Impact of Covid-19 on Financial Stability in Africa

The document examines how Covid-19 triggered financial instability in Africa through capital outflows, falling commodity prices, and sovereign credit downgrades, while recommending the development of local capital markets and continental policy coordination to enhance resilience.

• The pandemic caused severe dislocation in African financial markets, characterized by huge capital outflows, trade disruptions, reduced foreign direct investment, and funding shortages.
• African equity markets showed extreme vulnerability to global shocks, with major indices losing between 10% and 30% of their value within a two-week period in early March 2020.
• The collapse in energy demand, the largest in 70 years, significantly increased borrowing costs for African oil exporters including Angola, Nigeria, Ghana, and Gabon.
• Sovereign credit ratings in sub-Saharan Africa declined sharply, with seven of 19 rated countries experiencing downgrades since March 2020.
• South Africa's debt was removed from the FTSE World Government Bond Index on 30 April 2020 following a downgrade to a junk rating by Moody's Investors Services in March 2020.
• African bond markets experienced portfolio outflows and spikes in long-term interest rates that surpassed levels seen during the 2008 Global Financial Crisis.
• The document argues that African countries are overly reliant on foreign financing and non-local currency debt, which increases their vulnerability to mass outflows during economic downswings.
• Financial integration is increasing through pan-African banking groups and regional initiatives like the SADC Integrated Regional Electronic Settlement System (SIRESS).
• The authors recommend that African governments and central banks coordinate macroeconomic policy at a continental level to address rising corporate leverage and sovereign exposures.
• To build long-term resilience, the paper calls for the deepening of local capital markets and the fostering of a strong domestic institutional investor base to reduce sensitivity to global portfolio flows.

APA

SHIPALANA, P., & O’RIORDAN, A. (2020). Impact of Covid-19 on Financial Stability in Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2020/11/Occasional-Paper-311-oriordan-shipalana.pdf

Chicago

SHIPALANA, PALESA, and ALEXANDER O’RIORDAN. Impact of Covid-19 on Financial Stability in Africa. South African Institute of International Affairs, 2020. https://saiia.org.za/wp-content/uploads/2020/11/Occasional-Paper-311-oriordan-shipalana.pdf.

Wikipedia

{{cite report |last1=SHIPALANA |first1=PALESA |last2=O’RIORDAN |first2=ALEXANDER |title=Impact of Covid-19 on Financial Stability in Africa |publisher=South African Institute of International Affairs |date=October 2020 |url=https://saiia.org.za/wp-content/uploads/2020/11/Occasional-Paper-311-oriordan-shipalana.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shipalana2020impact, author = {SHIPALANA, PALESA and O’RIORDAN, ALEXANDER}, title = {{Impact of Covid-19 on Financial Stability in Africa}}, institution = {South African Institute of International Affairs}, year = {2020}, month = oct, url = {https://saiia.org.za/wp-content/uploads/2020/11/Occasional-Paper-311-oriordan-shipalana.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }