Three factors will determine the trajectory of the global economy in 2021, Deloitte Touche Tohmatsu chief global economist Dr Ira Kalish has said.
Speaking during a virtual executive conference hosted by professional services organisation Deloitte on January 20, he said the path of the pandemic and how it is managed; the vaccine and how it is rolled out; and what governments do in response to this would determine the trajectory of the global economy.
This year, the world will start to enter the post-pandemic phase, deemed the ‘great reset’ by the World Economic Forum, Deloitte Africa Emerging Markets MD Dr Martyn Davies elaborated.
This is contingent on the speed and effectiveness of the vaccine roll-out, as well as how the waves and variants of the virus are handled, he noted.
Looking at Africa more specifically, there would be several overarching themes that would determine the continent’s economic outlook for 2021, Davies said.
He noted that, without mass vaccinations, the continent risks economic marginalisation.
Secondly, he said there was the question of whether it was the beginning of a commodity super cycle.
He noted that 2020 saw commodity shocks, such as the oil price dropping drastically in March.
Moving forward, Davies said the factors to catalyse a commodity supercycle were present. This was especially important for Africa and sub-Saharan Africa.
These factors include China’s economic growth since it bounced backed from the pandemic, with the country as one of the major end-users of commodities.
Therefore, a commodity supercycle would pose one of the few positives and tailwinds for gross domestic product (GDP) growth, in the absence of structural reform required in the continent’s developing economics, Davies said.
Thirdly, he highlighted China’s engagement with Africa, which he said had been a megatrend over the past two decades. He noted that China would revaluate its lending to the continent, including the sustainability of the Belt and Road initiative and to what extent State capital would continue to fund infrastructure on the continent.
Fourthly, Davies noted that democracy and political accountability in Africa was being challenged. He noted that there was a theme of reversal or slippage in democracy, and a rise of authoritarianism, which was happening globally as well.
Davies said that, this year, it would need to be shown what the roles of organisations on the continent, such as the African Union, are in remedying this.
However, on a more positive note, the African Continental Free Trade Area (AfCFTA) agreement has been signed and signatories on the continent are embarking on the most ambitious free trade project since the World Trade Organisation, acclaimed Davies.
He noted that, despite headwinds, African governments are still engaged on free trade.
The agreement is useful and beneficial, but should not negate structural reforms needed in countries on the continent, Davies emphasised.
Meanwhile, Mo Ibrahim Foundation founder Dr Mo Ibrahim emphasised the importance of facilitating vaccine access and roll-out in Africa.
He noted that the economic impact of the pandemic would last longer than the personal effects.
Ibrahim said that, to manage this, lessons could be learnt from the pandemic, including looking internally for help during a crisis and not relying on outside help.
He indicated that this would require a change in the way of thinking and a change in the way countries on the continent were run.
Ibrahim said the crisis presented an opportunity to recover in a better way. This includes recovering in green mode, he noted, with energy vital for Africa, and especially green energy.
He indicated that green energy is more adaptable to rural communities, with a large number of these on the continent.
Ibrahim said there was a need to rethink offgrid electricity as a major breakthrough moving forward, developing it where it is needed, with massive grid development not feasible in Africa. Moreover, this would engender environmental benefits, he enthused.
Echoing Davies, Ibrahim said the AfCFTA presented a positive, with the pandemic leading to a shortage of goods owing to logistics issues. He emphasised the need to be able to move goods freely across borders on the continent.
This, he said, was important for development of economies on the continent, which would also spur investment.
Ibrahim emphasised that there needed to be political will to execute this agreement.
He also called for a focus on structure, such as agriculture development, which is noted as very important for development.
Ibrahim indicated that there is a major employment problem on the continent, and, with a growing young population, there is the pressing need to create jobs
He also called for good governance on the continent, noting that there had been a lamentable retreat in the past few years, with a need to refocus.
During a further panel discussion, speakers indicated that climate change had become front and centre for economies and that businesses needed to adapt to the new future.
The Coca-Cola Company Africa & Middle East president Bruno Pietracci said the sustainability of the planet was pivotal to consumers, and that the company had taken action in several ways to engender this in its operations.
This is especially so in terms of water stewardship, with the company embarking on several initiatives to become more efficiency in the use of water, in waste water treatment, and in water replenishment.
Actis Energy Infrastructure director Colin FitzRandolph indicated that policy makers were trying to make the right decisions around sustainable energy, with good intentions around facilitating a just energy transition.
He added that there had to be action on these, to ensure opportunities were not wasted.
General Electric - Steam Power Africa CEO Lee Dawes emphasised that companies must understand that it is an everything and everyone discussion, with everything needing to be geared around decarbonisation, and it affecting everyone. He noted that each country has to deal with balancing sustainability, reliability and affordability.
In terms of energy sustainability for the continent, he said the rapid acceleration of renewables must be the first priority, with costs for this coming down all the time.
This would be followed by going back to big ticket zero carbon sources, such as nuclear. Moreover, the continent also has considerable potential for hydropower, he stated.
The latter two require a lot of capital expenditure, Dawes said. However, they are being undertaken in other places globally. Therefore, he noted that, for Africa, presently, it must decide whether to undergo a big disruption and take a role in these projects, or, let other countries take the lead and copy this at a later stage.
Deloitte Sustainability, Risk Advisory; Deloitte Conseil partner Eric Dugelay said that, while climate change was high on the agenda on the continent, the region was not as invested in it as other regions; and key issues are sometimes overlooked. Moreover, he noted that the continent needs to have more presence and representation on global climate change initiatives.