Every crisis offers opportunities, and Shelter Afrique believes the construction of housing is a key path to recovery after Covid-19. Managing Director Andrew Chimphondah describes three ways in which construction can act as a panacea for African economies
Despite its apocalyptic pretensions, Covid-19 will not be the end of humanity. This is not to belittle the devastating effects it has had on the world, the economic burden it has placed on the international system and the certain ways it will force a redefinition of social interaction.
However, throughout history, the human race has been called to face and overcome several challenges, from the Great Depression to two major world wars, the Spanish Influenza, breaking the bonds of imperialism and colonialism to more recently the financial crisis in 2008. This is another defining moment in world history, and the response of humanity will be no different. We will be inspired to innovate, to access the levels of human ingenuity and derring-do in a way we have scarcely had to in response to the novel coronavirus. But it will be done, and there will be a tomorrow.
Looking to a post-Covid future
It is hard to escape the prison of now, but there is perhaps no better time to begin to envision what the world may resemble in the post-Covid-19 era. Indeed, those industries hardest hit by the pandemic have been compelled to rethink their business models; airlines, hotels, restaurants, gyms are all in the process of remodelling operations. To a lesser degree, other businesses are also changing their activities to ensure the safety of their staff and personnel, work at home orders and e-conferencing have become the new business buzzwords. For those of us concerned and existentially tied to the prosperity of Africa, the question is what thinking will spur Africa to prosperity in the post-Covid era?
The coronavirus in Africa
Fortunately, the contagion has not spread as rapidly on the continent nor has it been as fatal as in other countries; according to a John Hopkins University tracker, the recorded cases in Africa as of the 11th of May 2020 was 212,534, which represents 2.8% of the global total. Additionally, the recorded deaths of 5721 represent 1.3% of the worldwide total. These figures stand in sharp contrast to earlier predictions that envisaged the virus decimating African populations. A lot can still change; however, after several months of living with the disease on the continent, the trend of relatively low infection rate appears to be holding.
The economic price of Covid-19
Africa has not paid the same price in human lives as other continents, especially the Americas and Europe; however, the economic effects of the pandemic are very present. Deloitte has projected that Africa’s gross domestic product (GDP) will contract by 0.8% in 2020 rather than grow by 3.2% as previously forecast.
The United Nations Economic Commission for Africa (UNECA) reports that one month of lockdown costs Africa about 2.5% of its GDP, which works out to $65.7bn per month, and this is over and beyond what the pandemic has done to global commodity prices. The same reports details that a total of 42 African nations had implemented localised or national lockdowns as of May 4th, and 38 of these countries had those restrictions in place for at least 21 days. These lockdowns have had severe effects on productivity; the service industry is reportedly only using 45% of its capacity and the provision of goods is utilised at 39% of capacity.
The macroeconomic picture is even grimmer when Africa’s loss of World Trade is considered. International trade is expected to drop by 13% to 32% in 2020. The sharp drop in commodity prices, especially oil, will blunt whatever hopes of economic growth most African countries have. The International Monetary Fund (IMF) estimates that export revenue from fuel will fall by $101bn and total exports on the continent are projected to drop by 35%, which works out at a $270bn loss.
Additionally, the World Bank estimates that Foreign Direct Investment (FDI) will fall by 5% to 15%; remittance flows, which are one of the significant contributors to revenue in Africa, are also expected to fall across sub-Saharan Africa by 23.1% from $59.1bn to $48bn. Finally, the African Union predicts that spending on capital projects, such as housing and infrastructure, will fall by 25%. All these figures, of which there are many more point to what is true for most of the world; the economy will recede and in some cases slump. Governments, policymakers and companies cannot afford to be prisoners of the moment; we must begin to anticipate and plan for a resurgence in the post-Covid-19 world. Shelter Afrique views housing construction as one of the answers to economic revival in Africa after the pandemic.
