Ebola Begins to Take an Economic Toll in West Africa

The Centre for African Democratic Affairs (CADA) has gathered that Caterpillar, an American company has evacuated a handful of its employees from Liberia, Canadian Overseas Petroleum Limited has suspended a drilling project, Kenya Airways has suspended its flights to all the Ebola-hit West African countries and the British Airways is canceling flights to a number of countries in West Africa due to the current outbreak of Ebola. CADA has also learnt that ExxonMobil and Chevron are waiting to see whether health officials can contain the danger.

So far, the Ebola outbreak which has claimed more than 1,300 lives is disrupting business and wreaking economic damage in countries like Guinea, Sierra Leone, Liberia and Nigeria though some analysts have revealed that the crisis doesn't threaten the broader African or global economies. But collectively, CADA believes that we must all make sure the situation is dealt with and controlled immediately else it will have adverse impact on the economy in West Africa and on the entire African continent in general.

The World Health Organization (WHO) recently professed the outbreak an international public health emergency. The organization though did not recommend any travel or trade bans yet it cautioned anyone who had had close contact with Ebola patients to avoid international travel and urged exit screenings at all international airports and border crossings. CADA is of the view that, if we have a widespread outbreak of Ebola, definitely we can end up with a panic which may prevent people from even going to work and forced expatriates to leave the continent and when this happens it means that our economic activities will slow. The World Bank estimates that the outbreak could shrink economic growth in Guinea, where the crisis emerged in March, from 4.5 percent to 3.5 percent this year.

CADA's search on Ebola and its impact on the West African economy have revealed that heavy equipment manufacturer Caterpillar Inc., based in Peoria, Illinois, has evacuated some of its staff from Liberia stating that the health and safety of its staff is their top priority; British Airways has also announced that it is suspending its flights to and from Liberia and Sierra Leone through 31 August 2014 due to the deteriorating public health situation in both countries; Tawana Resources, an Australian iron-ore company, has also revealed that it had suspended all its non-essential field activities within Liberia and sent all non-essential African workers, expatriates and contractors home; London-based mining company African Minerals has begun imposing health checks and travel restrictions on employees in the region; Canadian Overseas Petroleum, based in Calgary, has stopped drilling in Liberia with some of its expatriate employees already left the country; ExxonMobil has said in a statement that its offices remain open and that they are taking precautions to ensure the health and safety of their employees; Chevron, which has an office in the Liberian capital of Monrovia and is in the process of exploring for oil off Liberia's coast recently indicated that it is closely monitoring the outbreak of Ebola virus in West Africa but the company would not say whether it was withdrawing any employees or taking any other steps as a result of the outbreak.

These are many other issues associated with the outbreak of this deadly disease is very worrisome. CADA is of the view that the world's worst outbreak of Ebola may inflict “broad” economic damage on the West African countries and is the outbreak is not contained as soon as possible particularly in Guinea, Liberia, Nigeria and Sierra Leone where case of Ebola have been reported. Very soon commercial and transport disruptions may be experiencing in the region along with increased health expenditure which might put pressure on budgets, jeopardizing the nations' economic growth. It is worth mentioning that Ebola threatens to have significant economic and fiscal ramifications for a number of sovereigns in the region.

CADA, undoubtedly, believes that the outbreak risks having a direct financial effect on government budgets by increasing health expenditures that could be significant and indirect effect arising from an Ebola-induced economic slowdown on government revenue generation in a region where budgets are already hindered by low tax collection, corruption, mismanagement, dysfunctional leadership, bad governance, misappropriations of funds, etc. The outbreak that has killed more than 1300 people, the worst since the virus was first identified in 1976, has reached Nigeria, Africa's most populous nation of nearly 170 million people. There is no cure yet for the disease, which is normally treated by keeping patients hydrated, replacing lost blood and using antibiotics to fight opportunistic infections.

Furthermore CADA believes that one of the first casualties of any epidemic like Ebola in any economy is tourism. There is no doubt that the outbreak of Ebola in West Africa provides the latest evidence. The region will soon start feeling the Ebola scare really affecting touring in the region with a lot of big companies are putting on travel restrictions and tourist diverting their attention from the region.

Nigeria has started recording her deaths from Ebola. Business has suffered more in Guinea, Liberia and Sierra Leone, where the virus has killed over 1,300 people in all. Government restrictions on the movement of goods and people have halted commerce in some areas. Cross-border markets have been shut down, stripping vendors of their one source of income. Farmers have fled affected zones, leaving crops to rot in the fields.

CADA suggests that governments and aid groups will probably spend hundreds of millions of dollars containing Ebola and caring for its victims. But the cost to the affected economies could well exceed the medical bills. The extent of the damage will depend on how far the disease spreads and how long the outbreak lasts. Already, the World Bank has revised down its economic-growth estimate for Guinea this year by one percentage point. The Liberian finance minister believes that the IMF's projection of 5.9% growth in his country is now unrealistic.

In the opinion of CADA, the economic costs of epidemics are often out of proportion to their death toll. The outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 was estimated over $50 billion-worth of damage to the global economy, despite infecting only about 8,000 people and causing fewer than 800 deaths. That is because panic and confusion can be as disruptive as the disease itself. Studies of past outbreaks have shown that lethal diseases that lack a cure tend to provoke overreactions. This is true even if the risk of transmission is low, as is the case with Ebola.

CADA believes governments should walk a fine line between limiting the spread of Ebola and causing needless disruption. Panic is avoided not just by combating an epidemic, but by being seen to do so. Transparency is important. It is worth mentioning that by disclosing the extent of an outbreak, governments limit the spread of rumours and encourage an appropriate response from business and the public. But there is also the risk that weak governments will simply expose their impotence.

--Signed--
Frank Adarkwah-Yiadom
Executive Director,
CADA