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Economic Policies in Africa Reduce Poverty

Economic Policies in AfricaCOVID-19 has had disastrous effects on Africa’s fight against poverty. After a 25-year streak without a recession, sub-Saharan Africa now faces a new uphill battle. In spite of the challenges posed by the global pandemic, several economic policies in Africa are being quickly implemented by African governments stepping up to combat pandemic-induced poverty.

Impacts of COVID-19

Projections in 2020 indicated that the economic effects of COVID-19 would lower Africa’s GDP by three to five percentage points. A lower GDP is projected to increase the number of Africans living below the international poverty line by 13 million people. In sub-Saharan Africa, a projected loss of $37-79 billion is expected in output losses.

Facing a dire economic situation, several African nations are implementing comprehensive policies and strategic partnerships with key financial institutions. These economic policies in Africa come with the goal of providing much-needed economic support for individuals and families hit hardest by the pandemic.

Cameroon’s Joint Initiative

In late November 2020, French multi-international bank, Société Générale, and the European Investment Bank (EIB) confirmed a new joint initiative to support economic development in Cameroon. The new initiative aims to provide support for private sector development to help increase the economic resilience of companies across Africa that have been impacted by COVID-19.

Among the initiatives is the SocGen-EIB COVID-19 economic resilience financing program. It will allow working capital expenses, and most importantly, payment of salaries and social security and tax, leaving out a minimum maturity requirement to help ease the economic effects of COVID-19. By increasing backing for financial investment through more flexible disbursement conditions, the initiative hopes to support the economic challenges faced by Cameroon and the Central African economy.

Rwanda’s Economic Recovery Fund

Among the most effective economic policies in Africa, Rwanda’s government finalized an Economic Recovery Fund in June 2020 to increase the number of businesses eligible for economic support. The recovery fund initially included approximately RWF100 billion aimed at supporting local businesses most financially impacted by COVID-19. Benefiting the most from this recovery fund has been hotels. Through refinancing initiatives, hotels are able to restructure loans and working capital to avoid lay-offs and ultimately keep their doors open.

Although only a portion of the total funds (roughly RWF50 billion) was slated for hotel refinancing, the portion looked to restructure at least 35% of total outstanding loans of the hotel industry for some 571 borrowers by close of February 2020. The mark has already been met, resulting in John Rwangombwa, Rwanda’s central bank governor, approving RWF43 billion more in additional funds for hotel loans. The hotel refinancing loans are disbursed at a 5% interest rate compared to present market rates of 16%.

Zimbabwe’s Economic Blueprint

Zimbabwe’s President Emmerson Mnangagwa recently launched a five-year economic blueprint called the National Development Strategy (NDS). Targeting a 5% growth rate per year, the plan intends to establish the country as an upper-middle-income economy by 2030. The NDS will look to accelerate economic growth, improve infrastructure and improve investments and usage in information and communications technology.

The plan takes over from the now outdated Transitional Stabilization Program (TSP), which managed to help the country take steps toward a more stable economy. The NDS hopes to improve and bolster the economy even further through improved quality of life and more equitable and equal distribution of wealth. It was projected that the Zimbabwean economy would contract by 4.5% in 2020 due to the effects of COVID-19. Fortunately, the NDS is expected to expand the economy by 7.4% in 2021 and an estimated 760,000 formal jobs are to be created.

African Continental Free Trade Area Agreement (AfCFTA)

Malawi is working to finalize the ratification of the African Continental Free Trade Area (AfCFTA) with other key stakeholders in the African Union (AU). The AfCFTA went into effect on January 1, 2021, and will bring together 55 African countries, affecting 1.2 billion people. The initiative has ambitious goals such as boosting the region’s income by a projected $450 billion. If accomplished this would bring 30 million people out of extreme poverty and increase the incomes of 68 million Africans.

In the short term, the measure will help mitigate the immediate effects of COVID-19 by supporting regional trade and value chains. In the long term, it will lay a new foundation and framework for cooperation among AU members and policy reform needed to curb the shocks felt on the African economy after COVID-19.

The Road to Recovery

Unfortunately, COVID-19 is still a major global issue that continues to pose serious threats to the economic and social stability of Africa. The situation calls for government action, and fortunately, many African nations are stepping up to the plate. Strategic partnerships and expedient economic recovery plans put in place by Cameroon, Rwanda and Zimbabwe hope to set an effective precedent for other African nations to follow. More importantly, pan-African agreements that require continent-wide cooperation such as the African Continental Free Trade Area Agreement can lay the potential groundwork for a prosperous and strengthened Africa.

– Andrew Eckas
Photo: Flickr

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How to Fight Poverty Using Solar Energy in Uganda

Solar Energy in UgandaAs of 2016, it was estimated by the World Bank that only 26% of Uganda’s population has access to electricity. In urban areas, the percentage is higher, at about 60%. However, in rural areas, the amount of people with electrical access is limited to only 18%. The use of solar energy in Uganda hopes to bring increased access to electricity, specifically in rural areas, as well as make electricity more affordable for the population.

What is Solar Energy?

Solar energy is energy from the sun that can be used electrically or thermally. It is a renewable energy source that provides a sustainable and clean alternative. Through photovoltaics (solar thermal collectors) solar power is collected and then converted into an energy source that can be used as a heating system or for electricity.

Solar Energy Fighting Poverty

Solar energy in Uganda can bring poverty reduction. It is an affordable and reliable source of energy that rural areas can depend on. It can also produce jobs within the community. Since solar energy makes household chores easier, women and girls have more time available to search for jobs or pursue education and development opportunities. Overall, renewable energy is a valuable component to provide electricity access, financial empowerment and sustainable economic and social development.

European Investment Bank (EIB)

With solar energy, more of the country will have access to electricity. The European Investment Bank (EIB) is using its finances to help people without electricity in Uganda. As it is the rural communities that are more affected by a lack of electricity, programs are more focused on maintaining reliable resources for those areas.

Through EIB’s efforts, more than one million people in Uganda will have access to electricity for the first time, making for easier cooking and the ease of many other household activities. Families will also be able to save money since the household will not be using as much kerosene, candles or charcoal. Indoor pollution will decrease from less kerosene usage and fire hazards will be reduced.

Reliable electricity has many benefits, with access to health opportunities being one of them. With access to phones, radios and televisions, farmers will be open to markets that can increase their income. EIB has given a loan of $12.5 million to build 240,000 solar home systems throughout Uganda, increasing economic and social opportunities.

Sustainable Energy for All (SEforALL)

Sustainable Energy for All (SEforALL) created an agenda that was adopted by Uganda’s government to help provide an increase in accessibility. The goal is to provide more than 99% of the population with access to electricity by 2030 and improve the energy efficiency of power users by at least 20% by 2030. SEforALL plans on accomplishing this ambitious goal by building energy savers throughout the country in households, industries, commercial enterprises and more.

It is clear that Uganda is in need of more access to electricity throughout the nation. Solar energy is one of the sources that hopes to increase those numbers. There is still a lot to be done to raise access to electricity from 26% to 100%, but with efforts from Sustainable Energy for All and the European Investment Bank, the situation looks exceptionally hopeful.

– Sarah Kirchner
Photo: Flickr