The COVID-19 pandemic is becoming one of the most serious threats to global markets and international trade seen in recent times. Border closures and travel restrictions instituted by different countries to restrain the spread of the virus, have adversely affected transportation and other supply side businesses and service providers.1 Uncertainty about the disease has plagued stocks, bonds and futures markets with negative implications. Financial markets have suffered losses and global economic forecasts are being reassessed and downgraded to account for the loss in trade and income to businesses and governments resulting from the pandemic.2 Asian, American and European governments and policy makers have pursued policies of social distancing, quarantines and business closures to curb the spread of the virus,3 along with stimulus packages to support businesses and individuals during the intervening period when work in many business sectors will be restricted.4 Across the world, in addition to the effects of the pandemic, markets are simultaneously suffering the effects of an oil price war between Russia and Saudi Arabia, which has seen oil prices falling as low as $21 for WTI Crude and $25 for Brent crude (per barrel), with analysts predicting a $20/ barrel oil market.5
Africa is currently experiencing an increase in cases of COVID-196 and African governments and policy makers are pursuing similar policy strategies7 as their Asian, American and European counterparts. These restrictions along with the concerning state of the markets discussed above, have implications for African businesses, in their dealings with their employees, investments and trade dealings and in their dealings with the government and regulatory agencies. Some of these considerations will be considered below.
2. African Businesses and Employees
African countries such as Ghana, Kenya, Nigeria and South Africa have instituted travel restrictions, social distancing and/ or quarantine policies.8 These policies are bound to affect businesses as they are generally obligated to comply with government policies especially during a public health crisis. This will inevitably result in businesses changing their work environment policies to protect the health and safety of their workplaces and employees while prioritizing business continuity and the maintenance of the quality of services provided. This may, in some cases, lead to the institution of remote work policies for employees, especially those with the capacity to work from home.
Measures for Workplace Environments
Businesses are encouraged to institute workplace health and safety preventive measures and guidelines in line with the World Health Organization guidelines, 9 including ensuring workplace environments are clean and healthy and promoting good personal and respiratory hygiene for employees, clients and other visitors to the workplace. Restriction of business travel may be necessary, especially in light of the travel restrictions and border closures instituted by various countries. Companies may also need to institute new sick and annual leave rules to account for illnesses and symptoms peculiar to COVID-19 and to cater to employees that may prefer to self-quarantine where symptoms are not evident or the certainty of such persons' contacts with infected persons is not clear.
Businesses in essential services are encouraged to consider and mitigate the risk of employee lawsuits relating to occupational safety and health standards in the workplace. African businesses in the agricultural sector, an essential industry for food security during the pandemic, will have to consider how they manage their workplace environment and worker interactions during COVID-19,as they may not be subject to the outright restrictions of other manufacturing and production industries, yet they are responsible for ensuring healthy and hygienic workplaces, especially during the pandemic.
Considerations for Remote Work Policies
African businesses must also consider and plan for the implications of remote working policies, especially those considerations that are peculiar to businesses in Africa. For example, the availability of stable power supply and internet access for employees working out of the formal office space may be a significant business continuity concern for African businesses instituting remote working policies. Other general issues such as the effect of working from home on work and employee productivity should also be carefully considered and planned for. Some helpful measures that businesses may undertake in this regard include providing employees with alternate power and internet for remote work and ensuring employees log and account for their hours. However, businesses must make the necessary cost-benefit analyses in deciding on suitable options.
For African businesses in sectors such as manufacturing, mining of natural resources and agriculture, which usually employ day labourers and involve higher levels of close contacts between workers, social distancing and other shelter-in-place policies may amount to layoffs for workers within those industries. Some of the government policies discussed in paragraph 4 below (African Businesses and Government/ Regulatory Agencies) might be relevant to these businesses and employees.
Considerations for Business Reorganizations
The effect of reduced trade and business, especially from a depressed international trade market, will affect company budgets and income and may in turn result in business reorganizations, reduction in employee work hours and potential layoffs of employees. These business reorganizations are generally expected and may even be allowed, subject to certain considerations including the provisions of relevant labour laws and anti-discrimination laws.
Labour and Anti-Discrimination Laws
Each African country will have its own labour and anti-discrimination laws that the African businesses within its jurisdiction will be subject to. Businesses are expected to comply with the provisions of these laws when considering reorganization due to the COVID-19 pandemic. From an international perspective, African businesses may also consider the provisions or principles of the Discrimination (Employment and Occupation) Convention, 1958 and the Right to Organize and Collective Bargaining Convention, 1949, which are international labour guidelines ratified by all African countries.10
African businesses operating in sectors with employees that have collective bargaining powers11 may be required to prepare more detailed business reorganization plans than those without such considerations. Employers considering layoffs are bound to comply with anti-discrimination laws and policies. The implication of this is that businesses may not simply terminate sick employees, employees exhibiting symptoms, employees with high risk of illness from COVID-19, or employees in contact with potentially ill persons, neither may they be seen to do so without legally adequate justifications. Recommending quarantine, sick and/ or other paid leave for employees should be in accordance with the provisions of business handbooks and rules rigorously prepared to account for COVID-19 situations.
