ESA COVID-19 situation report – Third Quarter 2022

Introduction

This report contains a brief overview of the situation around COVID-19 for the 24 countries that form the East and Southern Africa (ESA) region. The update – the thirteenth of its kind – covers the period of July to September 2022. As has become the case lately, it is almost impossible to report on any matter without mentioning the impact of COVID-19. As 2022 has commenced, this remains the case, although the effects of the virus on our daily lives are starting to abate. Nevertheless, the economic realities remain, as, according to the International Monetary Fund’s regional economic outlook, economic growth is expected to slow by more than 1% to 3.6%. The revised outlook is due to a worldwide slowdown, tighter global financial conditions, and a dramatic pickup in global inflation clouding a region already in turmoil due to an ongoing series of shocks. As a result, many African countries find themselves warped closer to the edge as inflation and public debt are at levels not experienced in decades while rising food and energy prices are preying on the most vulnerable countries on the continent.

With fears growing that a global recession is looming in 2023, the short-term outlook for the African continent is increasingly uncertain as the region’s prospects are firmly aligned with future developments of the global economy. Policymakers are facing the most challenging environment seen in years as the sociopolitical and security situation remains difficult for many countries on the continent. Policymakers have their hands full as they need to alleviate the current socioeconomic crises while reducing economic vulnerabilities that could have detrimental effects when the next future shock emerges by building resiliency. In addition, high-quality economic growth is needed to ensure the region’s safety and sustainability, which demands policymakers make room for economic recovery planning. Thus, African policymakers need to consider the following four policy priorities to ensure effective and sustainable economic recovery:

With approximately 123 million people facing acute food insecurity across the continent, addressing food insecurity becomes an essential policy priority that policymakers need to consider, especially in the wake of rising food and energy prices placing more lives at risk. However, the ability to expand social safety nets is constrained in many countries, which has led to the implementation of unnecessarily expensive and poorly targeted support measures in the past, proving ineffective. Therefore, although food support remains necessary after the COVID-19 pandemic and the ongoing Ukrainian war, African countries need to phase out the current measures, which have proved ineffective, and adopt better-targeted alternatives that ensure that these scarce resources are distributed to the people who need it the most.
The aftermath of the COVID-19 pandemic and the ongoing Ukrainian war has led to high levels of inflation accompanied by rising interest rates, which has resulted in authorities tightening their monetary policies. Therefore, policymakers in Africa must manage the shift experienced in monetary policies effectively to ensure they are well-placed to implement economic recovery strategies. Furthermore, policymakers should consider a gradual and cautious increase in policy rates while closely monitoring inflation expectations and foreign exchange reserves.
Policymakers across Africa should strongly consider consolidating public finances amid tighter financial conditions due to regional debt approaching levels equivalent to the early 2000s before the impact of the heavily indebted developing countries initiative. As mentioned above, the tightening of monetary policies includes increased interest rates, which will increase the difficulty of obtaining funding and could further prove detrimental to economies on the continent. Debt levels will also take longer to be settled in full for individuals who have not agreed to a fixed interest rate, as the increased interest rates will heighten the cost of the debt owed to the credit provider. Therefore, consolidation of public finances should be strongly considered to build resilience and absorb the costs associated with higher interest rates. Furthermore, fiscal frameworks such as effective debt management could reduce exposure to risk sentiment shifts and decrease borrowing costs. Some countries may even need debt restructuring, which would require the improved implementation of the G20 common framework.
Climate change is a growing threat to lives and livelihoods in Africa as the continent has historically accounted for a negligible 3% of cumulative worldwide CO2 emissions. Therefore, policymakers need to plan- and create frameworks that encourage and facilitate greener and more sustainable growth. High-quality growth has always been a priority for the continent; however, accelerating climate change experienced across the globe is changing the landscape dramatically and demanding countries to adapt their policies and strategies accordingly. Thus, innovation, private funding, and energy sector reforms will be needed to ensure that the continent capitalizes on its sizable endowment of renewable energy sources, which could enable sectors to leapfrog the fossil-fuel-based model and shift towards a greener and more sustainable economy over the long term.

Contents

1. African economic outlook 2022

According to the African Development Bank, the 2022 African Economic Outlook theme is “Supporting Climate Resilience and a Just Energy Transition in Africa.” The theme highlights climate change as a growing threat to lives and livelihoods in Africa and mirrors the theme of the 2022 Annual Meetings. Despite having 17% of the global population, Africa has historically accounted for a negligible 3% of cumulative worldwide CO2 emissions. However, climate change and extreme weather events disproportionately affect Africa, with severe economic, social, and environmental consequences for its people.

The African Economic Outlook makes it clear that the pandemic and the Russia-Ukraine war could leave a lasting impression over several years, if not as much as a decade. Meanwhile, around 30 million people in Africa were pushed into extreme poverty in 2021, and about 22 million jobs were lost in the same year because of the pandemic. The trend is expected to persist through the second half of 2022 and into 2023. Moreover, the economic disruptions stemming from the Russia-Ukraine war could push a further 1.8 million people across the African continent into extreme poverty in 2022, while that number could swell to another 2.1 million in 2023.

The continent’s additional financing needs for 2020-2022 are estimated at $432 billion. Financing African countries’ nationally determined contributions in the form of public pledges from countries on how they plan to play a part in post-2020 collective action on climate change will require up to 1.6 trillion between 2022 by 2030. The continent loses between 5% and 15% of its gross domestic product to climate change. African countries received only $18.3 billion in climate finance between 2016 and 2019, which leaves a gap of up to $1 288 billion annually from 2020 to 2030.

According to the World Bank, growth in Africa is expected at 3.7% in 2022 and 3.8% in 2023, which is on par with projections made in January. Yet, excluding the three largest economies, growth was downgraded by 0.4% in 2022 and 2023. Although elevated commodity prices would underpin recoveries in extractive sectors, rising inflation would erode real incomes, depress demand, and deepen poverty in many countries. In addition, growth in low-income countries (LICs) was revised down by almost a full percentage point this year as food price inflation and food shortages are expected to take a particularly severe toll on vulnerable populations, further worsening food insecurity in those countries.

According to the World Bank, domestic food price inflation remains high in Africa and the rest of the world, heightening the risk to food security in many countries. Data captured in the third quarter of 2022 illustrates high inflation in most low-income and middle-income countries. 93.3% of low-income countries, 90.9% of lower-middle-income countries, and 93% of upper-middle-income countries have seen inflation levels above 5%, with many experiencing double-digit inflation. The share of high-income countries with high inflation has also increased sharply, with about 85.7% experiencing high food price inflation. Several African countries have experienced very high inflation rates, inflating concerns regarding their levels of food security. Figure 1 below depicts the top 10 African countries that experienced the highest inflation rates in 2022 compared to the previous year. Astonishingly, Sudan experienced an inflation rate of 245%, while Zimbabwe and Ethiopia saw 86.7% and 34.5%, respectively.

Figure 1: Top 10 African countries with the highest inflation rate in 2022 compared to the previous year.

Source: Statista

The map below illustrates the widespread food inflation experienced around the globe in the aftermath of the COVID-19 pandemic and the ongoing war in Ukraine. The restrictions imposed on Russia and the inability to trade with Ukraine are continuously halting the supply of maize, grain, fertilizer, oil and the like, which is one of the main contributing factors towards the inflation experienced. Therefore, the inflation levels experienced in several African countries are highly concerning and must be addressed effectively to ensure that food security levels are maintained and secured.

