With reports of cases of Covid-19 increasing globally, West African commodities are also feeling the negative effects of the pandemic, international commodities consultancy Core Consultants tells Mining Weekly.
“The effects of the pandemic can be seen directly in commodities, such as oil, with the price being dragged down since China, the most dominant commodity consumer and importer of oil, closed its doors to imports. This not only affects the global economy but also has an exacerbated effect on African countries whose gross domestic product is primarily comprised of supplying raw materials,” says Core Consultants MD Lara Smith.
Oil, which is a major export in West Africa, has suffered one of the heaviest price declines as a consequence of the Covid-19 outbreak. Projected oil prices have dropped by 16.17% for West Texas intermediate crude oil and by 12.42% for Brent crude oil, Smith adds.
She also states that Nigeria has indicated the possibility of a midterm review, as the pandemic reduced the expected oil price to below $53/bl.
“The International Monetary Fund has also reduced the region’s economic growth projection from 2.5% to 2% because of the decline in oil prices.”
With many Chinese citizens arriving in West Africa for business during the onset of the Covid-19 outbreak, countries such as Guinea, Sierra Leone and Liberia are at risk. However, the challenge of this pandemic can be combatted, as West Africa has gained vital experience from the recent Ebola epidemic, says Smith.
“This means that the region might be better prepared for the pandemic than otherwise expected. “The Ebola virus was spreading, owing to delays in testing. Now, all testing is done in the country with the help of the World Health Organisation. Additionally, handwashing stands from the Ebola crisis have been reinstated.”
Smith mentions that screenings and quarantine programmes have been implemented at airports and that specific actions in West Africa have been communicated, including the implementation of ‘social distancing’ and the $100-million allocation to the Covid-19 fund, in Ghana, as well as the ban on travel in Gabon and Mali.
“However, import demand is expected to remain subdued and prices are expected to potentially reduce further. While China has slowly started to recover, many African borders remain closed and there is still panic surrounding the pandemic in the workplace, primarily owing to mines in Africa being largely unmechanised and, therefore, requiring gatherings of people,” Smith notes.
She concludes that, while there is also a decline in the price of cocoa – directly attributable to Covid-19 in countries such as Côte d’Ivoire – with prices dropping by 4%, the gold price is more than $1 500/oz, owing to investors rushing to ‘safe haven’ assets.