For African economies, a rough road lies ahead

In the United Kingdom (UK) practically every month since July, they have had a new Chancellor of the Exchequer - the Cabinet Minister in-charge of the economy.

In typical British humour, it is now said that at this rate everyone including the odd comedian down the road, will soon have a go at it.

Jeremy Hunt was appointed last week by Prime Minister Liz Truss to replace Kwasi Kwarteng who warmed the seat for only 38 days, starting from September 6.

Truss, who took over office on that day following the resignation of Boris Johnson, had appointed Kwarteng to replace Nadhim Zahawi who was in office from July 5. That is the day he replaced Rishi Sunak who had been in charge from February 13, 2020.

The crisis in the United Kingdom is one around bread and butter-issues. The disruptions caused by Covid-19 over the last two years have had a serious ripple effect on the economy leaving many unemployed and businesses shut down.

It has been exacerbated by the war in  Ukraine following the invasion by Russia. This has led to an increase in commodity prices, especially of oil and food, worldwide. The result is an increase in the cost of living and it is causing a lot of protests as people can’t go hungry and keep quiet.

The people supposed to be giving solutions are overwhelmed and have resorted to kicking the ball anywhere. They have to ostensibly, as a matter of priority, save themselves from the people they lead, then save the people from economic distress.

While at it, there is a gloomy forecast that there will be greater pressure on the leadership in the coming winter months. The need for already expensive energy for heating in homes and other buildings is expected to rise.

Ominously, Russia, one of the world’s leading suppliers of energy to Europe, is an enemy territory under sanctions for its attack on Ukraine. If the Ukrainian war does not end soon and there is no sign of it doing so, even super optimists can only anticipate trouble.

Looking at the drama unfolding in the politics of the UK, one can not help but fear for African economies back home.

Our economies are so dependent on American, European, Chinese, and the Indian economy, among others, for aid and trade.

Disruptions in those economies have an instant contagious effect on ours. Yet we can’t maintain a social distance from them lest we suffocate. So we have to accept our position that will see our economies catching colds.

The aid and assistance to balance budgets are likely to go down. There will be an increase in ensuring strict adherence to paying interest and levying sanctions in cases of default.

The Republic of Kenya has allegedly had a warning shot with its failure to make good its obligations on the monies it used to build the Standard Gauge Railway. China has drawn the mark in the sand. The likelihood of having a significant cut in foreign assistance is real. If not borrowing at higher interest rates will become a reality which will add to the already heavy debt burden we are suffering.

We might also see a significant loss of market for goods from Africa because of cutbacks in expenditure in developed economies.

As a quick fix, African governments will put more emphasis on domestic revenue mobilisation. That will mean higher rates levied with a lot of emphasis on compliance using the stick of penalties.

There will also be cutbacks in expenditure because of low revenue. This will affect the social safety net that encompasses mainly the provision of healthcare, education, and other necessities such as relief food to the vulnerable thus making day-to-day living harder.

The trouble is that all these measures will take place in an African economic environment that has not been spared from the downturn in the global economy due to Covid-19 and the increase in global oil and food prices. It is also an environment that has high incidents of corruption and a lack of accountability.

These economies are under extreme stress with low growth, high inflation, low demand, and unemployment being prevalent. 

It is not going to be an easy ride in the near future. Unlike the UK and most developed countries where there is fear of repercussions in the next election if the government does not deliver, here elections are more of mere occasions to perpetuate the incumbent.

In such circumstances, there are four likely scenarios. The first is an increase in demand for the government to provide through demonstrations on the streets. There will be an increase in keyboard remonstration on social media. The former will be met with brutality by state security agents while the latter will be met with draconian legislation like the Computer Misuse Act to muzzle dissent and cow the population.

Secondly, you are likely to have an increase in crime where people will have to use their wits and muscles to snatch from others to make ends meet.

The version of organised crime in these parts of the world usually sees security agents working  hand in glove with criminals. That means the citizen hardly has anyone to come to their rescue.

Thirdly, there will be many people who will vote with their feet and flee the country to greener pastures. They will use all sorts of means to all sorts of places even if there is no evidence that their lives will be safe or get any better. Anywhere will do.

Fourthly is the rise in social problems. As is happening currently, we shall have an increase in the abuse of narcotic drugs and alcohol.

Consequently, the mental health and well-being of many young people will be adversely affected.

The same applies to an increase in heterosexual and homosexual encounters especially with young people in exchange for money for survival.

This may result in an escalation in the spread of sexually transmitted diseases including HIV.

It is going to take a while to see the light in the tunnel. As we hope for the best we will have to prepare for the worst.

Mr Sengoba is a commentator on political and social issues

Twitter: @nsengoba