East Africa has suffered a string of catastrophes since the start of 2020: locusts have ravaged crops, the global pandemic has caused demand for agricultural products to tumble, and unusually heavy flooding has triggered fatal mudslides and damaged logistics infrastructure. The extent of the damage on the region’s burgeoning agricultural sector must now be assessed, writes Maddy White.
At the start of July, the United Nations Food and Agriculture Organization (FAO) reported that fresh batches of desert locusts were circulating in northwest Kenya, eastern Ethiopia and parts of Somalia, engulfing crops and looking set to eventually migrate to South Sudan and Uganda. The FAO said the risk to crop production, livestock pasture and food security was “unprecedented”.
The world’s most dangerous migratory pest, a swarm of locusts can travel 90 miles a day and is capable of chomping down on the same amount of food in 24 hours as approximately 35,000 people.
While locust swarms are not a new phenomenon to the region, recent waves are among the most devastating witnessed in decades. These new swarms first arrived in the Horn of Africa in mid-2019, with the FAO subsequently declaring in January 2020 that this was the worst outbreak to have struck Ethiopia and Somalia in 25 years and the most severe infestation in Kenya for 70 years.
Efforts are being made to minimise the destructive impact of the insects on agriculture. In May, the World Bank approved a US$500mn emergency locust response programme to provide flexible support to countries affected by the outbreak.
So far, US$160mn in total has been allocated to farmers in Kenya, Ethiopia, Djibouti and Uganda to restore crop and livestock production systems disrupted by swarms, strengthen their capacity to respond to future outbreaks, and finance surveillance and control measures. The World Bank also approved a US$40mn International Development Assistance (IDA) grant for Somalia as part of the same programme in late June.
However, without more intervention by the international community, swarms in the Horn of Africa and the wider east of the continent may trigger mass crop failure, exacerbating an already serious food security situation and potentially leading 5 million people into starvation, revealed the International Rescue Committee (IRC), a global humanitarian aid organisation, in June.
In fact, the World Bank estimates that even with broad-scale, co-ordinated control measures to reduce locust populations and prevent their spread to new areas, anticipated damages and losses in the Horn of Africa and Yemen – where the pests have also reached – will still be around US$2.5bn.
Yet some believe the locust plague has been somewhat forgotten about since the outbreak of coronavirus – despite continuing to be a significant threat.
“Pre-Covid-19, there was a lot of media focus around the locust invasion,” says Nairobi-based Grace Murage, senior regional manager for banks and DFIs at Rand Merchant Bank. “Once the news stream was taken over by the Covid-19 pandemic, there was little to no information around the status of the locust invasion. There was a joke on social media which said: ‘Did the locusts just mysteriously disappear?’ Because we didn’t see much of what the government was doing.”
Given how reliant the region is on the agricultural sector, the locust swarms remain a grave concern, she says. “The problem is, we don’t have much insight as to what is going on because we are in lockdown in the cities, and where the impact is being felt is in our breadbasket, which is in the central parts of the country.”
Cue Covid-19
Already facing one devastating outbreak at the start of 2020, life in East Africa (and the rest of the globe) was quickly turned upside down by the Covid-19 pandemic, as the virus spread and lockdowns and travel bans were imposed.
Economies in pre-pandemic East Africa were some of the fastest growing on the continent. According to International Monetary Fund (IMF) data, South Sudan’s GDP grew by 11.3% in 2019, Ethiopia’s increased by 9%, and Kenya clocked a 5.6% rise.
This year, however, the region has faced plummeting demand caused by Covid-19. In Kenya, for example, exporters in the fruit and vegetable sector only shipped 25-30% of their typical capacity in April, while flower exports suffered a more than 50% drop with indications that production was at less than 10% and at risk of total collapse, according to a report by Deloitte.
In Ethiopia, where agriculture accounts for nearly 60% of the country’s exports and 70% of total employment, agri exports were only one-fifth of their usual volume in April, resulting in a loss of about US$132mn since the start of the year.
The compounded impact of Covid-19, the locusts, and a high reliance on agriculture, makes Ethiopia the most vulnerable country in East Africa, says Jacques Nel, head of macroeconomics for Africa at NKC African Economics, a company which provides economic insights and forecasts for the continent.
“Then you have Kenya, which acts as a regional trade and services hub and the gateway into East Africa, struggling with locusts and floods,” he tells GTR. “In general, the East Africa region isn’t having a good year.
In terms of trade, the Covid-19 situation is going to have the biggest impact just because of the overall shock that it is going to have on growth. East Africa has been the fastest growing region in Africa in recent years. But, because of the slump in demand, we expect contractions in most East African countries.”
Because trade has been acutely impacted by Covid-19, banks across East Africa have made the decision to restructure loan facilities.
“In Kenya for instance, of the US$1.7bn of loan facilities that banks restructured in April 2020, trade accounted for the largest portion at 26.3%. Restructuring has been in the form of a moratorium on capital and/or interest, which provides much-needed relief to the industry, given how liquidity positions have been affected by the slowdown of business owing to lockdowns and depressed purchasing activity,” says Murage.
She adds that for agri traders, there are now “heightened” risks for banks lending in the sector, with demand for finance outstripping the availability of funds.
Nevertheless, Murage remains upbeat about the sector’s potential. “Kenyan banks restructured about US$118mn (7% of the total loan book) in Q1 owing to Covid-19. However, there is great potential for the agricultural sector as food security will be pivotal to how economies manage through the pandemic. East African economies are agrarian in nature and this is the time we should focus on value addition for our food produce and mechanisation of the agricultural process. If anything, Covid-19 has elevated the sector’s profile and I expect to see more financing opportunities come out of this crisis.”
Different approaches and torrential downpours
Governments across East Africa responded differently to the pandemic, with some opting to enter lockdowns immediately and others taking more relaxed measures.
Tanzania took a very different approach in its Covid-19 response to its neighbouring countries. Ahead of the Easter weekend in April, President John Magufuli encouraged the public to congregate at churches and mosques, reportedly stating the virus could not survive in the bodies of the faithful.
As this publication goes to press in July, the US Embassy in Tanzania has warned that the risk of contracting coronavirus in Dar es Salaam, a major city and commercial port, and other regions remains extremely high but cannot be quantified because authorities have not released data on cases and deaths since the end of April.
The country’s counterintuitive approach has had a noticeable impact on trade, with most of its neighbours sealing off their borders or implementing extensive safety measures. “A lot of the agri products in Tanzania are for export out of Tanzania to Kenya, Uganda and Rwanda,” says Murage. Because these countries now require the staff of the logistics companies transporting the goods to be tested before they are let in, a lot of produce has been stuck at the borders, which has proven costly, she says.
Amid the Covid-19 and locust chaos, parts of East Africa experienced a third disaster in Q2: torrential downpours and heavy flooding. In Kenya, Uganda and Somalia, fatal mudslides have taken hundreds of lives, washed away hospitals and bridges and put pressure on transport and logistics infrastructure.
Murage tells GTR that she drove out of Nairobi in mid-June and saw waterlogged fields and damaged crops. “The severe flooding has swept away roads and bridges, making it even more difficult to transport agricultural products to their destinations. The rainy season is usually in April and that is when people get ready for planting. What happened is that the rains were slightly delayed and then suddenly there was an onset of floods when people had already planted,” she says.
The torrential rains have been caused by moisture in the air carried by winds coming from the Indian Ocean, where temperatures have been higher than normal in recent months.
In the wider East Africa region, an above average rainy season in March and April also generated more favourable conditions for the locusts to breed, which increased their numbers and ability to spread to more areas.
“Silent pandemic” spurs economic worries
In April, the World Health Organization (WHO) warned that Africa could be the next epicentre of the coronavirus. It has since raised concerns that the continent could face a “silent pandemic” as testing hasn’t been prioritised in many states, meaning a low number of cases has been recorded publicly, with the actual figures thought to be much higher. As of July 14, Africa recorded just over 13,460 deaths, most of which were in Egypt and South Africa. At the time of press, the worldwide death toll was more than 575,000.
Even though they account for a tiny proportion of official global death figures, East African countries have been hit economically by lockdowns. In Kenya, the IMF’s projected GDP growth for 2020 now stands at 1% compared to the 5.7% predicted pre-pandemic, as the economy deals with a decline in tourism and export revenues, and disruption to supply chains, says the Deloitte report. In Ethiopia, GDP growth has been revised to 3.2% from 6.2% for this year. The outlooks in Tanzania and Uganda show a similar downward GDP growth trend.
Nevertheless, at this point in time at least, East Africa is faring better economically than the rest of Sub-Saharan Africa. A bi-annual report by the World Bank finds that the Covid-19 outbreak has caused the first recession in Sub-Saharan Africa in 25 years, with average regional growth forecast as low as -5.1% in 2020.
NKC African Economics’ Nel points out that governments across the continent have little fiscal space to support their economies when such a shock occurs.
“Debt relief has been a big topic and a clear channel through which you can provide these countries with support,” he says. “That’s going to be a key tunnel through which support should be given to reduce the fiscal burden-related debt.”
He says that this form of fiscal stimulus will be a source of critical aid to mitigate the extent of the virus’ impact. “A lot of these economies generally have a poor population, which means they are not just going to have to save less for a while, it means that they’re not going to be able to buy food.”
Such support is already being made available. In late March, the African Export-Import Bank (Afreximbank) announced a US$3bn facility to help African countries deal with the economic and health impacts of the pandemic. Available through direct funding, lines of credit, guarantees and cross-currency swaps, it will provide aid to member country central banks and other financial institutions to prevent trade payment defaults.
Whether the support available will be enough, and whether it will reach the numerous players along the East African agri supply chain who continue to be battered by natural disasters, is yet to be determined.
