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Covid's Impact on Consumer Spending in Africa

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By: Shira Petrack 

Estimated reading time: 4 minutes

The Covid-19 pandemic has caused a recession in Africa for the first time in twenty-five years. The World Bank calculated that the considerable drop in economic activity will cost the region at least $115 billion in output losses in 2020 alone.

Some worry that the restrictions affecting entrepreneurs and small businesses will affect the trajectory of Africa’s middle class for years to come. But the middle class also includes a large share of young people age 15-24 who drive consumer trends in food, entertainment, and connectivity. In the aftermath of Covid-19, this generation will exercise an even greater influence on Africa’s consumer demand trends. 

Covid’s Economic Impact 

In a high-frequency phone survey of Malawi, Nigeria, Uganda, and Ethiopia during May-July 2020, the World Bank found that 77% of households had lost income due to the pandemic. Business income represented the most common source of lost revenue in all four countries, although there were some disparities in the findings: Ethiopians reported significantly less wage income, farm income, and remittances losses than the other three countries. In all four countries, concern about the financial threat of Covid-19 was greater than worry over the virus itself. 

An SMS poll of Kenya, South Africa, Nigeria, Côte D’Ivoire, and Mozambique conducted by GeoPoll during June-July 2020 revealed similar findings: 76% of respondents reported income losses, with almost half (49%) stating that their income decreased “a lot.” In a follow-up survey conducted in November 2020 in the same five countries plus the DRC, the percentage of respondents who told GeoPoll that their income had decreased a lot since June 2020 had increased to 52%. Another 27% stated that their income had decreased a bit. All in all, almost 4 out of every 5 people surveyed experienced a loss of income during this period. Interestingly, although more people reported income losses in the November survey, only 65% of respondents were concerned with paying their expenses, compared to 71% in June. 

Africans are Spending Less 

A majority of respondents, including those who have not experienced a recent loss of income, told GeoPoll that they expect to spend less this holiday season. This thrifty attitude should change by next year’s holidays. A September consumer sentiment survey conducted by McKinsey in South Africa, one of the hardest-hit countries, found that 69% of respondents do not expect the financial impact to last more than a year.  

The younger generation (aged 15-24) is the most optimistic both about the length of the economic impact and their future income prospects. They were also the least likely to report that their income decreased “a lot.” 

Effect on E-Commerce is Varied

The pandemic’s effect on e-commerce has been mixed. The World Bank found that sales decreased for most specialized e-commerce companies, whereas most third-party online marketplaces saw increases in sales. In South Africa, McKinsey found a 90% growth in online purchasing on average across most categories, with online purchases of alcohol, snacks, personal care products, and groceries growing over 100%. GeoPoll, on the other hand, found an overall decrease in online shopping among its respondents, perhaps due to the general decline in spending. 

Small businesses all over the continent are joining digital sales interfaces for the first time. Savvy entrepreneurs are capitalizing on the increased demand by building e-commerce platforms or integrating them into their existing offerings. In March, SafeBoda, a Ugandan rideshare app with an emphasis on safety that matches passengers with motorcycle drivers, launched a food delivery service shortly before the country went into lockdown. Several days later, the company launched a delivery service for food, groceries, and essentialsFlutterwave, a payment platform, set up an e-commerce portal that allows merchants to set up virtual shops and receive payments through Flutterwave. 

Bringing more shoppers to these new online stores depends on improving connectivity on the continent and making it more affordableGovernments can enact regulations to encourage competition in the space. Since young Africans are more likely to use the internet than their older counterparts, their online shopping habits will shape the future of e-commerce in Africa.

The Restrictions’ Collateral Damage  

GeoPoll found that residents of countries that had enacted the most severe restrictions struggled the most financially and experienced the most emotional stress. In hindsight, the lockdowns’ economic cost may outweigh the benefits.

The region has surprised experts in its resilience to the virus. With the exception of South Africa, where over 28,000 people have died from Covid-19 to date, Africa’s average case-fatality ratio (number of deaths per diagnosed cases) is significantly lower than the global average. The continent as a whole has recorded a little under 3 million Covid cases – significantly less than the 250 million that some experts were predicting. While the lockdowns undoubtedly slowed the virus’ spread, many have attributed Africa’s success with the virus to the low median age in the region – the median age in SSA is 18.7 compared to 43.1 in Europe.

The overall public health benefits of the restrictions are also not yet known. For instance, the World Health Organization predicted that the Covid-related disruptions reducing access to treatment will lead to an estimated 20,000-100,000 increase in malaria deaths, depending on the extent of the disturbance, compared with the approximately 40,000 deaths in 2020 caused by Covid-19 in the region.

Looking forward to 2021

It is always hard to predict the future – and it seems downright impossible to do so amid a novel global pandemic. However, one thing is sure: Africa’s youth will play a key role in Africa’s post-Covid economic recovery.

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© 2021 Empower Africa. All rights reserved.

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