Figure 2: Food Inflation heat map

Source: The World Bank

As a result of these high inflation rates in Africa, the World Bank has illustrated its commitment to finance $30 billion over a period of 15 months in areas such as agriculture, nutrition, social protection, water, and irrigation as part of a comprehensive, global response to the ongoing food security crisis. This financing will include efforts to encourage food and fertilizer production, enhance food systems, better facilitate trade, and support vulnerable households and producers. More specifically, (1) a $315 million loan will be made available to support Chad, Ghana, and Sierra Leone to increase their preparedness against food insecurity and improve their food systems’ resilience. (2) A $500 million loan will be made available for the emergency food security and resilience support project to bolster Egypt’s efforts to ensure that poor and vulnerable households have uninterrupted access to bread. It will also help strengthen the country’s resilience to food crises and support reforms that will help improve nutritional outcomes. (3) A $130 million loan will be directed at Tunisia, seeking to lessen the impact of the Ukraine war by financing vital soft wheat imports and providing emergency support to cover barley imports for dairy production and seeds for smallholder farmers during the upcoming planting season. Furthermore, (4) the World Bank’s $2.3 billion Food Systems Resilience Program for Eastern and Southern Africa assists countries in Eastern and Southern Africa to increase the resilience of the region’s food systems and ability to tackle growing food insecurity. The program will enhance inter-agency food crisis response, boost medium- and long-term efforts for resilient agricultural production, sustainable development of natural resources, expanded market access, and a greater focus on food systems resilience in policymaking.

However, another glimpse of hope is provided to African countries facing food security challenges as the “Black Sea Grain Initiative” is ramping up grain and fertilizer exports from Ukrainian- and Russian ports, easing the food shortage many countries face. The agreement has made it possible for almost 240 vessels to leave Ukrainian ports conveying approximately 5.4 million metric tons of grain and other foodstuffs since the initiative’s inception on 1 August 2022. This initiative is slowly but surely enhancing the confidence level in the shipping industry as more ships are committing their vessels to facilitate Ukrainian exports, resulting in reduced insurance premiums. Most importantly, confidence is being restored to the local Ukrainian agricultural community as they can start planning future harvests. This increase in confidence seen throughout the supply chain environment has seen wheat shipments delivered to Ethiopia, Yemen, Tunisia, and the like.

In addition, the International Monetary Fund (IMF) provides policy advice, capacity development, and financial support to help member countries tackle the global food crisis under the new Food Shock Window initiative. The new Food Shock Window provides increased access under emergency financing instruments for countries with urgent balance of payments needs associated with acute food insecurity, rising food and fertilizer imports, or substantial cereal export shortfalls. To date, several African countries such as (1) Benin, (2) Cabo Verde, (3) Mozambique, (4) Tanzania, (5) Zambia, (6) Jordan, and (7) Senegal stand to benefit from the initiative with the view to strengthen their social safety nets and address the balance of payments challenges associated with food insecurity.

Furthermore, preferential trade under the African Continental Free Trade Area (AfCFTA) agreement kicked off during the third quarter of 2022 as Kenya successfully exported their first Exide battery shipment worth Sh9.24 million to Ghana under the AfCFTA pilot project. Kenya was picked alongside six other nations to champion the trial phase of the framework designed to reduce tariffs on goods and services and eliminate barriers to the movement among African countries. Other countries selected to participate in the pilot phase of the AfCFTA Initiative on Guided Trade are Tanzania, Tunisia, Cameroon, Egypt, Mauritius, and Ghana. The AfCFTA could be an excellent framework for the African continent to kickstart economic growth and facilitate proper recovery in hindsight of the COVID-19 pandemic. Currently, the gap between Africa and continents hosting an abundance of developed economies is highlighted by the fact that intra-African trade is merely between 16-18%, while intra-European trade and trade between ASEAN countries is approximately recorded at 70%. One of the main reasons is that African countries tend to export raw materials and import manufactured goods as they cannot develop their own raw materials into finished articles. As a result, attention is turned to developed economies worldwide instead of who can satisfy the need for manufactured goods. Additionally, the non-tariff barriers and costs associated with doing business in Africa are often more expensive than importing goods from Asia and Europe.

2. Continent overview

The following section gives an overview of the recorded COVID-19 infections, deaths, and vaccine doses administered throughout Africa.

a. COVID-19-reported infections and deaths

For the sixth week in a row, weekly COVID-19 cases have continued to decrease across the African region, which strongly indicates that the pandemic is stabilizing in many African countries. According to the World Health Organization’s COVID-19 dashboard, 9.3 million COVID cases were reported at the end of the third quarter of 2022. In 2021, the African region reported a total of 5.3 million cases, while merely 1.5 million cases were reported from January 2022 to September 2022, which further emphasizes that the pandemic is stabilizing in Africa. The total number of COVID-19-associated deaths currently stands at 173 296, with a case fatality rate of 2% in the region. Since the inception of the pandemic, South Africa accounted for 102 108 fatalities (59%), while Ethiopia accounted for 7 572 (4%), Algeria for 6 879 (4%), Kenya for 5 674 (3%), and Zimbabwe for 5 596 (3%).

Figure 3: Lab-confirmed COVID-19 cases in African regions as of 4 September 2022

Source: WHO

Similar to the information in the figure above, COVID-19-related deaths have also subsided by the end of the third quarter of 2022. The reality suggests that the vaccination drives in Africa have been largely successful in mitigating the health implications of the pandemic. By the end of the third quarter of 2022, Africa will remain the continent with the fewest reported COVID-19-related deaths. However, it is also important to note that not all African countries have committed to reporting their latest COVID-19 statistics. The figure below illustrates that the Americas is the region with the most reported deaths since the inception of the pandemic, with approximately 2.8 million deaths recorded to date, shortly followed by Europe, which reported approximately 2.1 million deaths to date. The region with the third most COVID-related deaths is the South-East Asia region, which recorded approximately 797 681 deaths since the inception of the pandemic.

Figure 4: COVID-19-related deaths by WHO region

Source: WHO

As illustrated in the figure above, the trends in new COVID-19 cases and associated deaths have decreased in the African region, with many countries reporting very low hospital admission and fatality rates. These low hospital admission and fatality rates could indicate the continuous transitioning out of the pandemic alert phase, which could be attributed to the non-aggressive nature of the COVID-19 Omicron variant and hybrid immunity in individuals two years after the inception of the pandemic.

b. COVID-19 Vaccinations

At the end of the third quarter of 2022, the African continent recorded a vaccination utilization of 66.5%, as a total of 974.6 million vaccine doses were received across the continent, while 648 million doses were administered to date. Out of all African countries, merely three countries have surpassed the target of having a vaccinated population of at least 70%. Tunisia subsequently joined Mauritius and Seychelles with a vaccinated population above 70% in the third quarter of 2022, while Rwanda dropped out of the top three with a fully vaccinated population of 68%. Although these countries have relatively small populations, Mauritius has a 79% fully vaccinated population. Seychelles enjoys the status of the highest fully vaccinated African country, with a vaccinated population of 80%, while Tunisia’s population is 73% fully vaccinated.

Additionally, 10 African countries have recorded a vaccinated population between 40% and 70%, an improvement from the six recorded in the second quarter of 2022. The ten countries are identified as (1) Rwanda (68%), (2) Morocco (67%), (3) Cape Verde (61), (4) Botswana (59%), (5) Egypt (48%), (6) Mozambique (42%), (7) Eswatini (41%), (8) Angola (41%), (9) Uganda (40%), and (10) Zimbabwe (40%). In the third quarter of 2022, five African countries identified as (1) Senegal (8.9%), (2) Cameroon (5.9%), (3) Madagascar (5.5%), (4) Democratic Republic of the Congo (5.1%), and (5) Burundi (0.15%) have reported vaccinated populations below the 10% benchmark as can be seen in the figure below.

Figure 5: Share of Vaccinated Populations in African countries

Source: Our World in Data

As of 4 July 2022, Africa had administered around 41 coronaviruses (COVID-19) vaccines per 100 people. The vaccination rate on the continent was far slower than the world average, measured at 154 vaccines per 100 individuals on the same date. A striking divide between countries has also marked vaccination in Africa. Africa started receiving vaccine supplies under the WHO-backed Covax facility in February 2021. As a result, some African countries purchased additional doses, while others benefited from bilateral donations. The figure below illustrates the gap between the number of fully vaccinated individuals in Africa and the rest of the world.