Housing as the engine room of economic revival
It is telling that in many cases across the world, the construction industry was one of the sectors that were encouraged to remain open; indeed the Australian premier Scott Morrison pointed to the construction industry as one that could buoy the economy during the pandemic. Global estimates for the contribution of construction to GDP are about 11% according to the WTO; in Africa the number is estimated to be 10.5%, although that varies from country to country.
Traditionally, governments have invested in large infrastructure and construction projects, capital projects to stimulate the economy. The consensus on the relationship between construction and economic growth is that construction activity tends to increase during the early stages of economic growth, stabilises or flattens out in middle-income countries and then declines in advanced economies. Many African countries are still in the early stages of economic development and can use construction as a way to boost their economies.
Three ways housing can help revive economies
Shelter Afrique sees three ways in which construction can act as a panacea to African economies in the post-Covid era; large-scale construction, trade finance and policy reform.
Large scale housing delivered by Private-Public-Partnerships (PPPs) are a vital way to inject much-needed capital into the economy; it also offers immediate employment opportunities. When we think about the gig economy, it often leaves out construction workers, but they are a critical group of that economy and delivering large-scale construction reabsorbs them into active employment as well as having the capacity to absorb a lot more. Additionally, the building industry is uniquely suited to the features of social distancing; workers can separate from themselves on a site.
Beyond the economic benefits, there is a real and social need for decent and affordable housing which has become more apparent during this pandemic.
Some of our member states have adopted this position; in Rwanda, the government has instructed that construction works must continue as a vital economic activity. One of our projects, Rugarama Park Estate, which is a sustainable housing development of 3,000 affordable units, has continued in earnest in Rwanda.
We offer a trade finance product that provides crucial linkages for the transfer and importation of essential construction industry needs. We partner with key players in cement production and other construction materials to arrange timely delivery of this critical product through trade finance; however, the pandemic has revealed the dangers of over-reliance on importation and having supply-chains outside of the continent.
One of the trends in African development is that it has been growing without industrialising. However closed borders and economic nationalism have forced countries to look inwards; African countries have scaled or created value chains for Personal Protective Equipment (PPE), facemasks, hand sanitisers, among others. The pandemic will also force creative thinking and reinvention of supply-chains for construction within Africa. Considerable progress has already been made with cement; a post-Covid economy will feature greater trade within Africa especially as the African Continental Free Trade Agreement comes (ACFTA) into effect. This development can make up the shortfall expected in African business with the rest of the world.
The pandemic has inadvertently created an impetus for a review of housing policy on the continent. The limits of social distancing were all too evident in the developing world, where the average size of a household is between 6-8 people per household. It is little wonder that the contagion has been virulent in informal settlements, which are often densely populated and unsanitary. It is also challenging to carry out contact tracing in informal settlements as they are usually not planned.
The Centre for Excellence (COE,) the research arm of Shelter Afrique is mandated to advocate for a reform of housing policy in Africa. A Model Law is currently under development by the African Union, which the COE, UNECA and UN-Habitat play an active role in. The Covid-19 pandemic is as much a public health crisis as it is a social one, as it is forcing us to rethink how all our industries interact. African governments will have to rethink how to regulate informal settlements and upgrade them; they will also need to rethink green engineering and how housing construction interacts with the environment; this alone will unlock vast funding in green bonds.
Additionally, the sudden need to construct large isolation centres within a short period has made us look differently at Alternative Building Materials, which were once scorned but are essential when construction times need to be reduced. Countries must also rethink how the PPPs are governed and how to encourage these projects as economic drivers.
Entering the post-COVID-19 era
Every crisis offers opportunities; Africa’s opportunity will be how to restart the economy in a world that may be markedly different from what we are accustomed. Africans cannot be prisoners of the moment and must fashion an African future that is prosperous and not dependant. Shelter Afrique believes large-scale housing offers a solution. The continent appears to have survived the worst of the pandemic; it must turn this into an advantage.