ECA Calls for Support to City Gov’ts to Mitigate Economic Effects of COVID-19

Addis ababa: The Economic Commission for Africa (ECA) has called for adequate consideration of the vulnerability of city economies as African governments consolidate efforts and define stimulus measures to mitigate national and regional economic impacts by COVID-19.

ECA Gender, Poverty and Social Policy Division Director, Thokozile Ruzvidzo stated that cities, being engines and drivers of economic growth, face considerable risks in light of COVID-19 with implications for the continent’s resilience to the pandemic.

In light of these circumstances, ECA is proposing specific support to city governments to mitigate and respond to the economic effects of COVID-19, in addition to the immediate health and humanitarian focus, a press release of the commission stated.

Disaggregating the analysis and identification of priorities and responses at the sub-national and city scales is a first step.

Proactive measures are also needed for urban economic recovery, including through measures to boost finances and capacities of local authorities as first responders, short-term bail outs and exemptions for SMEs to limit productivity and employment loses, social protection for those in informal urban employment while anticipating the potential of labor intensive public work programs for job creation in the medium term.

The director emphasized that “local governments must be supported because they are better able to respond to local needs, including in coordination with community-based structures.”

According to ECA, Africa’s cities are home to 600 million people and account for more than 50% of the region’s GDP. This is even higher at more than 70% for countries such as Botswana, Uganda, Tunisia and Kenya. A third of national GPD (31%) comes on average from the largest city in African countries.

As such, the economic contribution of cities in the region is far higher than their share of population.

COVID-19 employment effects are likely to be severe in urban areas. With urban-based sectors of the economy (manufacturing and services) which currently account for 64% of GDP in Africa, cities are expected to be hit hard by COVID-19 related effects, leading to substantial losses in productive jobs.

In particular, the approximately 250 million Africans in informal urban employment (excluding North Africa) will be at risk.

Firms and businesses in African cities are highly vulnerable to COVID-19 related effects, especially SMEs, which account for 80% of employment in Africa, the release added.

These risks are compounded by a likely hike in the cost of living that is expected as shown for example by some initial reports of up to 100 percent increase in the price of some food items in some African cities.

Additionally, urban consumption and expenditure (of food, manufactured goods, utilities, transport, energy and services) is likely to experience a sharp fall in light of COVID-related lockdowns and reduced restrictions, it added.

Ruzvidzo explained that “Africa’s cities drive consumption with their growing middle class with per capital consumption spending in large cities being on average 80 percent higher at the city level than at the national level.

COVID-19 related decline in urban consumption will thus impact domestic value chains, including rural areas.”

Furthermore, with the per capital expenditure of African local authorities being the lowest in the world at 26 USD, many local authorities are poorly resourced and less able to contend with the onslaught of COVID-19.

In the longer term, the acute vulnerability of city economies calls for efforts to revitalize and enhance the productivity of Africa’s cities through adequate investments to address the substantial deficits and barriers they face.

 

 

Source: Ethiopia News agency

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