As the West African countries affected by the Ebola virus continue to seek ways to eradicate the disease, Africa’s richest man and Nigerian cement magnate, Alhaji Aliko Dangote, has pulled out some of his employees from his cement plant in Liberia.
Dangote also stated that one per cent growth might be shaved off in the region this year.
A Lagos-based financial advisory and research firm, Financial Derivatives Company Limited (FDC), revealed this in its latest bi-monthly economic report obtained yesterday.
According to Dangote, the effect of Ebola “will have a great impact”. However, he acknowledged that “various governments are doing things to tackle the situation.”
The Chief Executive Officer, Dangote Cement Plc, Devakumar Edwin, had explained that some members of staff of the company had left Liberia as a result of the spread of Ebola and increased air transport in and out of the West African country.
The company is reviewing plans in Liberia for an import terminal and considering whether a larger grinding facility in the country would be a better investment, Edwin had explained.
Dangote Cement doesn’t expect Ebola, which has killed more than 1,500 people in Guinea, Liberia, Sierra Leone and Nigeria, to have a “big impact” on its operations, as previous outbreaks have been “short-term”, Bloomberg also reported.
In Liberia, Sierra Leone and Guinea, attempts to quarantine infected populations and contain the virus have paralysed some companies and led to job losses.
In Liberia, the government had said the epidemic threatens to derail the progress made since the end of the civil war in 2003. Also, Sierra Leone has cancelled its first sale of bonds open to foreigners.
However, in Nigeria, since Friday, July 25, 2014 when the importation of the disease was confirmed, fear, panic, disbelief and frustration have taken their toll on economic activities, particularly in Lagos.
Moody’s had announced that the outbreak of Ebola in Nigeria could lead to serious disruptions in some sectors of the economy with negative financial consequences.
Continuing, the FDC report listed the sectors that would be impacted mostly by the epidemic in Nigeria to include aviation, hospitality and tourism, trade, medical and agriculture.
“Analysing these sectors’ contribution to GDP shows that Nigeria may lose about $2 billion in the first quarter of the outbreak.
“The chance of the outbreak going into a second quarter is very slim; which could extend the loss to $3.5 billion,” it added.
Furthermore, it stated that while a small part of the Nigerian economy is already benefiting from the Ebola scare, such as shop owners selling sanitisers, a larger part is experiencing losses.
Commenting on the effect of the disease on the aviation sector, the FDC report showed that air transport accounted for 0.09 per cent of Nigeria’s GDP in the first quarter of 2014 and the second most used means of transportation after roads. “Since the outbreak of Ebola in West Africa, several airlines including Arik Air, Asky, British Airways and Emirates have suspended flight operations to and from some of the Ebola affected countries.
“Saudi Arabia also suspended giving out visas to Muslim pilgrims from West African countries. Serious screening for Ebola has also begun at several international airports before passengers are allowed to board an airplane.
“We expect revenues in the aviation sector to plunge downwards, which would affect both the airlines and the support industry (handling companies, oil marketers, catering, duty free shops, etc.),” it added.
It also stated: “Air transportation is very critical to trade. Hence, a reduction in the number of international flights literally means a reduction in international trade flows. Domestic trade is also likely to be negatively affected significantly if the disease spreads.”
In addition, FDC said visits to restaurants in Lagos had already declined by 50 per cent, noting that a direct implication on the low turnout to social events is a decline in the events management business.
“In addition, in a bid to prevent illegal movement of Ebola-linked corpses across states, there will be many stops at checkpoints. This is expected to affect the time taken to deliver agricultural goods.
“Given Nigeria’s weak health care system, especially lack of facilities to hold patients in isolation and intensive care units, an outbreak may overwhelm the poorly-equipped facilities. Because of the infectious nature of the disease, expenditure on preventive healthcare has risen, especially spending on personal hygiene and care products.
“The breweries and distilleries industry will be affected due to a decline in drinks, especially for spirits. This will result to a loss in revenues and decline in profits in the medium to long term,” it stated.
Similarly, the International Monetary Fund (IMF) said yesterday that the outbreak of the Ebola disease was likely to lead to “sharply” lower growth in Guinea, Liberia and Sierra Leone and raise financing needs in all three West African countries.
“The Ebola outbreak is having an acute macroeconomic and social impact on three already fragile countries in West Africa,” Reuters quoted IMF spokesman, Gerry Rice, to have told reporters.
“We are actively working with all three countries to prepare a preliminary economic assessment of the impact of the Ebola crisis, and additional financing support that may be required.”
Nevertheless, a report by NBC News quoted US observers who expressed optimism that the Africa continent would eventually overcome the epidemic, noting that despite immediate concerns, the often-fatal disease has done little to change their increasing optimism about investing on the continent.
“Clearly people are aware of (the Ebola scare), but it’s not something that’s slowing anybody down,” Managing Director, African Sunrise Partners, Melissa Cook, who visited Abuja last week said.
“As far as Nigerians are concerned, business is full steam ahead.”
Cook had a packed schedule of meetings with local business people and government officials to drive power sector projects forward.
“We aren’t seeing any decline in investor interest, and it has really been a non-issue as most investors are focused on the long term,” a New York-based partner at a $7.5 billion private equity firm Abraaj Group, Tom Speechley added.
London Mining said Ebola could decrease production in the second half of the year at its iron ore facility in Sierra Leone, according to Reuters.
ArcelorMittal also said a mine expansion project in Liberia would be delayed because of the disease after hundreds of employees were evacuated, according to The Wall Street Journal, while Vale, Randgold Resources and AngloGold Ashanti have also moved workers in Guinea, according to Mining.com.
“It’s not going to affect long-term private investments — not from an area that’s less than 1 per cent of African GDP,” a former partner at Bridgewater Associates who is now CEO of Sango Capital Management, Richard Okello, said.
Okello said his mostly US institutional clients are monitoring the situation in the short-term but understand that it’s a temporary phenomenon. “It’s a blip,” he said.
“Lots of investors and tourists who wanted to come to Guinea are not coming. It’s certain there will be an impact on the Guinean economy,” the former prime minister of the country who now leads a leading political opposition party, Cellou Dalein Diallo, said.
“You have to do that to attract investors so that people can contain their risk,” he said.
But, for all its destruction, Ebola could be an investment opportunity as the head of US distribution at an investment bank, African Alliance, Ashley Bendell, noted that “because large-scale health infrastructure is clearly not in place in a lot of Africa, then if anything, this has helped to highlight the potential for investment into the healthcare sector.”