Instructing employees who are sick or potentially exposed to COVID-19 to undergo sick leave or other remote work measures, may not inevitably lead to termination. In order to protect themselves in the event of some of the inevitable post-COVID-19 unlawful termination or workplace discrimination lawsuits, African businesses are encouraged to develop adequate strategies and policies to govern any restructuring of work place policies to ensure a healthy working environment, as well as any business reorganizations.
Employees' Data Privacy
Employers may also be naturally inclined to source the health information of employees as part of their workplace COVID-19 prevention and control strategies. Under such circumstances, employers are also bound by the privacy and data protection and anti-discrimination laws and policies of their respective jurisdictions Compliance requirements such as the processing of personal data subject to a justifiable legal basis has to be complied with despite the prevalence of the COVID-19 pandemic. For instance, in a bid to curtail the COVID-19 epidemic, employers may need to ask employees to inform them if they have recently visited COVID-19 high risk countries so as to recommend remote working to such employees where appropriate. In such a case, Nigerian employers (for example), will specifically be bound to comply with the legal basis requirement of the Nigerian Data Protection Regulation (NDPR) as well as the requirement to demonstrate the compliance of their actions with provisions of the NDPR.12
Furthermore, employee health data may not be used or seen to be used by employers in a discriminatory manner to terminate or otherwise prejudice employees.
Some Recommended Considerations/ Actions
- Institution of preventive workplace health and safety measures and guidelines.
- For employees with remote working capabilities, provision of alternate power (considering that many African countries experience intermittent power supply) and internet for work and ensuring employees log and account for their hours.
- Provision of adequate group insurance covers for employees especially those involved in the provision of essential services.
- Preparation and update of rules for sick and other paid leave that adequately consider COVID-19 situations.
- preparation and update of employee handbooks and rules in compliance with labour and anti-discrimination laws in COVID-19 situations.
- Compliance with national data protection and privacy rules.
3. African Businesses, Investments, Trade and Markets
While the long-term effects of COVID-19 remain uncertain, the pandemic poses serious short-term downside business risks to African businesses and the continental economy.
Financial Markets and Investments
African financial markets are already experiencing COVID-19's similar negative impacts on equities and other securities trading as the rest of the global markets.13 Foreign equity and debt investments in African businesses will also be adversely affected by COVID-19 as governments and businesses in China and Europe, which represent the major African investment partners, respond to their own COVID-19 concerns. Potential foreign investors may be reluctant to invest in African businesses given the bearish outlook of the global financial markets.
African businesses should consider the implications of COVID-19-based restrictions on investments and other business dealings. Travel restrictions may require that meetings be held over teleconference or other electronic means. Transactions that require regulatory searches, filings and disclosures may be stalled or otherwise delayed if regulatory offices are closed, restricted or otherwise restrained from undertaking full business functions. For ongoing business investments such as mergers or acquisitions, company valuations and other price negotiations may be affected even after the pandemic status is lifted.
Trade and Supply Chains
African businesses are also being affected by supply chain disruptions in China, Europe and Central Asia as these markets become less easily accessible. These disruptions are affecting African import and export businesses as the export of African raw materials and importation of machinery and manufactured goods from European, Chinese and Indian markets into the continent have decreased.14 This decrease may amount to a default under already existing contracts and affected businesses should be concerned about the legal implications of such default.
The Chinese government has sought to support its business owners by issuing force majeure certificates to companies defaulting on their trading obligations. These certificates are intended to protect the holders from breach of contract claims by counterparties.
Most supply contracts will include a force majeure clause which may be triggered by COVID-19 related defaults and will most definitely be relied on by the party defaulting on their sale, purchase or supply obligations under these contracts. We can expect to see a high number of default claims in the coming months with force majeure implications. African businesses may be on the claiming or defending side of any such default suit and must therefore consider the implications of their contract terms and their obligations under contract on the success of their position.
Considerations for a Successful Force Majeure Claim
Force majeure may be invoked to relieve the claiming party of performing its obligations under contract, where events beyond its control have occurred to hinder performance. The specifically allowable force majeure events are usually listed in the force majeure clause along with a catch-all phrase to cover events not explicitly provided for. Events such as act of god, epidemics and change of law are usually explicitly provided for in force majeure clauses. We can expect that in future contracts, force majeure clauses will include provisions on pandemics such as COVID-19.
Beyond the explicit classification of an event as a force majeure event, a successful force majeure claim generally requires the satisfaction of the following criteria:
- that the claimed event is beyond the reasonable control of the affected party;
- that the affected party's ability to perform its obligations under contract was prevented or hindered by the claimed event; and
- the affected party took all reasonable steps to seek to avoid the event or its consequences.