Figure 6: African Vaccination Compared to the rest of the World

Source: Our World in Data

Although the gap between Africa and the rest of the world remains large regarding vaccinated populations, the surge in vaccination uptake in Africa during the second and third quarters of 2022 indicates Africa’s commitment towards COVID-19 vaccinations. As of 10 July 2022, 282 million people on the continent, representing 21.1% of Africa’s population, had completed their primary series vaccinations, an uptake of ↑10% compared to the beginning of the year. The African continent certainly experienced a slow start to their vaccination drive as several countries struggled to get their vaccination campaigns off the ground. However, several of these countries made exemplary efforts in 2022 to ensure that uptake in COVID-19 vaccines is realized. A prime example is Ethiopia, which saw a surge in vaccinations from a modest ↑3.5% at the beginning of the year to 33% in the third quarter of 2022. Elsewhere, Cote d’Ivoire experienced a further uptake from 24.8% in the second quarter to 25.8% in the third quarter of 2022. Zambia experienced an uptake from 3.5% to 25.2% in 2022, while Uganda experienced an equally plausible uptake from 4.4% to 25.5% in 2022.

As mentioned above, a total of 974.6 million COVID-19 vaccines have been delivered in the African Region. The figure below illustrates the composition of the total doses received as (1) approximately 622 million COVID-19 doses (63.5%) were received from COVAX, (2) approximately 273 million (27.9%) from bilateral cooperation arrangements, and (3) approximately 83 million (8.6%) from the African Vaccine Acquisition Trust (AVAT).

Figure 7: COVID-19 Vaccine doses received by African countries (in millions)

Source: African Union

Two years of COVID-19 have stretched health systems, societies, and supply chains across the globe, leaving vulnerable communities with less capacity to cope as the world is witnessing a significant increase in the number of people requiring humanitarian assistance. As a result, the World Health Organization (WHO) has set an objective to ensure that 1 billion people across the globe are better protected from health emergencies. Subsequently, the WHOs Global Health Emergency Appeal (GHEA) aims to contribute towards this strategic objective and to meet urgent emergency and humanitarian health needs for every region, including the COVID-19 response. In the WHOs GHEA 2022, published in March 2022, they called for $2.7 billion in funding to serve people around the world in the most vulnerable settings, including $1.6 billion for ending the acute phase of the COVID-19 pandemic. Thanks to the generosity of donors, investments in WHO’s COVID-19 response have helped slow the pandemic’s destructive path and enabled the introduction of life-saving tools.

However, the inequities in access to these tools among communities and countries that need them most have not yet been addressed. As of 19 September 2022, WHO has received $1.1 billion in support of its COVID-19 response, and $37.1 million have been pledged. WHO’s current funding gap against funds received and pledged is $479.6 million. This situation is reflected in the figure below, which indicates the donor investments received in the ACT-Accelerator to date.

Figure 8: Contributions to WHO for COVID-19/ ACT-A – data as of 19 September 2022

Source: WHO

In mid-2021, the WHO called on all countries to vaccinate 70% of their population against COVID-19 by June 2022, with an interim milestone of 40% by the end of 2021. This global goal was to reduce virus transmission, protect people everywhere from the disease, reduce hospitalization and death rates, and support socioeconomic recovery. Vaccinating the world against COVID-19 has been the largest public health initiative ever, and more than 12 billion vaccine doses have been administered to date. According to a recent study, the vaccines administered in the first year of the global rollout were instrumental in averting an estimated 19.8 million deaths. However, significant inequities in the accessibility and affordability of vaccines between countries have prevented low-income countries from reaching the 70% goal. As a result, they continue to bear the brunt of the pandemic’s devastating effects.

At the inception of the third quarter of 2022, only 1.3% of all vaccines had been administered to people living in the poorest 27 countries, while two low-income countries have not yet started their vaccination campaigns. The key constraint to the above was the inequitable distribution of the global vaccine supply throughout 2021, as vaccine equity has been undermined by factors such as (1) bilateral deals between manufacturers and high-income countries, (2) vaccine hoarding, (3) export bans, and (4) manufacturer refusals to share vaccine know-how. As a result, by the end of 2021, only four low-income countries identified as (1) Mozambique, (2) Rwanda, (3) Togo, and (4) Uganda had received enough doses to achieve the feat of fully vaccinating 40% of their populations.

The vaccine inequity experienced between high-income- and low-income countries is illustrated in the figure below, where 80% of people in upper-middle-income countries have access to vaccinations, while approximately 73% of people in high-income countries have access to vaccines. Approximately 56% of people in lower-middle-income countries have access to vaccines, while approximately 15% of people in low-income countries have access. The African continent will fall between low-income- and lower-middle-income countries on the graph as every 40 out of 100 people in Africa enjoy access to vaccines.

Figure 9: Accessibility of vaccines across the globe

Source: United Nations

Merely 66 countries and territories achieved the WHO target of vaccinating 70% of their population by 30 June 2022. However, vaccine access and affordability inequities have resulted in zero low-income countries reaching this goal, compared to nearly two-thirds of high-income countries. As a result, more than 500 million of the 665 million people living in low-income countries remain unprotected, which emphasizes the importance of an equitable approach to vaccine distribution across the globe to ensure fair and sustainable global recovery. The figure below further substantiates vaccine inequity by revealing which countries can vaccinate 70% of their respective populations in the timespan provided. Furthermore, the figure illustrates that no African countries could achieve the objective on time, with only three countries on the continent managing to achieve the objective by the end of the third quarter of 2022.

Figure 10: 70% Vaccination target reached by 30 June 2022

Source: United Nations

In low-income countries where vaccination rates are lagging, the path to recovery will be long and uncertain unless urgent action is taken now by the global community. By September 2021, only 2.33% of people in low-income countries had been fully vaccinated. UNDP’s analysis suggests that, had the vaccination rate been equal to that of high-income countries (54.3%), low-income countries’ GDP would have increased by $16.3 billion, representing an increase of 5.16% in 2021, which could have been used toward other development priorities. For instance, if 40% of the population had been vaccinated in the Democratic Republic of the Congo by September 2021, the country’s expected increase in GDP could have covered 75% of its current health expenditure, while the same level of vaccination in Ethiopia could have covered all interest payments on government debt three times over.

3. Impact on trade

a. Global Services Trade

The Services Trade Barometer is a composite coincident indicator of trade activity of world services which combines six component indices. These six indices are identified as (1) global services, (2) financial services, (3) ICT services, (4) passenger air transport, (5) container shipping, and (6) construction. By adjusting nominal services trade statistics to account for changes in prices and exchange rates, an approximate measure of the volume of world services trade is calculated, which translates to the services trade activity barometer. Readings in line with the baseline score of 100 in the Services Trade Barometer indicate growth, which is considered in line with medium‐term trends, while readings greater than 100 suggest above-trend growth, and those below 100 indicate below-trend growth. The figure below illustrates the performance of each of the six component indices.

Figure 11: Indices of the Services Trade Barometer

Source: WTO

During the second quarter of 2022, world services trade continued to grow, according to the WTO’s Services Trade Barometer, which indicates the services trade’s resilience to the ongoing war in Ukraine. The latest reading of 105.5 is firmly above the previous reading of 102.5 recorded in September 2021 and comfortably over the baseline value of 100 for the index, suggesting that services trade is likely to post sustained gains in the second half of 2022. Moreover, compared to the performance of the goods trade barometer, it is evident that the services trade barometer is outperforming its counterpart, suggesting a possible shift in consumption patterns away from goods and back toward services as the COVID-19 pandemic eases.

