Ebola – the fear factor

In December 2014, the World Health Organisation reported that there had been over 7,000 deaths as a result of the Ebola epidemic. Within the three hardest hit countries – Sierra Leone, Liberia and Guinea there have been growing fears of a potential humanitarian crisis occurring due to the limited medical resources and the availability of international aid. Before the virus hit, the three countries had experienced buoyant economic growth, but now the negative impact of the virus is expected to last for many years to come.

Recent efforts to contain the outbreak from spreading to other African nations have proved to be fairly successful as we can see from the below diagram with only seven countries having been affected. However, the ‘fear factor’ and the subsequent economic impact have now spread far beyond the affected countries.

ebola econ

Slowing growth?

For 2014, the IMF’s economic growth forecast for Africa was cut to 5.0% from 5.5% primarily due to the potential spill over effect from Ebola. To put this into perspective, the World Bank estimated that the economic impact is expected be in the region of $3-$4 billion for the region. However, if continued efforts to restrain the spread of the virus do not prove successful, the total economic cost could be as high as $32 billion.

The virus is having a larger impact on particular industries, with the tourism being one the worst affected industries. One of the key fundamental issues is that many are failing to distinguish between those countries affected with the virus and those that are low risk. As such, the negative implications of Ebola on the African economy could take a long time to return to normality.

Fear factor, the amplification of risk

Many news outlets have reported that America has increased the fear factor of the virus. This is evident as there have been numerous reported cases of individuals in America casually wearing hazmat suits. Such stigmatisation has led to the social amplification of the risk perception and the subsequent negative economic impact that the virus will continue to have on the continent.

It’s not all negative

Although the virus will have a profound effect on Sub Saharan Africa, the long-term economic growth prospects remain positive. According to the IMF, economic growth within countries such as Nigeria and Zambia is expected to be over 7% in 2015.

Many investors have continued to pursue investment projects in Africa. A notable example is China International Water and Electric Corporation. The company is currently working on the largest electricity and water project in Guinea. When the Ebola outbreak initially spread in the country, the company set up an emergency aid centre. This was done in spite of the fact that none of its 2,000 employees in the country were infected.

If other investors follow suit in pursuing investments projects in Africa, then economic growth will continue to thrive.

Photo: www.thehealthsite.com

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