Female Speaker: You’re listening to the economics and country risk podcast from S&P Global. In each episode, our experts will provide you with a clear 360 degree perspective on what’s happening around the world.
Lindsay Newman: Hello, this is Dr. Lindsay Newman. I’m a director leading on Global Political Research with the Country Risk Team at S&P Global. Today, we will return to a topic that we have been following quite closely COVID-19 vaccine delivery. We, at S&P Global, have been following the path of COVID-19 and the vaccine rollout closely, always leveraging our data driven approach.
Over the last few months, we’ve undertaken a global study looking at the geopolitics of COVID-19 vaccine delivery, thinking beyond the advanced purchase agreements and vaccine supply numbers to analyze the global operational security and political challenges which are likely to face as they administer their vaccination campaigns. We’re looking at this again today, focusing on Sub-Saharan Africa and the risks around vaccine distribution there.
We’ll also be talking about vaccine diplomacy, a topic on everybody’s minds. To discuss this and more, I’m joined by Thea Fourie, Economics Associate Director, and Will Farmer, a research analyst with our Sub-Saharan Africa country risk team. We’ll starting with Will, how does Sub-Saharan Africa’s vaccine rollout timeline compare with other regions that we focus on?
Will Farmer: Sure. Well, it’s definitely been slower than that of other regions for a number of reasons. Really, first off, the regions missed out on those advanced purchased agreements you just mentioned, which were taken up by countries such as the US, UK, and EU member states. And this has really pushed many Sub-Saharan African countries to the back of the queue in this regard. There’s also very limited domestic manufacturing capacity for COVID-19 vaccines.
In South Africa, I should say there’s a agreement to manufacture Johnson & Johnson vaccines. And in Egypt, there are advanced stage talks to develop Sinovac there. And thirdly, we have Morocco hoping to start producing COVID-19 vaccines by the end of 2021. But really, that’s insufficient to vaccinate the 1.3 billion or so population of the continent. And this is driven reliance on external sources of vaccines. There have been limited bilateral agreements between Sub-Saharan African countries and producers. And so there’s been a major reliance on pooled procurement schemes.
In particular, here, we’re talking about the Covax facility, which is a multilateral scheme run by those including the World Health Organization, and GAVI, the vaccine Alliance, they plan to vaccinate around one-third of the region’s population by the end of 2021 and 60%, at least to achieve herd immunity, the end of 2023. But we think that – that we think that delays will be likely to this ambitious timeline they’ve set out.
Lindsay Newman: And why will delays be likely? What do we think the main risk factors are here, Will?
Will Farmer: Yes, we think firstly, funding issues will be a key issue with some countries having to partially fund the procurement and distribution of COVID-19 vaccines, even under the Covax facility, which is largely donor funded. And we think in a context where countries have seen increasing budget deficits, increasing debt to GDP ratios and liquidity issues, this is going to be too difficult for some of them to manage. Thea, can you just expand a bit on those points?
Thea Fourie: Yes, absolutely, Will. I think during 2020, we have seen how fiscal deficits in the Sub-Saharan African region has widened similar to many other countries in the world. Of course, you had the spending pressure coming from the COVID-19 pandemic, the health spending pressures, and at the same time, you had the squeeze on revenue flows. And there is however one factor to end to keep track of in the near term. And that’s what’s happening around the IMF spring meetings in the next few days or weeks coming weeks.
Particular interest would be the prospects of additional Special Drawing Rights allocations or SDRs. As we know, it SDRs is a IMF reserve asset, which means that countries that do get additional SDRs and that’s really all member countries to the IMF will be able to exchange this reserve assets for hard currencies because this money do not have any conditions linked to it and therefore can be used as government pleases. But it also unlocks the possibility to use this money to procure vaccines for these low income countries that you just mentioned or maybe even serve as the debt obligations going forward. So, that’s one key factor to watch in coming days, the SDR allocations and the possibility of unlocking some funding for vaccine procurement.
Will Farmer: Thanks Thea. There are also some operational issues that we’re looking for Lindsay down here, where we think that infrastructural weaknesses are likely to hobble the distribution in particular, of vaccines, and also focus them just in areas where the infrastructures particularly good, and that’s going to be in densely populated urban areas where, whereas rural areas are likely to be left behind. We have seen a couple of instances, particularly in Ghana and Rwanda, where drones have been deployed to distribute COVID-19 tests.
But largely, we think that infrastructure in rural areas, particularly around cold storage for vaccines, is likely to be very costly to implement, and probably not going to be forthcoming in the immediate future. And finally, we have security issues, which in certain regions of the continent are likely to make vaccine distribution pretty much impossible. And here, I’m thinking about key terrorism hotspots like northern Mali, Burkina Faso, Somalia, and even Cabo Delgado province in Mozambique.