Among the Services Trade Barometer’s component indices, the passenger air transport index (117.1) registered the most substantial gain, contributing significantly to the trend reading in the global index captured in the figure below. Furthermore, strong performances captured in the services Purchasing Managers’ Index (105.1) and information and communication technology services (104.2) also contributed towards the improved services barometer reading. In contradiction, although it remains above the trend, the financial services index (101.7) appears to have lost momentum recently, which could likely be attributed to sanctions on the Russian Federation due to its role in the Ukrainian war. On the other hand, other indices, including container shipping (101.5) and construction (101.1), remain slightly above the trend.

Figure 12: Services Trade Barometer (index history = 100)

Source: WTO

To further substantiate the latest improved reading of 105.5 on the services trade barometer, the figure below illustrates the services import and export activity of the G20 economies. The import and export activity of the G20 economies up until the third quarter of 2022 shows an uptake in the trade in services. The increased trade provides another indication that the COVID-19 pandemic is easing. However, the ongoing Ukrainian war is continuously impacting international trade and posing the threat of a global recession that could be looming in 2023. This reality will exert a tremendous impact on trade in services which remains to be seen in the coming year.

Figure 13: G20 Economies’ Trade in Services

Source: OECD

b. Global Merchandise Trade

According to the WTO, world trade is expected to lose momentum during the second half of 2022 and remain passive in 2023 as multiple shocks weigh on the global economy. These shocks include aspects such as (1) the war in Ukraine, (2) high energy prices, (3) inflation, (4) the tightening of monetary policies and the like, which could all contribute towards a potential global recession during the latter stages of 2022 persisting through into 2023. As a result, WTO economists now predict that global merchandise trade volumes will grow by ↑3.5% in 2022, a slight improvement from the 3.0% forecast in April. However, they foresee a significant ↑1.0% increase for 2023, down sharply from the previous estimate of 3.4%. In addition, the global gross domestic product (GDP) at market exchange rates is anticipated to increase by ↑2.8% in 2022 and by ↑2.3% in 2023, which is approximately an entire percentage point lower than the initial forecast for global GDP in 2023.

Quarterly merchandise trade volume developments and projections by each WTO region from 2019 to 2023 are illustrated in the figure below. The imposed sanctions on The Russian Federation, in retaliation for their invasion of Ukraine, started to take its toll as the Commonwealth of Independent States (CIS) region suffered a substantial ↓10.4% q/q export decline during the second quarter of 2022. In contradiction, expectations were exceeded during the first half of the year regarding merchandise trade volumes from South America, Africa and especially the Middle East as their export activity increased due to the reduced shipments from the CIS region. Exports from North America, Europe, and Asia during the year’s first half were broadly in line with expectations.

In terms of merchandise imports, the CIS region was negatively impacted by the effects of the Russian Federation’s invasion of Ukraine, as imports plummeted by ↓21.7% during the second quarter of 2022. The WTO’s economists suspect that the decrease in import activity from the CIS region could be attributed to the Russian Federation’s exclusion from the SWIFT payments system. Like their export activity, South America, Africa, and the Middle East exceeded expectations as they comprised the capacity to import larger volumes because their increased export activity, accompanied by higher commodity prices, provided the necessary inflation of export revenues to fund their import activity. Europe and North America also exceeded expectations regarding import growth during the first half of 2022. However, Asian imports stagnated in the first half of the year.

Figure 14: Merchandise Imports and Exports by region (Volume index, 2019=100)

Source: WTO

Robust merchandise imports, primarily from Europe, the United States, and parts of the developing world, supported merchandise trade growth in the first half of 2022. This reality partially reflected suppressed demand relating to the aftermath of the pandemic-driven spending shift from services towards goods that could not be satisfied earlier due to supply bottlenecks. However, it also resulted from other positive factors, such as the appreciation of the dollar from the United States perspective, the relative dynamism of intra-regional trade in Europe, and favorable terms-of-trade effects present in some large emerging economies due to elevated energy prices. The figure below illustrates the trend followed by global merchandise trade volumes from 2013 to the third quarter of 2022. A few weeks after the inception of the Ukrainian war, WTO economists relied on simulations to generate reasonable growth assumptions due to the absence of accurate data regarding the impact of the war. Consequently, the growth assumptions made in their April forecast turned out to be broadly correct, while the assumptions made regarding growth prospects now seem to be overly optimistic as (1) energy prices have surged, (2) inflation has become more broad-based, and (3) the war shows no sign of letting up.

Figure 15: Volume of World Merchandise Trade (Seasonally adjusted index, 2015=100)

Source: WTO

It should be noted that with the forecasts mentioned above, there is a high degree of uncertainty due to shifting monetary policy in advanced economies and the unpredictable nature of the Russia-Ukraine war. Should these trade forecasts be accurate, trade growth will remain positive in 2023 but slow to a great extent. In addition, if these forecasts are accurate, trade growth in 2022 could end up between 2.0% and 4.9%. If the downside risks materialize, trade growth in 2023 could be as low as -2.8%. However, if the surprises are on the upside, trade growth next year could be as high as 4.6%. Trade could also finish outside these bounds if any underlying assumptions change.

To further substantiate the economists’ assumptions, the most recent WTO Goods Trade Barometer was issued on 23 August 2022, and the yielded results suggest that global merchandise trade growth is facing the prospects of stagnation during the latter stages of the year. As depicted in the figure below, the Goods Trade Barometer showed signs of steadiness but found itself below the recent trend line for merchandise trade, which suggests that global merchandise trade continued to grow in the third quarter of 2022. However, the pace of growth was slower than in the first- and second quarter of 2022 and is likely to remain weak for the rest of the year.

Figure 16: Barometer for Global Merchandise Trade

Source: WTO

The Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends. The latest reading of 100.0 coincides precisely with the baseline value of the index, indicating on-trend trade expansion. However, the overall barometer remains below its companion index, representing actual merchandise trade volumes, suggesting that annual trade growth may slow but remain positive.

c. Trade and Development (UNCTAD)

The United Nations Conference for Trade and Development (UNCTAD) announced in their report on global trade that the world economy is amid cascading and multiplying crises which could see a global recession take center stage in 2023. Growth is stagnating everywhere across the globe as incomes are still lingering below the levels seen in 2019 in many major economies. Many households in developing countries and advanced economies feel the effects of the heightened living costs due to the COVID-19 pandemic and the ongoing conflict in Ukraine, while damaged supply chains remain fragile in crucial sectors. Fiscal rules and highly volatile bond markets are increasing pressure on government budgets as over half of low-income countries and about a third of middle-income countries are edging ever closer to default due to their debt distress. Several asset classes are coming under increased scrutiny as questions are mounting regarding their reliability resulting in volatile financial markets. Additionally, climate stress is intensifying, with mounting loss and damage in vulnerable countries that lack the fiscal space to deal with disasters, let alone invest in their long-term development. In some countries, the economic hardship resulting from these compounding crises is already triggering social unrest that can quickly escalate into political instability and conflict.

One of the main concerns raised in global economies is the inflation experienced due to the COVID-19 pandemic and the ongoing conflict in Ukraine. Both catastrophic events have tremendously affected global commodity prices and the relationship between consumer demand and the ability to supply certain commodities. The recently experienced relationship between “demand-pull” and “cost-push” is causing a vicious inflation cycle as one feeds into the other. For example, demand-pull inflation is caused by factors such as the inability of Ukrainian exporters to get their wheat and grain crops out of the country to their intended markets. Thus, demand for these products is growing while the supply cannot satisfy the global demand, leading to increased commodity prices. The same situation applies to Russia’s oil reserves; however, the main difference is that sanctions and embargoes are imposed upon Russian exporters, hindering them from exporting their goods to the intended markets. As a result, the price of food and fuel is increased, leading to an increased cost of living which further leads directly to cost-push inflation as employees now demand higher salaries to compensate for the heightened living costs. Therefore, the cost of production is higher, which automatically increases commodity prices affecting the consumer. At the end of the second quarter of 2021, 23 economies, representing less than 0.9 billion of the world population, experienced double-digit inflation. At the end of the second quarter of 2022, 69 economies representing more than 2.1 billion of the world population experienced double-digit inflation, illustrated in the figure below.

