The Likely Impact of COVID-19 on the Extractive Industries and its Governance Implications
COVID-19, the disease caused by the SARS-CoV-2 virus, has been declared a pandemic by the World Health Organization (WHO). Global policy responses have shut down economic activity in attempts to flatten the curve – to prevent a stiletto-type impact on the capacity of healthcare systems to provide care for COVID-affected patients. Recent projections from the Asian Development Bank suggest that resultant global economic losses could amount to between $5.8tn and $8.8tn. African countries appeared, initially, to be particularly susceptible to the negative social and economic consequences unleashed by COVID-19. However, the demographic profile of many developing countries, not only in Africa, entails a ‘youth bulge’, and the elderly – most susceptible to contracting severe forms of the virus – tend to live at home rather than in concentrated spatial locations. Though a lack of data and testing capacity is a governance concern throughout the continent, African countries thus far have relatively low numbers of recorded infections. Nonetheless, the global figures make for gloomy reading. Total cases at the time of writing stand at 5,462,447; recorded deaths amount to 344,503. A looming governance question is how countries will respond to the economic contraction and address looming fiscal deficits in the wake of vastly reduced tax bases. For many African countries, dependent on natural resources for exports and foreign exchange revenue, economic recession will have a devastating effect on livelihoods. The World Bank estimates that, globally, 49 million more people will be pushed into ‘extreme poverty’, with sub-Saharan Africa likely to suffer disproportionately. Extractive industries are particularly susceptible to the worst impacts of the economic downturn as they are capital-intensive businesses deeply connected to global supply chains.