Ebola: The economic impact

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With more than 1,300 reported deaths from Ebola in West Africa, the hemorrhagic disease which can kill up to 90% of those it infects has provoked a mounting health crisis, but it is also having a devastating impact on the economies of Guinea, Liberia and Sierra Leone.

Ebola virus virion (Public Health Image Library)

All three West African nations are already poor, but the Ebola outbreak could make them even poorer. Sierra Leone and Liberia have both emerged from horrific civil wars and managed to rebuild their economies. Liberia has been trying to revive its mining sector which before the civil war accounted for more than half its export earnings. But now there are fears that all the good work that has been achieved since those conflicts could be destroyed.

Sierra Leone’s Agriculture Minister Joseph Sam Sesay told the BBC that the economy had been deflated by 30% because of Ebola, with the agricultural sector the most impacted in terms of Ebola because about 66% of people in Sierra Leone are farmers. Mr Sesay described how farms are being abandoned by people running away from the epicentres and going to areas that don’t have the disease.

Twelve out of 13 districts in Sierra Leone are now affected by Ebola, although the epicentres are in the Eastern Province near the borders with Liberia and Guinea. Road-blocks manned by police and military are preventing the movement of farmers and labourers as well as the supply of goods.

Although the United Nations Development Programme (UNDP) chief co-ordinator David McLachlan-Karr thinks that the road-blocks are absolutely crucial to containing the outbreak, he admits agriculture in Sierra Leone has been brought to its knees.

“We are now coming into the planting season which means a lot of agriculture is not happening, so down the line that will create food shortages and pressures on food prices. We are starting to see a rise in inflation and pressure on the national currency as well as a shortage of foreign exchange,” he told the BBC.

The UNDP has appealed for $18m to bolster Sierra Leone’s health system but the UN’s Food and Agriculture Organisation (FAO) and World Food Programme (WFP) will also be asking for a further $60m to help the government deal with food shortages and its farmers cope with the crisis.

In Guinea and Liberia the economic predictions are also causing concern. The World Bank said it was expecting GDP growth in Guinea to fall from 4.5% to 3.5%.

The Liberian economy had been expected to grow by 5.9% in 2014 but the country’s Finance Minister, Amara Konneh, said this was no longer realistic due to a slowdown in the transport and services sectors and the departure of foreign workers because of Ebola. Steel giant ArcelorMittal has halted work at its iron ore mines in Liberia after some of its staff were evacuated. The mining firm said contractors working to expand its Yekepa and Buchanan mines had declared “force majeure” and were moving people out of the country.

The closure of borders in West Africa and the suspension of flights are also having a detrimental effect on trade, severely limiting the ability of countries to export and import goods.

Recent examples are the closure of Cameroon’s border with Nigeria and the announcement by Kenya Airways that it is suspending flights to and from Sierra Leone and Liberia. Equatorial Guinea’s  national airline Ceiba International has suspended until further notice all of its flights to Accra, Ghana, Lome in Togo, Abidjan in Cote d’Ivoire, Dakar in Senegal and Cotonou in Benin. The Equato-Guinean government has also stopped issuing visas to West African citizens wishing to visit until further notice. Arik Air, Asky, British Airways and Emirates have suspended flight operations to and from any of the Ebola affected countries. Saudi Arabia also suspended the issuing of visas to Muslim pilgrims from West African countries. Serious screening for Ebola has also begun at several international airports before passengers are allowed to board an airplane.

In Sierra Leone, commercial banks have reduced their hours of business by two hours to reduce contact with clients and the country’s tourism industry has taken a severe knock – some hotels are empty and are laying off staff.

Impact on Tourism

Tourism elsewhere is feeling the effects too. According to Reuters, the outbreak is putting off thousands of tourists who had planned trips to Africa in 2014, especially Asians, including to destinations thousands of miles from the nearest infected community such as Kenya and South Africa. Visitors from the United States, Brazil and Europe have also scrapped their plans altogether or delayed their trips.

There is a problem of perception – and geography. Hannes Boshoff, managing director of Johannesburg-based ERM Tours, says. “A lot of consumers just see Africa. They see it as one country … I try and tell people that Europe and America are closer to the Ebola outbreak than South Africa”.

This month, one Brazilian business delegation cancelled a trip to Namibia, in southern Africa.

Thompsons Africa said it had also seen the biggest cancellations from Asian clients but recently had a luxury group of US tourists withdraw, which will cost the South African travel firm 500,000 rand.

Intense media cover has magnified fears, although no current Ebola cases have been confirmed anywhere in the world outside Sierra Leone, Liberia, Guinea and Nigeria. Two suspected Ebola cases in South Africa in August tested negative.

The national tourist agency South Africa Tourism sought to reassure travellers.

“Any contagious disease will have an impact anywhere in the world, whether it was happening in Asia or in America it would have been the same thing,” chief executive Thulani Nzima told state television.

“The message is: come enjoy South Africa, it is definitely Ebola free.”

Lagos-based financial advisory and research firm, Financial Derivatives Company Limited (FDC), has forecast that Nigeria – now the continent’s largest economy – may lose about $2bn to the Ebola outbreak, Nigerian newspaper This Day reported on August 18th.

In a report entitled: “Making Economic Sense of the Ebola Scare,” it listed sectors that would be impacted to include aviation, hospitality and tourism, trade, medical and agriculture. Analysing these sectors’ contribution to the country’s GDP, it stated that though the chance of the outbreak going into a second quarter was very slim, it could extend the loss to $3.5bn.

Ratings agency Moodys said, “Whilst a small part of the Nigerian economy is already benefiting from the Ebola scare such as shop owners selling sanitisers, a larger part is experiencing losses”.

“We expect revenues in the aviation sector to plunge downwards, which would affect both the airlines and the support industry (handling companies, oil marketers, catering, duty free shops, etc.),” the report also stated.

Commenting on the impact on the hospitality and tourism sector, it said preliminary information showed that many hotel and airline bookings in Lagos had been cancelled by in-bound travelers.

“This is not surprising since India and Greece have openly advised their citizens to avoid non-essential travel to Nigeria and other Ebola-affected countries. It is estimated that restaurant visits in Lagos have already declined by 50%. The accommodation and food services sector was approximately one per cent of total GDP in first quarter 2014.

Dianna Games, chief executive of Johannesburg-based consultants Africa@Work, thinks Nigeria is the only affected country that has the health system and infrastructure to deal with Ebola. At the moment there have only been 12 confirmed cases, all of which were linked to the death of one man from Liberia in July.

She says fears about the virus could damage Africa’s economic revival of recent years.

“Ebola has made a dent in the Africa Rising narrative,” she told the BBC. “The stereotypes of Africa as a place of poverty and disease have started to re-emerge again.”

However, In the long run, Ms Games believes history will view the 2014 Ebola outbreak as a temporary blip rather than a permanent U-turn in the continent’s fortunes.

“The fundamentals pushing this Africa Renaissance are still there,” she said.

Meanwhile, the African Development Bank (AfDB) has given $60m in budgetary aid to the affected countries, Radio France Internationale on August 19th. Bank president Donald Kaberuka told a news conference the aid would go towards making it possible to pay health personnel and equip monitoring systems.

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