What is the economic impact of Ebola in Africa?
The ramifications of the Ebola epidemic can not yet be fully quantified. What is certain is that with the number of deaths, the stalling in economic development and the costs of containing the disease that the economic impact is likely to be substantial for the hardest hit African economies. Alec Hogg was joined by Francois Conradie from NKC Independent Economists on CNBC Africa's Power Lunch to get in-depth insights into the expected economic impact of the spread of the disease and what is likely to transpire from its presence. A truly chilling reality when one considers the already struggling nations as they fight to manage the disease in what would otherwise be a growth environment. – LF
ALEC HOGG: The 64th session of the World Health Organisation's Committee of African Health Ministers will be held in Benin next week. Well, it was supposed to be held in Benin last week. It's now been postponed due to the Ebola epidemic. On a sporting front, the Cote d'Ivoire football team will no longer be holding home games because of the Ebola outbreak, so it's affecting not just the academics and of course, those people directly involved, but the sports stars, too. Joining us now from our Cape Town studio to get an insight into the economic implications of Ebola, is Francois Conradie. He's a Political Analyst at NKC Independent Economists. Francois, we've been giving quite a lot of coverage to this subject because it is such a scary disease. The last time we spoke with a medical professional, the insight was that 55 percent of those who are infected actually die.
When people die, it has all kinds of social impacts, but it also has an economic impact and I guess there's a fear factor that comes into it as well. Is there a way at this early stage, of being able to quantify what the economic impact will be of this terrible virus?
FRANCOIS CONRADIE: Well, many of us are trying. That's a question we get at NKC probably five times per week. We are trying, the answer is no, probably not. It's too early. We don't know how far the disease is going to spread geographically. We don't know many people it's going to end up affecting in the three countries – Guinea, Liberia, and Sierra Leone – where it is worst, so it is too soon to say. Yesterday, I saw that Donald Kaberuka of the Africa Development Bank reckoned that all three of those countries would see that their GDP growth for 2014 is going to be less by one and one-point-five percent. Just off the top of my head, I think that's too low and I think it's going to end up being worse, just because of how important mineral exports are to those countries, and that's a sector that's going to end up having been seriously affected.
In Guinea's case, logistics is also going to be seriously affected, which is going to drag down growth.
ALEC HOGG: Why would the mineral sector be hardest hit?
FRANCOIS CONRADIE: It's mostly because of the number of expatriate employees who operate in those sectors. Mining companies are big multinationals. It's the same with oil and gas in other countries, and they are quick to pull their people out when there's danger. We've already seen some mining houses, pulling out staff in Sierra Leone and Guinea, and while they always do have contingency plans in place to keep day-to-day operations going, strategic decisions are put on hold and it's a decrease.
ALEC HOGG: Interesting point. You have the skilled labour if you like, being withdrawn and that brings everything to a grinding halt.
FRANCOIS CONRADIE: Well, maybe not a grinding halt, but it slows it down to an appreciable degree.
ALEC HOGG: If you look at other impacts that there might be, such as people literally not going to work because they're scared of being infected…
FRANCOIS CONRADIE: Yes.
ALEC HOGG: Companies closing down… Has any of that come through?
FRANCOIS CONRADIE: Yes, there's a lot of that. There's a major fiscal impact in that all of these countries/governments, which aren't rich governments to begin with, have to throw many resources at the problem. They are getting help, but still, Sierra Leone's had to go to the bond markets to raise emergency funds to deal with the outbreak, so that fiscal impact is going to be serious and crowd out some other investment spending that they would have put that money into. On imports and trades as well, there's a major effect as borders close and imports decrease. There are supplier issues that push up prices. As mineral exports decrease, the currencies are dragged down, which also, has an inflationary effect. These are all economic effects that are going to take months to really see.
ALEC HOGG: Francois, before the Ebola outbreak, what were the prospects looking like for those three hardest hit countries?
FRANCOIS CONRADIE: Well, Liberia and Sierra Leone were growing at a really impressive clip and IMF's forecast for this year was a 13.9 percent growth in Sierra Leone and eight-point-nine percent in Liberia. They're obviously countries with a very tragic history where reconstruction efforts, combined with institutional developments have really been making the environment better for business. Coming off a low base again – poor countries – and so growth was going to be very rapid in those countries before the outbreak hit. Guinea, less so, but still the forecast for this year was around four-and-half percent GDP growth, which is not bad.
ALEC HOGG: So one percentage point decline in those numbers seems extremely conservative, given the picture that you've painted for us.
FRANCOIS CONRADIE: That's what I think – yes.
ALEC HOGG: And if you take a long-term view, is it likely that the problems are going to be restricted to those three countries? We've heard of outbreaks in Nigeria and even in East Africa. Is it likely that this disease could spread and then infect other countries in a similar way?
FRANCOIS CONRADIE: Yes, it is, unfortunately. That's a real danger. The current Nigerian outbreak has been contained. It looks like the outbreak that started when a Liberian/American doctor arrived in Lagos, has been fully contained. Everyone who has been in contact with any infected person has been observed for the 21-day incubation period, and none has shown symptoms. It looks like that outbreak has been contained, but the danger of someone else arriving in Nigeria and starting to spread the disease, or the Ivory Coast… The border between Liberia and the Ivory Coast is pretty open and there's generally a lot of movement of people. Yes, that's the danger that could still happen. It is more likely to happen across a border than through someone travelling on an airplane, which is something people have been worrying about, perhaps to an excessive degree.
ALEC HOGG: Interesting insights there from Francois Conradie, who's a Political Analyst at NKC Independent Economists. Big stakes there for all countries on the African continent to try to restrict the movement of this terrible virus.