The global engine has stalled! or at least it did, and recovery is underway. The world as we know it will not be the same again, and yet it never is any way. COVID-19 has presented as a catalyst to an already rapidly evolving world. We have encountered another great disruptor that will shape policy, strategy and actions over the coming years. However, it would be inconsiderate to describe it as merely a catalyst because real lives have been impacted, that’s the reality behind the numbers. Thousands of deaths, collapsed businesses, over 26 million job losses in the global powerhouse (USA) alone with millions more around the world as the global economy shut down, manufacturing and trade ground to a halt and millions reduced to relief programs. That is the painful reality we are faced with today.

The Healthcare sector tells another story for obvious reasons. The world is counting on the entirety of the health system to come through so that’s where big action is right now. While other sectors were letting go of labour, around the world, health care workers were being conscripted to the frontline of this war. Health Researchers, Research and Testing Labs and Pharmaceutical companies are driving new research and development in vaccines, treatment and equipment. The level of activity in this space further attests to global dynamism and what will continue to grow as we emerge from this crisis. As such, the heightened level of collaboration will set a new standard that will transcend the health sector. Innovation has skyrocketed and we are going to see huge dividends as a result. For one, we now have lower cost ventilator solutions and for low income countries, this should be of interest into the future. Technology has been embraced in areas that had previously been slow adopters and there is no turning back. As such, while we envision better times, there is a journey towards that future that has commenced.

So how do we pick up the pieces? China has started to recover as manufacturing units reopen and online orders begin to trickle in from around the world following gradual easing of restrictions. This is noteworthy because to date, China is dubbed the world’s factory. This suggests that China’s pace of recovery is therefore pegged to global recovery. For big dependents including Africa, Australia, some Asian countries etcetera, whether there will be a shift in supply chains is left to be seen. What is evident is that the conversations have begun. For Africa, this has given further credence to the Continental Free Trade Area. Now more than ever before, we are convinced that we must make Africa work. Translating that conviction into real action is where we need to go now, first in the form of favourable laws, policies and programs that go on to deliver an environment in which innovation and private sector can thrive in all forms.

Rebuilding is now at the heart of every conversation for governments and the private sector. Sadly, some enterprises are down and out. Several small business owners operating in the most vulnerable sectors have been scarred and probably rethought doing business in that sector, choosing to shift their business interests elsewhere as capital has been wiped out and infrastructure at this level is more flexible. This means that tax revenues are equally at all-time lows and yet governments have had to roll out relief programs. The extent of disruption in the informal sector is only left to our imagination and yet real in as far as it has impacted individual lives and households.

For developing economies, the notion of resource constraints needs to be reconsidered.  There will be an increasing need for resource optimisation. What does your resource envelope look like now? How are we working with what we have to re-build? This is an important conversation because the world now has less to go around. Regions and economies will be focusing on rebuilding their own economies. The Multilateral Agencies that have over the years become god parents are pulling out all the cards to support economies in their regions and around the world first with the COVID response.  So, what will this mean for big ticket projects that were planned or already underway? These will be tough conversations in the coming months and yet this is not to paint a grim picture but provoke more of a reality check as this is all feeding into what we are beginning to appreciate as our new normal.

I submit that to reboot economies on the African continent, we are going to have to ramp up collaborations and syndications. Credit must continue to flow, enterprise demands this. The cost of funds must continue to ably deliver that credit and financial institutions are heavily vested in this largely through sourcing customer deposits affordably. Therefore, enterprise needs to recover, translate into incomes and savings so that consumption can be stimulated and governments too can generate tax revenue. As you can tell, this engine is vital. It is an economic ecosystem that keeps economies afloat.

Going forward, the scaling up of collaborations within the continent’s financial system is going to be critical. Development Finance, Export Credit, Insurance, various Funds, traditional Financial Institutions and Fintechs will need to work together for this bold action of financial resource mobilisation and de-risking. Business is risk ridden, all forms of risks plague the enterprise value chain and the ability to forestall and mitigate these risks is an integral part of enterprise sustainability. Banks need to continue to support manufacturing and trade under increased uncertainty while curtailing the fear of having to increase provisioning. As such, Risk participation programs become a valuable tool to deploy. Case in point, scaling trade finance programs is going to be valuable, targeted at supporting provision of working capital finance and de-risking international trade transactions. This will go a long way in boosting the lines that Financial Institutions can extend to their customers across the value chain.

Over the coming days and months, companies, small and medium enterprises will be getting back into business but with near to nothing in cash, having depleted reserves on maintaining wage bills and other operational costs while out of business, they will be looking for help from their banks. Commercial Farmers will need to be supported to replant, restart hatcheries etcetera. Banks are going to have to step-up to support orders for inputs and tradable goods in a heightened risk environment. In turn, Financial Institutions will be looking for instruments that can spread this risk out. Syndications for big ticket projects will remain valuable but more important is the value that can be unlocked from Trade Finance programs offered by African Export-Import Bank, African Development Bank, Trade and Development Bank etcetera. Additional guarantee solutions available through African Guarantee Fund and insurance solutions through African Trade Insurance Agency are all critical to the kitty of resources and instruments enterprise shall need to dip into. The challenge before us as a continent is how we rapidly grow our own capacity to mobilise finance and underwrite transactions. It is noteworthy that increased syndications among Banks and Agencies like Investment Fund Africa and Africa50 Infrastructure Fund will be vital in supporting Africa’s infrastructure projects.

While there have already been commendable targeted COVID-19 responses that have yielded positive results, focus on economic responses is rising and that’s while we are still in the heat of the COVID fight. This suggests that conversations across the economic and financial value chain must already be underway to lay the groundwork for the kinds of actions that are required in the coming months. The circumstances we find ourselves in make a strong case for scaling Risk participation programs for the continent’s economic engine to be restarted and gain momentum.

By Edgar Azairwe Rutaagi

Trade Finance Professional working with the Central Bank of Uganda