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24.04.2020

A new African socio-economic paradigm to confront the pandemic and its impacts

Reckya Madougou from Benin calls for a new socio-economic paradigm for Africa.

Bild: von Jasmin Hartmann, FES The informal economy provides three quarters of all jobs in Africa. A Beninese welder in his small workshop.

The pandemic, which marks the endpoint of the established order leaves us extremely vulnerable. It paves the way for a journey full of risks linked to our economic model and amplified by financial capitalism. This requires the organization of a multidimensional continental response and a pooling of efforts. It is very likely that growth in sub-Saharan Africa is expected to sharply contract in 2020, from 2.4% in 2019 to -5.1% in 2020, plunging the region into its first recession in more than 25 years. The African Union and the United Nations respectively announce that between 20 million and 50 million jobs might be lost in Africa as a result of the economic crisis. Faced with these frightening prospects, how could Africa avoid a drastic degradation of its economy? We are heading towards a crash that is even more severe than that of 2008. Thus, African economies ought to develop very fast adequate, maybe opportunistic public policies at the subregional, regional and global levels. We must take advantage of the beginning of international resource mobilization. Any crisis carries within it the seeds of a better tomorrow.

In the short term, there is an urgent need to protect the most vulnerable people and companies. Create a special resilience mechanisms framework. We should consider the expansion of a well-organized food banks system associated with health and hygiene guidelines, economic incentives for tax deferrals, wage subsidies especially in relevant companies, etc. As well as a temporary adjustment of durations of loans and credit guarantees and related conditions in general.

In the medium term, in order to restrict the consequences of this recession, our States must dismantle the current models of "predator capitalism", a source of growing inequality and instability, to meet the basic needs of a market economy oriented towards human capital, and based on productive social investment. For example, almost half of Kenyans derive their livelihoods from co-operatives, where the proceeds directly benefit producing stakeholders. The challenge is to work towards building an economy that is both liberal and sufficiently regulated and solidarity-oriented. An economy favouring responses to the challenges of sustainable development, based on equality and on the promotion of local, endogenous or adaptive capacities for initiative and innovation.

Staying at home and teleworking are privileges beyond the reach of 60% of the active people of the planet who live in precarious occupations of the informal economy. For those 2 billion workers, the coronavirus constitutes a humanitarian disaster even before being a health- related one. Informality accounts for up to 50% of national GDP in the West African sub-region. I will emphasize the informal food sector because it contributes greatly to food security. Its contribution to employment is 72% of non-agricultural jobs in sub-Saharan Africa according to the International Labour Organization. It is therefore essential to support them by offering them a special legal status, credit lines, to put in place universal credit measures for recovery as well as adequate locations with an infrastructure that allows for physical distancing. These are all new policies and measures that can be financed with the various special funds being mobilized at national and global levels to show their appropriate use.

The moratorium on the African debt should be made conditional – in consultation with the beneficiary States – in order to establish cyclical and structural measures centred on the primacy of human capital. This moratorium and perhaps the cancellation of African debt if it were to occur could encourage proactive budgetary adjustments in line with the substantial increase of resources allocated to health, effective education, economic empowerment and social protection for everyone.

Today, technical and vocational education and training are the poor parents of the education systems, hosting around 2% of an age group. It is important to get closer to African economic actors and to emphasize dual education systems. In addition to debt relief, the multilateral development banks have announced plans to provide $ 160 billion as funding for poor countries. Such resources must be directed to small and medium enterprises and industries (SME/SMI) and microenterprises representing 90% of commercial units in Africa.

Even so, five main issues are to be considered: (i) Greening of the economy through the promotion of the green entrepreneurship concept which could be turned into 5% productivity gains by 2050, while pushing back poverty which affects some 400 million smallholders. (ii) Youth entrepreneurship with specific support. (iii) Social entrepreneurship which is gaining in importance during this period and certainly after the covid-19 pandemic. (iv) Strengthening micro-credits through a universal credit and rural savings model in order to encourage female entrepreneurship and the potentially working poor. Gender inequality in Africa represents a loss of revenues of US $ 316 billion by 2025 for the continent, according to McKinsey's 2019 "Power of Parity" report. (v) It is also an opportunity for our States to invest in a "New Deal" for rural Africa by making direct investments to meet the needs of smallholders and small-scale producers, organized in cluster mechanisms, mutual guarantee and risk-sharing at the level of public and private stakeholders in productive value chains.

In the long term, we need to use our available resources to diversify economies, invest in research and innovation to get more and more industrialized. And we shall do so, by redirecting resources from unproductive sectors, with a low positive impact on human capital and degrading the environment, towards more promising productive sectors and in a more environment-friendly manner.

In summary, the current crisis more than clearly reveals one of the deepest contradictions of our current economic model in terms of the value it gives to human life. The success of strategies oriented towards human energy and the areas of action mentioned in this article depend on an increased decentralisation which calls for the accountability of local authorities in a transparent exercise of a participatory local democracy where local governance involves the private sector and civil society. To promote the new and really inclusive development model, equitable and sustainable is most likely the best approach to combine productivity and well-being of the people.


Reckya MADOUGOU, a Beninese national, is an international expert in financial inclusion and development projects. She has served as Minister of Justice, Legislation and Human Rights and Minister of Microfinance and Youth and Women's Employment in Benin.


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