Ebola’s economic effects in Africa are proving hard to quarantine even in the 49 of 54 countries that are untouched by the virus.
Corporate events are being canceled, international investors are declining to visit and multinationals are on high alert. The International Monetary Fund yesterday cut its forecast for economic growth in sub-Saharan Africa this year to 5 percent from 5.5 percent, due in part to “economic spillovers starting to materialize” from the outbreak.
The ripple effects present a fresh challenge to Africa’s economic progress, which is heavily dependent on foreign investment and vulnerable to even slight shocks. Business and political leaders say the virus is making overseas partners nervous and in some cases hurting bottom lines.
“The investors generally have all been concerned,” said Peter Sullivan, chief executive officer of Australia’s Resolute Mining Ltd., which mines for gold in Mali, bordering Ebola-stricken Guinea. “For some of them, what you find is a degree of speculation on you being impacted significantly as a result of any outbreak.”
No country has felt the psychological impact of the disease more than Nigeria, Africa’s most populous nation. With a gross domestic product of more than $500 billion, it registered 20 cases and eight deaths. Although Nigeria was yesterday declared Ebola-free by the World Health Organization, with no new cases since Sept. 8, the stigma lingers.
The Bobby Taylor Company, a Lagos-based communications firm, had to cancel an event for about 150 music aficionados from the U.S., Nigeria and South Africa late last month over Ebola fears.
“Lagos being Ebola-free is definitely something we can boast about but there’s still that twang of concern for people, the stigma that comes with us getting it in the first place,” said CEO Bukky Karibi-Whyte. “How do you really convince someone that the disease won’t touch them?”
Ebola’s effects have reached the pinnacle of Nigeria’s corporate world, which is seeking international investment to refurbish ports, build power plants and erect waterfront skyscrapers for Lagos’s burgeoning upper classes.
Dangote Group, the Lagos-based business empire controlled by billionaire Aliko Dangote, last month scrapped a planned visit by international investors to cement and sugar factories in and around the city. Some had said they were worried about Ebola. The trip hasn’t been rescheduled.
Dangote declined further comment.
Many overseas organizations “fail to distinguish between high and low risk areas and the whole of West Africa has suffered as a result,” said Charles Laurie, the head of Africa at Bath, England-based risk consulting firm Maplecroft. For that reason, he said, “economic recovery for the region will, in all likelihood, be a lengthy process.”
The three countries still battling the virus -- Guinea, Sierra Leone and Liberia -- together have a gross domestic product smaller than Afghanistan’s and are crowded together in the far western edge of the 4,500-mile-wide continent.
That may not stop investors unfamiliar with the diversity of Africa’s 54 distinct countries from responding disproportionately to negative news.
“Psychology plays a huge role and this has taken on a life of its own,” said Michael Marshall, whose Atago Pacific Partners advises on investments in sub-Saharan Africa. “Our long-term investment is not interrupted. The numbers, demographics and all the things that have made Africa compelling are still the case.”
In the short term, the damage is being felt both next door to the worst-hit region and further afield, the World Bank said in a report this month trying to quantify the overall economic impact of the epidemic. Senegal, which the WHO last week said was Ebola-free, and Ivory Coast, which has had no cases, are losing trade by closing their borders with affected countries, for instance.
In Gambia, a tourist-dependent nation of picturesque beaches and palm trees surrounded by Senegal, hotel bookings are down by 65 percent due to fear of the virus, the report said. Gambia’s geographic misfortune: being located within a few hundred kilometers of Senegal’s border with Guinea.
In Lagos, a metropolis of more than 20 million, early reports from malls and shops “indicate significant recent declines in demand, sometimes in the range of 20 to 40 percent,” the Washington-based lender said. All told, the bank estimates, a worst-case Ebola scenario could knock about $33 billion off of the region’s GDP, an estimated $750 billion for 2014, by the end of next year.
Ebola fears are “tapping the brakes” for some businesspeople considering African projects, said Bobby Pittman, who advised U.S. president George W. Bush on African issues and now works as an investor based in Washington.
Some outsiders have a less-than-informed approach to the risks; Pittman said he recently received an e-mail urging him to watch out for the virus on a planned trip to Johannesburg -- which is about as far from Liberia as New York is from Paris and has never recorded a case. “I said to them, ‘In Washington you may be closer to Ebola than I am,’” Pittman said.
Africa’s economic boom is unlikely to take a significant hit even after the largest-ever outbreak of a fearsome disease. Thanks to resource projects, gradually improving infrastructure and the demographic dividend of a growing population, sub-Saharan Africa has vied with Asia to lead the world in growth over the last decade.
The combined economy of the region will grow by 5.8 percent next year, with Nigeria, Zambia, and Tanzania expanding by 7 percent or more, the IMF said yesterday, and there is no shortage of positive investment news.
Intercontinental Hotels Group is developing six new African hotels, to add to 27 already in operation, while rival Marriott International Inc. works to integrate Protea Hotels, a South African-based chain with 116 hotels across the continent it bought for $196 million last year. Both companies -- neither has hotels in the three affected countries -- said via spokesmen that they were monitoring the Ebola situation carefully.
An 1,800-mile rail link between Rwanda and the Kenyan port city of Mombasa, now under construction, will also connect landlocked Uganda to global markets. Dams for hydroelectric power are being built in Ethiopia and proposed for Congo and Mozambique.
At African Alliance, an investment bank focused on the region, “we continue to take clients all over the continent and we’re still very busy with that,” said New York-based executive Ashley Bendell. “People who don’t know Africa don’t really understand the implications of the outbreak and think it’s a major threat to the whole continent.”
Companies with factories in West Africa are trying to prevent that. Nestle SA, the world’s largest food producer, has sharply limited employee travel to the affected region and said its operations are “on high alert” for the disease. Spirits manufacturer Diageo Plc and brewer SABMiller Plc are telling employees at facilities in Nigeria and Ghana to watch out for and report any Ebola symptoms.
The best course of action for companies is “to continue with what you do there, which is to create stability,” Nestle CEO Paul Bulcke, whose company operates in Ivory Coast, Ghana and Nigeria, said in an interview. “If all of a sudden you close all factories in Africa, that would cause more panic.”
The virus is having a greater effect on home-grown African businesses that have sought to develop West Africa as an important market. At Kenya Airways, which depends in part on West African travelers to feed its Nairobi hub, annual sales may slide as much as 4 percent this year after it pulled out of Liberia and Sierra Leone, CEO Mbuvi Ngunze said Oct. 15.
MTN Group Ltd., Africa’s largest mobile provider, can’t just pick up and leave. To keep its network running in affected parts of West Africa, the company is equipping maintenance staff with protective suits for their visits to some cellular base stations.
At headquarters in Johannesburg, life continues as normal, with some exceptions. When this month MTN held one of its regular corporate affairs forums for senior staff from around the group, the crowd was slightly smaller than usual. Two executives from Guinea and Liberia were missing. The reason: because the company, wary of the risk of infection and following government guidelines, had asked them not to come.