Mining and agriculture are two industries that stand to be most affected by the continued spread of Ebola in West Africa, GTR has learnt.
The outbreak of the disease is forcing firms to question the profitability of mining projects in the worst affected countries. Harvests will also be impacted as the epidemic impacts the planting season, predicts strategic risk advisor at consultancy firm Veritas International, Elizabeth Stephens.
“Several miners have suspended operations in Liberia and sent foreign workers home,” she tells GTR.
The largest miner in Liberia, Arcelor Mittal, is reportedly postponing its planned investment to expand iron ore production capacity in the country from 5.2 million to 15 million tonnes, and China Union, the second largest miner, has suspended its operations in the country since August this year.
The mining sector accounts for 17% of Liberia’s GDP. As a result of the outbreak, the World Bank has revised the country’s 2014 mining sector growth forecast, from a growth rate of 4.4% growth to a1.3% contraction in the sector.
“Guinea’s mining sector is better placed to weather the epidemic because its mines are beyond areas where there is a high risk of infection,” explains Stephens, “but further GDP downgrades in all the worst affected countries are expected.”
Ebola has so far had little impact on the trade finance industry because of the relatively few projects in the three worst affected countries: Liberia, Guinea and Seirra Leone, says partner at Norton Rose Fulbright, Nick Grandage. This depends, however, on how the spread of the epidemic develops.
“Trade finance is pretty used to dealing with short-term shocks,” he tells GTR. “And if the trade flows remain then banks will continue to finance them.”
“There is certainly a chance that trade flows will be affected. But at the moment, there’s no reason Ebola should put a stop to things more than any other short-term event.”
According to Grandage, it is likely that development banks will step in to boost trade in region. An international strategy meeting to tackle the economic impact of Ebola in Washington last week saw the president of the African Development Bank (ADB), Donald Kaberuka, call on the international financial community to “continue macro-economic support” in order to “deal with the epidemic and to stop Ebola spreading to other regions”.
The World Health Organisation (WHO) has announced that new cases of the virus could reach 10,000 a week in Guinea, Liberia and Sierra Leone in the next two months. 8,914 cases have currently been confirmed, resulting in 4,447 deaths as this report goes to press. As the epidemic continues, Stephens predicts that fear will be the most significant contributor to a downturn in trade.
“Aversion behaviour, driven by fear of contagion, has a significant economic impact as it reduces labour force participation, disrupts transport and closes ports and airports,” she says. “This is set to escalate.”