CoronaVirus Should Serve As A Structural Reforms’ Wake Up Call, lobby group says
The novel-CoronaVirus Disease 2019 (COVID-19) pandemic has exposed systemic inequalities in the current social, political and economic in many societies world over.
With a surge in cases over the last one month, African countries are disproportionately bearing the brunt of the impacts of the pandemic as a result of decades of privatisation and austerity measures resulting in underfunding of social sectors.
The crisis has also exacerbated the weak monetary and fiscal systems, with a limited capacity to respond. African countries, for example, are now also experiencing reduced tax revenues due to reduced economic activities as a result of the loss of export earnings and commodity price collapses.
The effects of the coronavirus are also being felt disproportionately by the poor and the working class. The International Labor Organisation estimates that more than 72% of total employment in sub-Saharan Africa is in the informal sector . Despite this sizeable informal economy of up to 90%, African countries do not have social welfare systems to cover those without jobs as a result of lockdown measures.
The pandemic has led to massive layoffs and non-payment of wages, pushing many of these workers into unemployment, poverty and starvation. The pandemic has also revealed and deepened existing gaps in social protection systems and has also translated into an intensified care burden for women. This has resulted in increasing the underpaid and unpaid care work and reinforcing patriarchal norms because women, on average perform 76.2 per cent of total hours of unpaid care work, more than three times as much as men. Lastly, most African countries are agriculture-based, and the GDP is primarily built upon agricultural services. However, food sovereignty and security is threatened as food supply chains are disrupted.
Africa’s low average annual growth of 3.3% in 2014-19 has in turn constrained public finances, leading to underfunded social sectors including health and education systems, weak governance, rapid increases in public debt, and large infrastructure deficits.
This neoliberal system continues to entrench a broken international financial architecture that enables illicit financial flows, tax evasion and avoidance by the rich and MNCs. This broken tax system allows transnational corporates to minimise their taxation by shifting their profits to offshore tax havens.
However, according to the Tax Justice Network Africa, the Covid-19 pandemic has created an opportunity to address some of the underlying principles of neo-liberal economic theory and demand structural and systemic reforms for redistributive justice including progressive taxation reforms, and where the wealthy elite and multinational companies pay their fair share.
“It’s about creating an opportunity to re-examine the continent’s fiscal and economic-policy priorities and creating alternatives to the current structure’s economic model that is fit for purpose and reinvigorating the role of the State”, says TJNA.
In a new report on the assessment of the pandemic, it noted the impacts of the virus in Africa are not limited to health but also has also affected peoples’ lives socially and economically. The effects of this, laying bare weak public health systems which are understaffed and poorly resourced due to decades of underfunding and privatisation.
The African continent is witnessing reduced economic activities as a result of lockdown containment measures which have led to a reduction in tax revenues despite the increased spending in the health sector.
Fewer exports from African countries due to reduced demand and less economic activity has the probability of leading to a substantial economic recession requiring governments to inject money into the economy for survival. However, Africa’s ability to use monetary and fiscal policies to mitigate the pandemic’s economic impact is limited . Governments and central banks lack the fiscal policy space and capacity to adopt robust and often unprecedented short- run stimulus measures.
Currently, the continent has a total external and domestic debt stock of $500 billion, and the median debt-to- GDP ratio had risen from 38% in 2008 to 54% in 2018. By causing a collapse in exports and terms of trade, the COVID- 19 pandemic is pushing African countries into negative per capita growth zones.