Figure 17: Countries facing double-digit inflation at the end of the second quarter of 2022

Source: UNCTAD

According to a comprehensive new study conducted by the World Bank, the world may be heading towards a global recession in 2023 due to the acts of central banks worldwide simultaneously hiking interest rates in response to the levels of widespread inflation experienced. These interest rate hikes seen in 2022 have been implemented with a degree of synchronicity not seen over the past five decades and are most likely to continue well into next year. Despite the actions undertaken by central banks, the expected trajectory of interest-rate increases and other policy actions may not be sufficient to bring global inflation back down to levels seen before the pandemic. As a result, it is expected that global monetary policy rates will be increased to almost 4% during 2023, representing an increase of more than 2% over the 2021 average.

Additionally, according to the report, these interest-rate increases could leave the global core inflation rate (excluding energy) at about 5% in 2023 unless supply disruptions and labor-market pressures subside. This potential inflation rate is nearly double the five-year average experienced before the COVID-19 pandemic. To ensure that global inflation remains consistent with the targets set out, central banks may need to raise interest rates by an additional 2%, according to the report’s model. Should financial-market stress accompany this, global GDP growth would slow to 0.5% in 2023, representing a 0.4% contraction in per capita terms which would essentially meet the technical definition of a global recession.

However, the study emphasizes that central banks should continue their fight against inflation which is a feat that could be achieved without sparking a global recession if concerted action by a variety of policymakers is followed:

Central banks – should safeguard their independence and communicate policy decisions clearly, which could help anchor inflation expectations and reduce the degree of tightening needed. In addition, central banks in advanced economies should keep the cross-border spill-over effects of monetary tightening in mind, while central banks in emerging markets and developing economies should strengthen macroprudential regulations and build foreign-exchange reserves.
Fiscal authorities – will need to carefully calibrate the withdrawal of fiscal support measures while ensuring consistency with monetary-policy objectives. The fraction of countries tightening fiscal policies next year is expected to reach its highest level since the early 1990s, which could amplify the effects of monetary policy on growth. It is also vital that credible medium-term fiscal plans are implemented to provide targeted relief to vulnerable households.
Other economic policymakers – need to take decisive steps to boost global supply, which would assist significantly in the fight against inflation. The steps taken to boost global supply should include the following:
- Easing labor-market constraints. Policy measures need to help increase labor-force participation and reduce price pressures, as labor policies can facilitate the reallocation of displaced workers.
- Boosting the global supply of commodities. Global coordination can go a long way in increasing food and energy supply. In addition, policymakers should accelerate the transition to low–carbon energy sources and introduce measures to reduce energy consumption.
- Strengthening global trade networks. Policymakers should cooperate to alleviate global supply bottlenecks. Moreover, they should support a rules-based international economic order that guards against the threat of protectionism and fragmentation that could further disrupt trade networks.

d. Ocean freight industry

i. Global container throughput

During the third quarter of 2022, the flash forecast for the Container Throughput Index indicates a slight seasonally adjusted increase to 127.4 points in August, which is ↑1.3 points higher than the reading captured in June at the end of the second quarter. Furthermore, a significant increase in container throughput could be observed in Northern Europe as the North Range Index, an indicator for economic development in northern Europe and Germany, recorded a remarkable increase in August from 111.5 (revised) to 115.2 points. This change was an impressive increase of ↑3.7 points. Additionally, container throughput in Chinese ports continues to recover after the hard lockdowns due to the short break taken in July and saw an increased index of ↑2.4 from 137.1 to 139.5 points. According to Torsten Schmidt, head of economic research at RWI, pressure on supply chains is easing due to the favorable third-quarter figures displayed by the container throughput index, especially in European ports.

This Container Throughput Index provides insights into the anticipated recovery of global supply chains after the COVID-19 pandemic and the ongoing Ukraine conflict that caused major global supply chain disruptions. Persisting factors such as global port congestion, poor schedule reliability and delayed berthing moderating have contributed to the container throughput increase, which is in accordance with the Container Throughput Index of RWI – Leibniz Institute for Economic Research and the Institute for Shipping Economics and Logistics (ISL). The figure below depicts the growth trend of the container throughput index from 2015, through the pandemic, until the third quarter of 2022.

Figure 18: Global Container Throughput Index

Source: RWI/ISL

ii. Global freight rates

The global liner shipping industry continues to react to the sudden drop in demand, as Drewry’s “World Container Index” (WCI) decreased sharply by ↓8.0% at the end of September for the 32^nd consecutive week, down to $3 689 per 40-ft container. The most recent composite index decrease means that the index has dropped a remarkable ↓64% compared to the same week of 2021 and is also ↓64% below the peak of $10 377 reached in September 2021. The composite index is currently ↓1% lower than the 5-year average of $3 723, which indicates a return to more normal container prices; however, container prices remain ↑160% higher than the average pre-pandemic rates of $1 420 experienced in 2019. The average year-to-date composite index is $7 500 per 40ft container, which is ↑50% ($3 777) higher than the five-year average of $3 723. The figure below illustrates the container index measured until the end of the third quarter of 2022.

Figure 19: Drewry Global Container Index

Source: Drewry

Freight rates on the Shanghai-Rotterdam trade route decreased by ↓13%, which translates to $717, to $4 724 per 40ft container, while spot rates on the Shanghai-Los Angeles trade route decreased by ↓9%, equivalent to $288, to $2 995 per 40ft container. Similarly, rates on the Shanghai-Genoa trade route retracted ↓6% to $4 912 per 40ft container, while rates concerning the Shanghai-New York trade route dipped ↓5% to $6 887 per 40ft container. Rates on the Rotterdam-Shanghai and the Los Angeles-Shanghai trade routes decreased by ↓4% each to $967 and $1 226 per 40ft container, respectively. Conversely, rates on the Rotterdam-New York trade route increased by ↑3% to $7 252 per 40ft container, while rates on New York-Rotterdam expanded by ↑4% to $1 305 per 40ft container. The figure below illustrates the rate change on eight major East-West trade routes that Drewry analyzed during the third quarter of 2022. These same analysts expect rates to decrease continuously in the coming weeks of the fourth quarter.

Figure 20: Spot Rates on eight major East-West trade routes

Source: Drewry

iii. Global trade deployment by cellular capacity

Updated data from Alphaliner has shown that the global cellular capacity grew by ↑3.8% (y/y). However, the growth has not been shared across all regions, as three trades have significantly reduced. The intra-Europe trade was the worst hit as the total capacity of cellular ships deployed in dedicated intra-European services was down ↓14.2% compared to last year – highlighting the ongoing issues of congestion, staffing, and now the container barge shortages. The two other regions with a reduced offering are intra-Asia services, down by ↓10.3%, and all Africa-related services, down by ↓4.3%, according to data from Alphaliner. The following side-by-side figures show the deployment growth and share:

Figure 21: Growth in global trade deployment by cellular TEU capacity (million TEU) and share per region

Source: Alphaliner

The narrative behind Africa’s reduction is emphasized by UNCTAD calculations, showing that the impact of higher freight rates on consumer prices is five times stronger in small island states than the world average. What is further detrimental for Africa is that between the consolidation of NileDutch and Bollore, disturbing services, availability of equipment, and problematic scheduling of calls, African economies ended up with some of the worst upheaval inflicted on global shipping. Moreover, the lack of connectivity for many nations is something regulators need to investigate, urged Olaf Merk, a shipping expert at the OECD-affiliated think tank International Transport Forum (ITF). As global carriers continue to reposition their capacity to trade lanes with the highest demand or profit potential, regulators must catch up with this situation and take the necessary action to prevent abuse of the power wielded by the major ocean carriers.

