Charting a Path for a Resilient Recovery in Sub Saharan Africa

IMF Blog, September 15, 2020

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Canonical URL: Charting a Path for a Resilient Recovery in Sub Saharan Africa

Authors and date: Kristalina Georgieva, Abebe Aemro Selassie; September 15, 2020.
Core message: The COVID‑19 crisis presents an opportunity to use fiscal support to build a smarter, greener and more equitable future in sub‑Saharan Africa by prioritizing resilience to increasingly frequent climate‑related and other shocks.
Regional vulnerability highlighted: sub‑Saharan Africa is especially vulnerable to climate‑related shocks because of heavy dependence on rain‑fed agriculture and limited adaptive capacity.

Finding: Over the medium term, annual per capita economic growth can decline an additional 1 percentage point with each drought.
Comparative impact: That impact is eight times worse than for an emerging market or developing economy in other parts of the world.
Digital expansion potential: Expanding internet access in sub‑Saharan Africa by 10 percent of the population could increase real per capita GDP growth by as much as 4 percentage points.
Broader effects: A recovery that raises resilience will translate into higher living standards, better‑quality jobs, and more opportunity.

Health and nutrition:
- Investing in healthcare and education pays dividends in growth, productivity, gender equity, and living standards.
- Good health reduces extra medical spending and shortens recovery time, protecting labor and schooling continuity.
- Example: Better education on climate impacts helps safeguard agricultural output (Chad: improved water retention via new rainwater harvesting techniques).
Digital and technological adoption:
- Sierra Leone launched a drone corridor to monitor agricultural conditions and enable rapid delivery of medicine (first in West Africa).
- Mobile networks enable early warning systems and weather information, including simple voice messages.
Labor market and gender impacts:
- Digitally‑connected firms in the region employ eight times more workers, and create higher skilled, full‑time jobs.
- Increased internet penetration is associated with a larger share of women working in the services sector—the shift to more employment in services is two and a half times larger for women than men.
Policy implication: Invest in building digital skills to create new, better jobs and to spread the benefits of digital integration.

Need for targeted infrastructure investment:
- Investments should be smart, green and inclusive, and encompass digital‑friendly traditional infrastructure and digital‑ready information technology infrastructure.
Connectivity status:
- Almost all countries in the region, except just a few, are connected through submarine cables or via cross‑border terrestrial links, but more is needed to improve within‑country digital access and reverse the widening gender gap.
Climate‑resilient infrastructure example:
- Mozambique’s Beira Port was operational within days after two consecutive cyclones due to extensive drainage systems and well‑constructed buildings and roads.
Energy diversification:
- One‑fifth of sub‑Saharan Africa’s electricity is generated from hydropower—which is susceptible to droughts—so countries need greater efforts to diversify electricity sources over the long run to solar and wind.
- Kenya example: government increased access to electricity from 40 to 70 percent of the population largely through small, off‑grid, solar‑powered energy plants using a pay‑as‑you‑go, mobile money model; this created 10 times more jobs than in traditional utilities.
Co‑benefits: Renewable deployment reduces carbon emissions, spreads electrification, and creates jobs.

Role of buffers:
- Social assistance and access to finance act as buffers after shocks, allowing households to smooth consumption and businesses to continue operating.
Examples:
- Ethiopia’s Productive Safety Net Program provides emergency cash transfers to food‑insecure households and improves financial inclusion by requiring recipients to use bank accounts.
- Togo’s “NOVISSI” social protection program uses mobile money and electronic cash transfers to support informal sector workers impacted by COVID‑19.
Financial inclusion and digitalization:
- Broadening access to finance for low‑income households and small businesses helps coping, investment in health and education, and business investment.
- Where digitalization supports better policy design and outcomes, it can be a win‑win.

Cost magnitude: Achieving resilience will be expensive; precise estimation is difficult given complementarities, but it will certainly be in the hundreds of billions of dollars in the coming years.
Fiscal constraints: COVID‑19 is straining already limited fiscal space; most countries’ public debts were increasing rapidly even before the crisis.
Required reforms and actions:
- Transformative reforms are required to eliminate policy‑induced distortions that stymie private investment and to improve public finance management systems.
- More domestic revenue mobilization will be imperative; digitalization can help improve the efficiency of tax collection.
- Support from the international community is vital: stepped‑up debt relief, financing, and capacity development are needed.
IMF role: The IMF is supporting the recovery in sub‑Saharan Africa through debt relief, financing, and capacity development and intends to do more in the years ahead.
Final rationale: Investing in resilience is more cost‑effective than repeated rebuilding after crises and should be the metric of success to encourage a more virtuous cycle and resilient development path for the region.

Charting a Path for a Resilient Recovery in Sub Saharan Africa, Kristalina Georgieva and Abebe Aemro Selassie; September 15, 2020.