Coronavirus

The coronavirus fallout is 'battering' African economies, Capital Economics says

Key Points
  • Port closures in China are causing oil importers to cancel purchases and forcing sellers to look elsewhere.
  • In Angola, state-owned petroleum group Sonangol has been forced to re-sell at a discount at least one shipment which was already en route, according to Capital Economics Senior Emerging Markets Economist John Ashbourne.
  • Brent crude prices have been in steep decline since the outbreak hit the headlines, down 16.96% since the turn of the year, and was trading at just over $54 a barrel on Monday afternoon.
An oil offshore platform owned by Total Fina Elf in the surroundings waters of the Angolan coast.
Martin Bureau | AFP | Getty Images

The indirect economic fallout from the coronavirus outbreak is hitting Africa, with the sharp fall in commodity prices "battering" economies across the continent, according to Capital Economics.

Much of the international ripple effect from China's mass shutdowns has been concentrated in areas like tourism and manufacturing, which have been roiled by a ban on outbound tour groups and supply chain disruption arising from factory closures.

However, port closures in China are causing oil importers to cancel purchases and forcing sellers to look elsewhere, John Ashbourne, senior emerging markets economist at Capital Economics, highlighted in a note Friday.

In Angola, state-owned petroleum and natural gas company Sonangol has already been forced to re-sell at a discount at least one shipment which was already en route, according to Ashbourne.

"While the price effect will hit all of Africa's commodity exporters, these trade disruptions will mostly affect West African oil exporters," Ashbourne said.

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Brent crude prices have been in steep decline since the outbreak hit the headlines, down 16.96% since the turn of the year, and was trading at just over $54 a barrel on Monday afternoon.

Other base metals heavily relied upon by the African export market, such as iron ore and copper, have also seen sharp depreciations in recent weeks.

In terms of economic exposure, industrial commodity exports from Republic of the Congo amount to almost 70% of GDP (gross domestic product) with exports to China accounting for more than 50% of total GDP. Angola relies on Chinese industrial commodity exports for more than 20% of GDP. Other countries with significant exposure include Zambia, the Democratic Republic of the Congo, Nigeria and Ghana.

Though the virus itself has not yet been diagnosed on the continent, experts have warned that the subcontinent is susceptible given its strong ties to China.

Last week, upon declaring the virus a global health emergency, World Health Organization (WHO) Chief Tedros Adhanom said the body's "greatest concern" was the potential for it to reach countries with "weaker health systems."