Meanwhile, in the latest analysis by Sea Intelligence, their data shows that the excess global demand has almost been eliminated. Moreover, the data shows that the extreme spikes in freight rates in 2021 were indeed driven by a situation where demand suddenly exceeded capacity globally, primarily caused by the unavailability of capacity. The recent trend towards normalization has also mainly been driven by gradual improvements in schedule reliability and vessel delays. If improvements continue, we should expect that the supply/demand balance will continue to decline and freight rates will be under increasing pressure downwards

e. Airfreight industry

i. Air Cargo Chartbook

During the third quarter of 2022, cargo tonne kilometers (CTKs) experienced a minor slow growth, even though CTKs continue to outperform passenger traffic compared to the trends seen in 2019. Unfortunately, cargo traffic volumes could not escape the effects posed by the slowdown in GDP growth and the high levels of inflation experienced across the globe due to the COVID-19 pandemic and the ongoing Ukrainian war, as global CTKs declined by ↓3% y/y at the start of the third quarter of 2022. However, substantial cargo volumes in Latin America, Europe, and China have driven global trade recovery. There are still several COVID-19 restrictions in China, which leads to the conclusion that their economic growth is set to be recorded at a mere 3%, which could significantly impact the global economy and cargo outlook.

Figure 22: Seasonally adjusted international CTKs (index, Jan 2020=100)

Source: IATA

A component of the purchasing managers’ index (PMI) identified as global new export orders is a leading indicator of demand for air cargo shipments which, historically, boasts a strong positive correlation to CTKs. After the boom in export orders seen in 2021, the view of the purchasing managers is that orders have stabilized around the current level. Sanctions against Russia have disrupted manufacturing activity, causing export orders to diminish in the third quarter of 2022 for major European exporters such as Germany. On the other hand, Chinese export orders are holding above the 50-mark, showing a degree of resilience in this market despite the remaining lockdowns that are part of the country’s zero-COVID policy.

Figure 23: Global PMI new export orders and Growth in CTKs (y/y growth)

Source: IATA

ii. State of the Region: Africa and the Middle East:

At the start of the third quarter of 2022, passenger traffic still lingered 26% below the level achieved during the same period in 2019; however, traffic levels have approximately doubled since January 2022, indicating that African airlines have recently seen a steady recovery. From a Middle Eastern perspective, airlines have also illustrated solid recovery, reaching 78% revenue passenger kilometers (RPKs) from pre-pandemic levels in July. Moreover, middle Eastern airlines experienced among the highest y/y increases compared to other regions after easing travel restrictions and reopening their borders. This growth translates to an admirable ↑193% increase in international RPKs. Similarly, African airlines have also experienced solid YoY growth of ↑85% from last year in international RPKs.

Regarding cargo movement, African airlines registered a ↑2% gain compared to the same month in 2019, which is in line with the gradual increase seen in the market share of African airlines in the global air cargo market since 2007. In contradiction, cargo traffic from Middle Eastern airlines is down by ↓2% from its 2019 level. However, its market share remained broadly the same as in the past five years. This situation is because the Middle East has continuously experienced volatile ticket bookings since the inception of the COVID-19 pandemic. Elsewhere, Africa has been slightly behind the global average regarding its recovery in volatile bookings.

Egypt and Nigeria have been the main drivers of passenger air traffic recovery in the African region as both countries recovered well from the COVID-19 pandemic thus far by showcasing strong and sustained growth since early 2020 and surpassed pre-pandemic levels at the inception of the third quarter of 2022. In the Middle East region, recovery is also in progress as the UAE and Qatar reached their pre-pandemic levels in May and June, respectively. According to IATA’s latest air passenger forecast made during the third quarter of 2022, total passenger traffic in the region is expected to recover to pre-pandemic levels by 2025. These forecasts further suggest that the number of airline passengers in Africa and the Middle East could double or even triple over the next 20 years from the levels experienced during the third quarter of 2022.

Figure 24: Regional Passenger Recovery (2020-2025, index 2019=100)

Source: IATA

The recovery seen in African airlines is among the most rapid in all regions across the globe when compared to 2019 levels of passenger load factors. The average passenger load factor reached 75% in July, at the start of the third quarter, exceeding its corresponding monthly level in 2019 since May. Similarly, Middle Eastern airlines surpassed pre-pandemic passenger load factors in May, posting 81% in July. Available Seat Kilometers (ASKs), which translate to a measurement unit of capacity, have experienced slow growth in African and Middle Eastern regions as African airlines recorded capacity levels 28% below pre-pandemic levels. In comparison, Middle Eastern airlines recorded capacity at 22% below pre-pandemic levels at the start of the third quarter. Confidence regarding future demand within the air freight industry is slowly but surely returning to both regions as aircraft deliveries in both regions have improved since the COVID-19 pandemic, especially in the Middle East.

Figure 25: Aircrafts delivered in Africa and the Middle East

Source: IATA

f. Road freight industry

Some insightful geofencing data captured by the Federation of East and Southern African Road Transport Associations (FESARTA) investigates the cross-border delays and associated costs experienced at several regional border posts. The analysis includes several border posts on the North-South corridor, Walvis Bay Corridor Group (WBCG), Maputo corridor, and the Dar Es Salaam corridor. Border posts on the North-South corridor are illustrated in the table below, accompanied by the weekly delays experienced by each border post for the week ending 24 September 2022. Thus, approaching the end of the third quarter of 2022, the Beitbridge- and Kasumbalesa border posts experienced the highest queue time and costs associated with delays on the North-South corridor. The most congested border post on the North-South corridor is the Kasumbalesa border post, linking Zambia and the DRC, as queueing time was recorded at 22.5 hours on the Zambian side and 11.5 hours on the DRC side. Due to the extensive queueing times at the same border post, delays cost both countries a combined $4.4 million per week. The delays experienced on the Zambian side cost the country approximately $3.5 million per week, while the DRC side cost the country approximately $878 220.

Similarly, the Beitbridge border post between South Africa and Zimbabwe is the second most congested border post on the North-South corridor, as extensive queueing times are also present. On the Zimbabwean side, a queueing time of 12.1 hours was recorded, while the queueing time on the South African side was slightly better at 10.8 hours. The Beitbridge border post is also the busiest border post regarding volumes, as an average of 410 heavy goods vehicles move through the Zimbabwean side of the border post, with an average of 472 moves through the South African side. Furthermore, delays at the border post equate to a combined $3.2 million.

Table 1: Weekly Cross Border Delays and associated Costs on the North-South Corridor

Source: TLC & FESARTA

Border posts on the Walvis Bay Corridor Group are illustrated in the table below, accompanied by the weekly delays experienced by each border post for the week ending 24 September 2022. The WBCG further extends into (1) the Trans Caprivi Corridor, (2) the Trans Cunene Corridor, (3) the Trans Oranje Corridor, and (4) the Kalahari Corridor. Compared to the North-South corridor, the border posts within the WBCG handle a significant amount less in daily volumes than the major border posts on the North-South corridor. For example, the busiest border post within the WBCG is the Skilpadshek/Pioneer Gate border between South Africa and Botswana on the Trans Kalahari Corridor, which accommodates an average of 200 heavy goods vehicles per day on the South African side and 100 on the Botswana side. At the same border post, queue times on the South African side equate to 3.9 hours and 0.9 hours on the Botswana side.

The Oshikango/Santa Clara border post between Namibia and Angola is experiencing the most extensive delays and border crossing times within the WBCG. The delays cost Namibia and Angola $130 200, and $328 300, per week.

Table 2: Weekly Cross Border delays and cost of delays within the WBCG

Source: TLC & FESARTA

Border posts on the Mozambique Corridors are illustrated in the table below, accompanied by the weekly delays experienced by each border post for the week ending 24 September 2022. The Lebombo border post between South Africa and Mozambique is by far the busiest border post within the Mozambique corridors as the daily average of heavy goods vehicles that move from South Africa to Mozambique is captured at 1 553. The most delays are also experienced at this border post which translates to a weekly cost of $1.3 million for South Africa.