Lindsay Newman: Thea, if there are going to be delays in the vaccine rollout as you and Will have been discussing, I imagine there must be economic impacts. Can you take us through those?
Thea Fourie: Yes, indeed, Lindsay, I think one of the sectors that comes to mind immediately, of course, is the impact on the tourism industry. And countries relying on tourism as a source of GDP growth as well as external liquidity, smaller ones like Mauritius, Seychelles, Cabo Verde come to mind immediately, but also large economies even like South Africa, as well as Kenya relies on tourism flows. And this will be detrimental to these countries because they will continue to be on the red lists as a tourist destination.
Ultimately, this had an impact on jobs during 2020. And our initial indicators for our employment purchasing managers in this index, which is compiled by S&P Global clearly shows that these, you know, PMIs have not moved above the 50 neutral levels during the first two months of 2021, suggesting that very few companies within the recreational and entertainment and hotels industries, has really showed any intention to improve the workforce during the early months of this year. And that, of course, is very worrying, because it has got a direct impact on employment creation and also poverty levels in the region.
In fact, we for a recent study, you know, released by the World Bank shows that the likelihood of reducing its employment in the Sub-Saharan African region was bigger than compared to other developing countries in the world. But companies also did other efforts like we’ve seen in many regions of the world to kind of mitigate the impact of COVID-19 by reducing their workforce hours, by 39% of respondents pursued such efforts. And again, I just want to highlight this as a World Bank study.
Some were allowing the leave of absence, about 38% of companies surveyed allow this and they did he was also the possibility of reducing wages, which was at about 31% of respondents that pursued that kind of effort. But ultimately, all of this means that overall income levels for consumers in in the Sub-Saharan African region and resulting increase in poverty has been quite significant in the past year, and during 2020 in the past few months of 2021.
I should also just highlight that it’s not our view that the slow rollout of the COVID-19 vaccine program will result in significant lockdown measures going forward. There could be some outliers and Kenya comes to mind where we had an outbreak of a new wave an outbreak of COVID-19 cases in recent weeks. And you had some hotspots which will areas particularly Nairobi where there has been some lockdowns, but another outlier of course, is South Africa where this is – where we have seen significant harsh lockdown measures implemented in other periods where we had an upsurge in COVID-19 cases. And this of course included longer curfew hours, the banning of alcohol sales and in some cases, even limiting mobility.
And there is of course, a strong possibility with a slow rollout of the COVID-19 vaccine program in South Africa, that we experience a third wave of COVID-19 cases in over the winter months. And judging by historical developments, it would not be surprising if the government’s implement very strict lockdown measures under such scenario. And this is of course, very problematic for South Africa’s economic outlook with a, you know, at the same time the economy is struggling with electricity deficits, and of course effects to keep track of in the near term.
But just to summarize, I think, not a strong rebound in employment for vulnerable sectors such as tourism, entertainment, recreational and even sectors that is linked to transport particularly for link to the tourism industry. And of course, also the possibility for harsh lockdown measures in some countries in the region due to the slow rollout of the vaccine program.
Lindsay Newman: Will, let’s turn to vaccine diplomacy. Certainly, transactional nature of international affairs is nothing new. But we’re seeing vaccine diplomacy as perhaps the new frontier on this. Are we seeing external actors donate vaccines for geopolitical and commercial reasons in Sub-Saharan Africa? And if so, what do we think they’re hoping to accomplish? What sort of impacts could this have on Africa?
Will Farmer: Sure. So, we are certainly seeing that happening across the region, with China and Russia being the front runners in this regard, having both made bilateral agreements to procure to distribute vaccines to countries where usually they have strategic interests. A good example, for both countries is Guinea which has significant iron ore deposits, where both Russia and China has offered vaccines. It’s important to note also that India has provided vaccines to a number of Sub-Saharan African countries as well.
But perhaps the most obvious instances of vaccine diplomacy have come where companies themselves have donated COVID-19 vaccines to governments. And here there are two prominent examples. Firstly, the Russian State owned mining company Alrosa has committed to donating dozens of thousands of vaccine it said to Zimbabwe and Angola where the country has a footprint in both countries diamond mining industries. And we’ve also seen South African Telecoms Company MTN offered to donate vaccines to the Guinea Bissau government. And in both those instances, we expect those companies to be seeking preferential treatment from those governments in exchange for the vaccines.
Lindsay Newman: Thank you both. That’s all the time we have for today. I hope you enjoyed this look around Sub-Saharan Africa and vaccine rollout vaccine diplomacy. I’m sure there will be more coming from our teams in weeks ahead. This has been the economics and country risk podcast with S&P Global.
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