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The Impact of the Ebola Outbreak on Business and Business’ Response

The Ebola Outbreak has had serious socio-economic and cultural effects firstly on the three countries affected and additionally on everyone. Despite this, it is only recent that the response seems to have picked up pace. From the first case in the beginning of the year to today, a lot could have been done to avoid the deaths that have occurred and the devastating impacts that have since emerged.

Sierra Leone and Liberia were before the outbreak some of the fastest growing countries in the world. Today these countries’ economies have been decimated with growth rates now down to low levels. Sierra Leone was to grow by 14% in 2014 and Liberia was growing at 10% since 2005.

Today, Sierra Leone has lost $163 million or 3.3% of its GDP while Liberia could lose up to $234 million this year or 12% of its GDP and Guinea, $142 million (2.3% of its GDP). And in the next 2 years, Ebola could cost $32 billion if its spreads to nearby economies.

In October this year, the World Bank estimated that the short term impact of the outbreak on all three countries in terms of forgone GDP was $359 million; and if uncontained, the economic loss to Liberia alone would be an equivalent of 12% of its GDP.

The regional impact would be very serious if the outbreak were to move to neighbouring big economies, for example, Ghana and Cote d’Ivoire. Already the two countries while still Ebola free have seen high rises in cocoa prices. The price of cocoa has climbed 23% this year and continues to increase (hitting a 3 year high).

In addition, the harvesting and analysis of cocoa pods is low due to travel restrictions and fear that has disrupted travel to these countries.

Quite interestingly, the world’s chocolate makers have been on high alert for possible further Ebola-related disruptions and ripple effects. Since the virus is threatening the world’s supply of cocoa, it has also caused them to band together and donate only $700,000 under the banner of the World Cocoa Foundation. If my information is correct, the chocolate industry as a whole makes close to $200 billion US annually. This raises the question around how business has been affected and its response. The chocolate industry’s response is a case for serious reflection. Why would such a big industry whose main raw material is from the region mostly affected not see the repercussions of not responding in a bigger scale to contain and resolve the outbreak? What about other businesses with operations in West Africa in general and the three countries in particular?

In case we have not appreciated the magnitude of the outbreak, we are at risk if we don’t respond effectively. The agriculture sector has been affected in many ways. First, the disruption of market linkages due to travel restrictions are leading to sharp price hikes. In Liberia, for example, the price of cassava has gone up by 150%. Secondly, the abandonment and labour shortages on farms have severe implications for food and cash crop production in the affected areas. Thirdly, there has been a reduction in crop production forecasts and low exports in commodities such as coffee, rubber and palm oil. In Liberia, for example, the agricultural sector (including forestry) accounts for nearly 73% of GDP. Due to the impacts of Ebola, Liberia’s timber exports are expected to drop significantly as well as rubber exports, which were expected to be about US$148 million in 2014. Rubber exports are estimated to drop by 20%. This will affect the production of tubings, stoppers and other ancillary components such as elastic, bands, etc.

A drop in timber exportation will lead to many adverse effects. Timber is the only 100% renewable resource of construction material used for example to make furniture, paper and paper production, artificial limbs, power poles and so on. Similar to rubber, if there is a decline in the availability of timber, without a doubt, the production of the above materials will suffer. As for palm oil, a decline in the supply of this product will lead to a decline in the production of the raw materials of the pharmaceutical industry.

Tourism is another sector that has been affected. A number of airlines especially to the three countries have been suspended, in turn hurting the tourism industry badly and causing, hotels and travel companies to suffer reduction in revenues. The World Travel and Tourism Council recently stated that early indications suggest a decline of 30% in bookings to the region. Gambia, which is dependent on its tourism sector, is perhaps the worst affected in the region.

The start of the tourism season in October has seen significantly lower number of tourists than in previous years with an anticipated 50-60% decline.

This has had knock on effects across other regions. SafariBookings.com reports that there has been a huge fall in tour bookings of between 20% and 70% since the outbreak. The effects are felt mainly closer home here in Botswana, Kenya, Tanzania and South Africa.

Other sectors affected are mining, manufacturing, retail, trade, financial services, banking, and social services among others, health care systems, education, sports, and culture. Perhaps even more significant are the cross cutting issues such as poverty, gender relations, human rights, regional integration and questions of dignity that have been exacerbated by the outbreak.

Meeting her as businesses, the questions to be discussed by the panel are

How has business been affected, and

How is business responding, and

What still needs to be done to curb the epidemic?

I am aware of the various efforts so far by business. For example, a few weeks ago, the African Union convened the private sector and managed to pledge about 28 million dollars. The private sector represented agreed to establish a fund under the auspices of the African Union Foundation through a facility managed by the African Development Bank, to boost efforts to equip, train and deploy African health workers to fight the epidemic.

To date, Nigerian billionaire, Aliko Dangote has committed 150Million Naira (USD $800K); Tony Elumelu, 100 Million Naira, (USD $600k) and Patrice Motsepe, USD $1 Million. The #UnitedAgainstEbola Fund has now raised over $45M, with additional commitments coming in over the past few days.

In addition to Africa’s leading business people, international companies such as GE, Standard Chartered Bank and Coca Cola, to name a few, have also made contributions.

Have these responses been adequate given the magnitude of the problem? I think more can be done still to put in place mechanisms for preparedness not just for the Ebola outbreak but for any other outbreak that could surprise us. It is for this reason that I and other civil society and business leaders thought such a dialogue would be timely in helping us understand the impact of the outbreak but also reinforce our efforts towards eradicating the problem.

Highlights