Table 3: Weekly Cross-Border Delays on Mozambique Corridors

Source: TLC & FESARTA

Border posts on the Dar Es Salaam Corridor are illustrated in the table below, accompanied by the weekly delays experienced by each border post for the week ending 24 September 2022. Once again, the Kasumbalesa border post is the busiest border crossing on the Dar Es Salaam corridor. However, the weekly delays and the associated costs on the Kasumbalesa border post have already been discussed. The second busiest border post on this corridor is the Nakonde/Tunduma border crossing between Zambia and Tanzania. A daily combined average of 727 heavy goods vehicles move through these respective border posts, as 373 moves through from the Zambian side and 354 from the Tanzanian side. The delays experienced at these border posts cost Zambia $52 220 per week, while the delays cost Tanzania $198 240 per week.

Table 4: Weekly Cross Border Delays and associated cost of delays on the Dar Es Salaam corridor

Source: TLC & FESARTA

i. Developments at the Beitbridge border post

During the third quarter of 2022, the Zimbabwean president commissioned the modernized Beitbridge border post after a public-private-partnership (PPP) project worth $300 million was established in 2018 between the Zimbabwean government and a Zimborders consortium. The consortium provides funding through various institutions as part of the PPP arrangement, while the government provides land and technical advice. The project’s main scope includes upgrading the border post with new terminal buildings, commercial facilities for the border post plant, an animal quarantine facility, and constructing 220 staff houses for border agencies. According to Beitbridge’s Acting Head of Immigration, Mr Trustworthy Manatsire, they have already started to witness an increase in traffic volumes through the freight and bus terminals since the beginning of May 2022. Between Q2 and Q3, the border cleared 625 778 travelers, including 327 370 arrivals and 298 408 departures on the Zimbabwean side. In July alone, 272 365 travelers were handled, including 136 881 arrivals and 135 784 departures.

In comparison, at the peak of the COVID-19 pandemic, less than 2000 daily travelers were cleared, while the current figures indicate a daily average of 13 000. Additionally, during the third quarter of 2022, 15 301 holiday visitors were handled, along with 8 623 individuals on business-related travel. Despite these figures, daily volumes are down by ↓19% compared to levels experienced in 2016. Mr Manatsire further stated that they are noticing an increased number of e-passport users, contributing to the higher volumes handled through the border post. The Beitbridge Border Post modernization project brings many benefits to the country and the region, mainly through the facilitation of trade, investment, business travel, and tourism.

Furthermore, the Beitbridge Border post was also one of six land borders in South Africa that is prioritized to be upgraded to a One Stop Border Post (OSBP) to ease congestion further and facilitate the movement of goods and people through the border. One-stop border posts have been agreed to at the African Union heads of States level, with notable frontrunners being Tanzania and Kenya in the Eastern African Community. One-stop border posts have also been agreed to in the Southern African Development Community, which gave rise to the agreement on the Beitbridge OSBP.

ii. Developments at the Lebombo border post

During August, Lebombo experienced a ↑1.2% increase in Northbound traffic, a ↑25% increase in Southbound traffic, and a ↑3.1% increase in overall traffic compared to the figures seen in July. As mentioned above, the Lebombo Border Post is one of the busiest border posts in Africa and subsequently also experiences extensive delays. During the latter stages of the third quarter of 2022, the South African Revenue Service (SARS) issued a brief statement addressing the cargo delays experienced at the border post. According to SARS, the delays are attributed to implementing the new Temporary Import Permit (TIP) payment system. The TIP payment system was scheduled to “go live” on 16 September 2022, after which numerous transporters were found not to be registered, which caused extensive delays and huge backlogs. However, the matter was resolved, and a grace period for cash payments was introduced to allow all transporters to finalize the registration process. SARS further stated that, although sufficient notice was provided to the transporters to ensure that they comply with the new payment system, additional measures are being implemented to improve the system’s efficiency. Continuous engagements are also initiated with Mozambique representatives to alleviate the challenges currently experienced. In addition, authorities have encouraged transporters not to enter the N4 beyond the last tollgate without cashless activation to avoid long queueing and staging times.

Furthermore, like the Beitbridge border post, the Lebombo Border post is also one of six land borders in South Africa that was prioritized to be upgraded to a One-Stop Border Post (OSBP) to ease congestion further and facilitate the movement of goods and people through the border. The OSBP will also be accompanied by improved infrastructure in and around the border post, assisting in fighting crime experienced against staging truckers.

iii. Developments of foreign truck drivers in South Africa

During the second quarter of 2022, the Road, and Freight Inter-Ministerial Committee (IMC), in partnership with the road and freight industry stakeholders, have agreed on an eleven-point action plan to deal with industry challenges and the recruitment of foreign nationals. The IMC included Employment and Labor Minister Thulas Nxesi, Transport Minister Fikile Mbalula, Police Minister Bheki Cele and Home Affairs Minister Aaron Motsoaledi and was formed to deal with escalating road blockages and protests by disgruntled South African truck drivers. The action plan involves (1) facilitating the appointment of a task team, (2) enforcing visa requirements, (3) consideration of all foreign driving licenses, (4) registration and compliance with labor laws, and (5) registration of operators in terms of Section 45 of the National Road Traffic Act. Additionally, the plan also sets out (1) to review the traffic register number, (2) to review cross-border road transport legislation, (3) to amend the National Road Traffic Regulation, (4) to integrate joint multi-disciplinary law enforcement operations accompanied by a driver training program, and (5) consider the introduction of operating licenses for the industry. Furthermore, Police Minister Bheki Cele has reiterated that any company employing illegal immigrants will be severely punished as the South African workforce still needs protection despite the agreement on an eleven-point action plan to allow foreign employment. During the second quarter of 2022, the South African government announced 213 arrests of foreign truck drivers were made, who were found to be in contravention of immigration laws, with 19 of those in possession of fraudulent documentation.

iv. Developments at the Kasumbalesa border post

Tensions at the Kasumbalesa border were at a boiling point during the latter stages of the third quarter of 2022 as Zambian truckers continued their strike action and maintained their stance that they would not enter the DRC due to the harassment faced. Several truck drivers have reported harassment by locals, police, and even soldiers whenever they enter the DRC and face the risk of stolen cargo. Alternative reports even suggested that some Congolese traders were throwing stones at police officers who tried to calm the situation at the Kasumbalesa border post. The truckers who were partaking in the sitting strike were blocking an area on the Zambian side by the border called “No man’s land”, which prohibits truckers from DRC to enter Zambia, as well as other truckers in Zambia, from entering DRC. The striking drivers’ staging queue stretched to extensive lengths to the point that it posed a risk for some of the drivers in the queue, as criminals could view it as an opportunity to steal cargo and harm the drivers. The extensive queue has also blocked off walking Congolese traders, who enter Zambia from the DRC, from conducting their business, adding fuel to the existing fire. In retaliation for being blocked, the traders directed their anger at police officers trying to mediate the situation.

According to reports, the strike came about due to the harassment Zambian truckers face when entering the DRC. The truckers’ complaints fell on deaf ears as the Zambian government vowed to assist them, but their words were fruitless. Eventually, Zambian- and DRC authorities agreed that two additional security patrol vehicles should be on the 100km road to Lubumbashi. However, this was not met with much enthusiasm from the truckers’ perspective, as their stance remained clear that the officials tasked with protecting them were also part of the corrupt system, which could have fatal consequences for them. As a result, the Zambian truckers have threatened that nothing short of intervention by President Hichilema of Zambia and President Tshisekedi of DRC would be accepted.

