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Policy and strategic framework to ease the impacts of Post-COVID-19 through climate action-based enterprises

by Byron Adonis Mutingwende
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By Ecosystem Based Adaptation For Food Security Assembly (EBAFOSA)

For a year now, the COVID-19 pandemic has been at the centre of news across the globe and Africa. In Africa where estimates put the effects of the pandemic to affect the economy of Africa to around a fall of 1.4% of its GDP,with smaller economies facing contraction of up to 7.8%. The contraction is mainly as a result of export adjustments affecting primary commodity exporters, and the attendant losses to tax revenue which reduce the capacity of government to extend public services needed to respond to the crisis.

In this publication, we shall focus on various policy recommendations and solutions that can alleviate the adverse effects of post-COVID in the agricultural sector, how the informal sector should adjust amidst the crisis, and the role of climate action enterprises to provide a winning formula for communal adjustments to the economic effects.

The informal sector accounts for over 80% of all employment in sub-Saharan Africa. This constitutes small-scale grocers, retailers, small scale traders in rural and urban areas. They are manufacturers and young entrepreneurs steeping into the scene. These are the people who supply household goods and services.These are a critical group without whom life in our cities would come to a stand-still.

This group has been most vulnerable as COVID-19 has meant slowed down their small enterprises. For example, small retailers, groceries, open-air traders, stall owners, who trade under $150 daily, who are the fabric of the informal sector across Africa, have been hit hard. The impact on the economy continues to unfold. As of March 2020, a 1.4% decline in GDP equivalent to $29 billion has been reported. These losses, which translate to lost jobs, income, and enterprise opportunities to the over 1.2 billion people in Africa, have far and wide-reaching effects in compounding a very precarious scenario – where the region already needs to create about 13 million jobs every year.

Africa’s informal sector accounts for over 80% of all employment in sub-Saharan Africa. This therefore means anything that that hard hits this informal sector needs to be taken with grave consideration.

Over 90% of new jobs created in Africa during the 90s for instance were in the informal economy. The cumulative effects of COVID-19 adding to existing vulnerabilities are pushing the region into its first economic recession in 25 years. With these strains on one hand and ever-increasing global competition on the other, it is very likely, that some businesses that have closed will never re-open. Some jobs that have been lost, will never be recovered.

It suffices to say that Africa, which is a socioeconomically fragile region, is being pushed further up the vulnerability scale. COVID-19 crisis is yet another reminder of the urgent importance to surmount and emerge stronger. And this leads us to two fundamental questions that need to be answered. First, how do we re-imagine, re-organise, and redesign Africa’s development under the changing climate and the unsettling realities of a COVID-19 plaguing our world and more so Africa?

Across the G-20 and indeed globally, countries have been framing policy responses to buffer their economies and populations against the repercussions of the COVID-19. The “stimulus package” has arisen as among most formidable policy measures to buffer economies, with some countries offering as high as 20% of GDP as emergency COVID 19 stimulus.

The US for instance announced a package of some $2 trillion. Germany announced $800 billion. Canada announced over $50 billion, and the list goes on. Africa has been estimated to need no less than $100 billion. But even more important for Africa, a continent whose productivity lags competitors in the global economy by up to 20times, is how such emergency measures can be maximized as investments to accelerate the ongoing charge towards unlocking globally competitive climate action enterprises in the continent under the changing climate.

Africa’s agro-market is estimated to be worth up to $150 billion each year in 5 years’ time. While it is open to global competition, empowering the local informal sector to take lead in developing competitive local products, that can compete for shelf-space with goods from elsewhere, offers an opportunity for developmental strides in the continent. Enabling this long-term perspective is the trajectory that stimulus packages in Africa should take.

Not short-term cash transfers as is the traditional approach currently been used. 1) First, prioritize buffering informal sector players in the continent’s catalytic sectors. These are economically inclusive sectors – meaning they engage the majority of the population. This implies that maximizing their productivity through value addition means putting more money in more pockets.

 In addition, these sectors can meet both climate and socio-economic priorities simultaneously. For example, decentralizing solar driers among cassava farmers – where cassava is converted into dried cassava chips that can be preserved for longer, sold to millers to be further processed into cassava flour, or eaten as is / or fried into cassava chips, has seen incomes increase by 150% and reduce loss by 30%. The use of solar driers to dry rice has proven to be 48times faster than traditional open sun drying and result in better quality, cleaner, more hygienic rice that fetches more in the market.

Decentralizing solar driers to farmers in local markets, to enable them to dehydrate and preserve their harvest that remains unsold at end of the day and sell when demand peaks are not only cutting post-harvest losses but increasing earning up to 30times.

All these are delivered by innovatively applying an accessible climate solution – solar dryers – which enhances incomes without piling on the emissions that exacerbate climate change in the first place. Stimulus packages being discussed should aim to buffer these players by targeting the structures that they use to conduct their trade.

For example, cooperatives are grounded community financing structures for these players. The stimulus could be targeted at cushioning cooperatives against liquidity crunches hence ensure that delayed payments that may arise out of such a slow-down, do not render them insolvent and close them down. The second is prioritising human capital.

A skilled person, capable of turning challenges, into enterprise opportunities is 4 times the value of produced capital and 15 times the value of natural capital. Over years, Africa has overlooked its most important capital – its people and prioritised physical resources instead. Youth need to be supported to refine, improve, and adapt their skills–regardless of disciplinary backgrounds – for application in establishing enterprises in the “catalytic areas of the economy. Stimulus packages should therefore go to create incentives in the form of tax breaks, reliefs, holidays, rebates – to enterprising youth already engaged in these areas, to encourage them and keep them afloat during these turbulent times. The third is more in the long term.

Even as we ride through the emergency response period, the continent must invest purposefully towards unlocking credit opportunities in the informal sector. But this remains untapped because formal credit structures, the commercial banks, remain reluctant to invest in measuring creditworthiness of players in the informal economy. Over 95% of their transactions are still in cash. Modern technologies such as block-chain offer a way out to evaluate transactions in the informal sector through blockchain governance.

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