The Business and Economic Impact of Ebola across Africa
KPMG Africa has collaborated across our healthcare practices in West, East and Sub-Saharan Africa to explore the impact of Ebola, both on the affected countries as well as on the businesses of some of our key clients.
The three countries in West Africa hardest hit by the epidemic are Liberia, Sierra Leone and Guinea, where the current outbreak started. Liberia and Sierra Leone have now experienced severe impacts, in part because the disease took hold in densely populated urban areas. Previous outbreaks were contained in less populated rural districts.
Liberia has experienced a sharp economic impact across all sectors with World Bank GDP estimates for 2014 decreasing from 5.9% to 2.5%. The greatest economic impact has resulted from fear-driven behaviour changes, as opposed to direct costs such sickness, death and caregiving time. This has affected employment levels, income and demand for goods and services. The MTN Liberia, Chief Financial Officer emphasises that a lot of skills in Liberia were drawn from ex-patriates, a large percentage of whom have returned home due to family or business concerns about the Ebola epidemic. He notes though that there are already signs of the trend reversing. The fear- driven evacuation of ex-patriats noted by MTN Liberia CFO, has, indeed, had a dramatic impact on key sectors of the Liberian economy. These are services (45% of labour force), mining (17% of GDP) and agriculture (nearly 50% of the workforce and 25% of GDP). The Services sector has been hardest hit with wholesale and retail traders reporting a 50-70% decline in turnover, the largest reduction being in markets serving expatriates. Commercial, residential and government construction are all in decline as contractors have evacuated key personnel. In agriculture large investments in palm oil have slowed, by Sime Darby, the world’s largest producer of palm oil, due to the evacuation of managerial and supervisory staff. Domestic agriculture has also slowed due to quarantines of rural food producing districts and migration of families at the start of the outbreak. This has affected harvesting and replanting of crops, restricted transport and marketing of produce resulting in food shortages and increased prices. Similarly, iron ore mining has been impacted by closure of operations by China Union in the epicentre of the epidemic and a hold on expansion plans by ArcelorMittal, the world’s leading steel producer.
The Sierra Leone economy has similarly been hard-hit by aversion behaviour related to the epidemic. The quarantining by government of affected districts has led to restrictions on internal travel and market closures, resulting in a decline in economic activity disproportionate to the human toll. World Bank estimates for GDP growth for 2014 are down to 8 percent from 11.3 percent; still relatively high given robust growth in the first half of the year. Key sectors of Sierra Leone economy are agriculture (50% of the economy), industry, mainly mining (20%) and Services (30% of the economy), which, similarly to Liberia, is hardest hit. There has been a wide range of Ebola- driven shut-downs and restrictions on markets, restaurants, bars and nightclubs as well as on transportation. Cancellation of commercial flights to the country are also impacting on the hospitality industry (31 flights a week in August down to 6 flights a week in September) and increasing isolation of the country from international markets. Hotel occupancy rates are down from 60-80% to 13%. In agriculture, government-induced quarantines on the two most active foodproducing districts are expected to impact heavily on rice production (staple food) and likely to increase rice prices by as much as 30%. This will impact heavily on districts where 30% of the population is already food insecure. The World Food Programme estimates that over 1 million people are likely to be in dire need of food due to the epidemic. Calls for an emergency operation have been made, amounting to 65 000 tons of food. Chronic malnutrition (35% of children 6-59 months), already a serious problem, is likely to be exacerbated by the upheaval in agriculture and food production. In the mining sector, there had been few disruptions to production by the end of September because most mines are not in severely affected areas. Many mines are, however, functioning with fewer expatriates so the risk of disruptions remains high. For more insights into the impacts of Ebola on Sierra Leone, see the Focus on Sierra Leone section later in this document.
The main impacts of the Ebola epidemic in Guinea have been in agriculture. This is due to a swift response of the Ministry of Health and Medecins Sans Frontieres to setting up contact tracing and follow-up in affected areas. Projected agriculture growth has been reduced from 5.7 to 3.3 percent. Again aversion behaviour by way of mass migration from affected areas has affected key export commodities such as cocoa and palm oil. Coffee production has decreased by half, cocoa declined by a third and palm production down by 75%. The impacts of international aversion behaviour is evident in the services industry. Mining companies Vale and Rio Tinto have evacuated many foreign workers affecting service industries. In addition, air lines have reduced travel, Senegal and Cote d’Ivoire have shut borders with the country and many expatriates departed. Hotel occupancy rates in Conakry have halved.
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