However, reports emerging on 06 October 2022 revealed that the situation at the border post had been resolved after a delegation from Lubumbashi addressed the drivers late in the afternoon on 05 October 2022. The drivers accepted the following resolutions presented by the delegation: (1) Operations resumed from 06:00 on 06 October 2022, allowing the crossing of trucks in both directions into both countries. (2) Operations for the clearance of cargo will be actioned from 06:00 to 20:00 for seven days a week, while backend operations such as document processing will be actioned from 20:00 to 06:00 for the following day. (3) The DRC will deploy three patrol vehicles along the routes used for international trade with immediate effect. (4) Drivers are encouraged to use the toll-free emergency line to report security concerns. The Ministry of Interior will manage the line. (5) DRC and Zambia will monitor the security situation and report regularly.

v. Developments at the Chirundu border post

The Ongoing fuel issues in Zimbabwe are still affecting traffic flows at the Chirundu border post, with the dipping of tankers still taking place, adding to waiting times. The ever-present queue at the border can sometimes stretch to 4km, where inefficiencies are highlighted by the fact that it takes up to 6 hours to clear just 1km of the queue. Additionally, the Zambian government has communicated their intention to transform the Chirundu border post to enhance the country’s capacity to facilitate trade. This initiative will be part of several accelerated infrastructure development programs that dovetails with an upper-middle-class income by 2030.

4. Economic recovery recommendations for African countries

a. The African Continental Free Trade Area (AfCFTA) Agreement

African policymakers have long seen trade integration as a mechanism for fostering prosperity, as several groups (trade and regional economic integration) have been formed over the years. The AfCFTA is the most ambitious initiative in this vein and has the potential to support the realization of the continent’s economic promise by helping raise productivity and investment, thereby increasing income levels and reducing poverty.

Preferential trade under the African Continental Free Trade Area (AfCFTA) agreement kicked off during the third quarter of 2022 as Kenya successfully exported their first Exide battery shipment worth Sh9.24 million to Ghana under the AfCFTA pilot project. Kenya was picked alongside six other nations to champion the trial phase of the framework designed to reduce tariffs on goods and services and eliminate barriers to the movement among African countries. Other countries selected to participate in the pilot phase of the AfCFTA Initiative on Guided Trade are Tanzania, Tunisia, Cameroon, Egypt, Mauritius, and Ghana. The AfCFTA could be an excellent framework for the African continent to kickstart economic growth and facilitate proper recovery in hindsight of the COVID-19 pandemic. Currently, the gap between Africa and continents hosting an abundance of developed economies is highlighted by the fact that intra-African trade is merely between 16-18%, while intra-European trade and trade between ASEAN countries is approximately recorded at 70%. One of the main reasons hereof is that African countries tend to export raw materials and import manufacture goods as they do not have the necessary capacity to develop their own raw materials into finished articles. As a result, attention is turned to developed economies worldwide instead of who can satisfy the need for manufactured goods. Additionally, the non-tariff barriers and costs associated with doing business in Africa are often more expensive than importing goods from Asia and Europe.

Therefore, African countries need to work together to reduce the non-tariff barriers to facilitate trade among one another. The private sector should also be encouraged to innovate and add value to the rich volume of raw materials across the continent. According to UNCTADs Economic Development in Africa Report, published in December 2021, the report finds that the continent’s current untapped export potential amounts to $21.9 billion, equivalent to 43% of intra-African exports. It says an additional $9.2 billion in export potential can be realized through partial tariff liberalization under the AfCFTA over the next five years.

Figure 26: Untapped static and dynamic export potential by sector ($ millions)

Source: UNCTAD

i) Removal of Non-Tariff Barriers (NTBs)

To unlock the untapped potential of the AfCFTA, various intra-African non-tariff barriers, including costly non-tariff measures, infrastructure gaps and market information gaps, need to be successfully addressed. Addressing these will require joint efforts under the AfCFTA between public- and private-sector participants. In addition, cooperation in long-term investment and competition policies will be essential to overcome market dominance by a few actors and reduce structural and regulatory barriers to market entry. The figure below illustrates the most prominent NTBs faced within the African Tripartite free trade area and indicates how long it takes to resolve each respective NTB.

Figure 27: Most-reported NTBs and resolution times in the Tripartite Free Trade Area (2009-2021)

Source: UNCTAD

The AfCFTA can potentially increase income and welfare significantly for its member countries as their study shows income gains of up to ↑2.1% for the continent if NTBs can be addressed and resolved more efficiently. However, they have also indicated that their findings could be severely underestimated due to the static nature of their model, which does not include the potential effects of the agreement on increased investment, innovation, and knowledge diffusion. In addition, previous studies have estimated that African countries could reap long-term income gains of up to ↑5% from the reduction in trade barriers in the context of the AfCFTA. The reduction of NTBs under the AfCFTA would also strongly impact intra-regional trade and would add about $60 billion to African exports and support ongoing diversification efforts. Trade among African countries could also be increased by ↑57% if NTBs are effectively addressed, which could lead to proper economic growth, kickstarting Africa’s recovery after the COVID-19 pandemic and the ongoing Ukrainian war.

ii) SMME access to funding

According to Wamkele Mene, Secretary-General of the AfCFTA Secretariat: “Complementary measures to support women and young people in the trade, small businesses and the least developed African countries are required to achieve a more inclusive AfCFTA,”. Due to border closures induced by the COVID-19 pandemic, vulnerable groups such as women cross-border traders, small businesses and informal traders have experienced a complete depletion of their savings, seriously impeding the sustainability of their businesses. Many SMMEs find themselves in similar situations, where funding is one of the main barriers to entry into international markets. Therefore, these SMMEs need easier access to funding which would enhance their production capacity to fulfill possible export orders and subsequently enhance trade under the AfCFTA. SMMEs account for approximately 80% of businesses across the African continent and could greatly assist with economic recovery after the COVID-19 pandemic and the ongoing Ukrainian war.

Conclusion

As we summarize this report, the challenges faced by the East and Southern African countries have not diminished during the third quarter of 2022 and still threaten economic growth prospects in the region. The effects of the COVID-19 pandemic and the ongoing war in Ukraine are still far from over, as economies in East and Southern Africa face the prospects of an economic recession. The effects associated with the COVID-19 pandemic are highlighted by the lack of access to vaccines and critical life-saving tools in low-income countries predominant in Africa. A lack of COVID-19 vaccines in Africa is exclaimed because merely three African countries have managed to achieve the WHO-prescribed feat of vaccinating 70% of their population. Additionally, food security due to the war in Ukraine is mounting pressure on African economies and their recovery prospects. Therefore, East- and Southern African countries should continue focusing on vaccine rollout campaigns to accelerate economic recovery and growth. They should also focus on how maximum benefits can be derived from the African Continental Free Trade Area Agreement after trade kicked off during the third quarter of 2022 under the AfCFTA pilot project. Furthermore, regional policies allowing market integration and investment accompanied by solid leadership remain critical to ensure that economic performance is fully enhanced for the remainder of the year.

In terms of regional trade, cross-border flows are continuously experiencing the aftermath of the COVID-19 pandemic, as many land border posts are still experiencing severe congestion and queueing times. It is, therefore, essential that growth and investment are driven at the region’s commercial ports, roads, and border posts through infrastructural upgrades, logistical performance and the like. The African Continental Free Trade Area (AfCFTA) provides African countries with the perfect opportunity to recover from the COVID-19 pandemic and the Ukrainian war. However, the emphasis is not lost on the importance of a collective approach to seize this opportunity. The responsibilities not only rest with one stakeholder but will require the collective input of all involved, including customs authorities, port authorities, the shipping lines, private transporters, OGAs, freight and clearing agents, and all other parties involved. Therefore, the RPSG collectively emphasizes the need for positive change in many areas in the region, including the uptake of the AEO program, trade digitalization (single windows and one-stop border posts), bond and transit guarantee, and regional transport systems. Currently, there are multiple projects at several border posts transforming a one-stop border post, proving that a section of the region is on the right track. Ultimately, we must harmonize and simplify trade to enable a compliant, safe, and secure trading environment.

ESA Situation report Q3 2022 Download