2020.1775499.

[12] COVID-19 and Africa: Socio-economic implications and policy responses, May 7, 2020, http://www.oecd.org/coronavirus/policy-responses/covid-19-and-africa-socio-economic-implications-and-policy-responses-96e1b282/

[13] Amelia Cheatham and Claire Felter, “Rising Hunger: Facing a Food-Insecure World”, September 21, 2020, https://www.cfr.org/article/rising-hunger-facing-food-insecure-world

[14] “Funding for humanitarian aid”, European Commission, February 2, 2020, https://ec.europa.eu/echo/funding-evaluations/funding-humanitarian-aid_en

[15] Carolina Sanchez-Paramo, “The new poor are different: Who they are and why it matters,” August 13, 2020, https://blogs.worldbank.org/developmenttalk/new-poor-are-different-who-they-are-and-why-it-matters.

[16] Ibid

[17] Gianluca Quaglio and Giovanni Putoto, “COVID-19 in Africa,” Public Health, May 2020, https://doi.org/10.1016/j.puhe.2020.05.030.

[18] Norman Loyaza, “Aid Effectiveness during the COVID-19 Pandemic: This Time It Must Be Better,” blogs.worldbank.org, 2020, https://blogs.worldbank.org/developmenttalk/aid-effectiveness-during-covid-19-pandemic-time-it-must-be-better.

[19] Kristalina Georgieva, No lost generation: can poor countries avoid the Covid trap? The Guardian, September 29, 2020, https://www.theguardian.com/business/2020/sep/29/covid-pandemic-imf-kristalina-georgieva