The question of force majeure in each case will generally depend on whether COVID-19 or any of the resulting government actions, if determined as force majeure events, has made it impossible for a party to perform its obligations under contract and to mitigate the non- performance. African businesses are also encouraged to consider mitigation strategies for their supply contracts to reduce the impact of the pandemic on their businesses.
Intra-African Trade as a Mitigation Strategy
African businesses may find new trading partners with businesses from neighbouring countries across the continent, as they grapple with strategies to mitigate the supply chain disruptions resulting from COVID-19.15 African countries will benefit from the sale and free movement of essential goods and services such as food and health items and services across the continent, especially during the COVID-19 pandemic, in an effort to reduce issues of food and health security which may arise from disrupted supply chains.
A framework has already been established to facilitate intra-African trading relationships in the African Continental Free Trade Area (AfCFTA) Agreement signed by African member states in 2019, under which trading is to begin on 1 July 2020. The Secretary-General of the AfCFTA has assured all stakeholders that COVID-19 is unlikely to affect the agreement's trading start date.16 However, African border and trade restrictions17 as well as persisting protectionist policies18 may hamper successful intra-African trade. African governments therefore play an important role in ensuring that intra-African trade amounts to a successful mitigation strategy. This role is discussed in paragraph 4 below.
Loans and African Businesses
African businesses which have undertaken debt facilities to sponsor corporate or project matters will be affected by the disruptions resulting from the COVID-19 pandemic. African businesses, either as debt providers or beneficiaries are encouraged to consider the implications of COVID-19 on their debt portfolio. Disruption in supply chains will affect source of income that forms the repayment basis for company loans. Employees who may have taken payday loans or other quick loans may have their repayment schedule adversely affected if they are laid off or their hours are cut due to COVID-19 related restrictions.
African businesses are further encouraged to restructure their loan portfolios to take into consideration the effect of COVID-19 on the markets in general and on their businesses in particular. We expect to see a wave of debt restructurings post-COVID-19, including for issues like extension of moratoriums and tenors, revision of interest payments, re-evaluation of assets or funds from which repayment is to be made. For example, we expect loan restructuring for African oil and gas companies with oil-based financing as the terms upon which those facilities were concluded has changed, i.e. the drop in the barrel price of crude oil. African businesses who provide short-term loans to individuals are encouraged to reach out to their clients and customers and propose debt renegotiations where possible to mitigate against mass defaults and a flood of small claims.
Some Recommended Considerations/ Actions
- Preparation of a COVID-19 risk analysis matrix for investments and trade contracts.
- Teleconferencing for meetings related to cross border investments.
- Re-assessment of supply contracts for force majeure provisions.
- Consideration of new trading partners as part of mitigation strategies.
- Restructure of loan portfolio and debt facility agreements.
- Consideration of the effect of COVID-19 on company stock valuations.
4. African Businesses and Government/ Regulatory Agencies
African businesses must also consider their policy environment and the changes to government economic policy in reaction to COVID-19.19
Proposed Stimulus Packages to Support Business
The governments of Nigeria and South Africa have proposed economic stimulus packages to mitigate COVID-19's impact. While details of the South African stimulus package are still being finalized, the nation's president noted that the package will contain fiscal and other measures concluded with business, labour and other relevant institutions.20
Nigeria's stimulus package includes funds to increase efforts to boost local manufacturing and import substitution.21 The Central Bank of Nigeria (CBN) also released its policy measures in response to COVID-19.22 These measures include an extension of moratorium on CBN intervention facilities, a reduction of interest rates, targeted credit facilities for households and small and medium enterprises affected by COVID-19, intervention facilities to develop the nation's healthcare industry and regulatory forbearance to allow banks restructure the tenor and terms of loans to businesses and households most affected by COVID, especially in oil and gas, agriculture, and manufacturing. This stimulus package not only cushions the adverse effects of COVID-19 but creates business opportunities for investment especially in the nation's health care industry.
African businesses whose governments, such as Nigeria, have proposed and/or put economic stimulus packages in place are encouraged to consider how these stimulus packages could support their business portfolio. They are also encouraged follow updates on the stimulus packages from their national governments in order to cushion the effect of the pandemic on their businesses.
Ratification of the AfCFTA
As discussed in paragraph 3 above (African Businesses, investments, Trade and Markets), successful intra-African trade through the implementation of AfCFTA is an important policy item which is beneficial for African businesses as they navigate new markets and trading partners as part of their mitigation strategies during COVID-19. However, AfCFTA agreement requires that African nations provide a structure for trade concessions and other import waivers to facilitate the free movement of goods and services across the continent. The supply chain disruption caused by COVID-19 makes this ratification by all African countries who are signatories to the agreement, a more urgent economic policy decision. African businesses will benefit from easy access to new markets with their geographical neighbours. The implementation of AfCFTA will translate to a larger inter-continental market, availability and access to more skilled labour, which further implies more job opportunities and construction of new supply chains to replace or support those affected by COVID-19 disruptions.23 The European Commission is already working to utilize the intercontinental European market to push for cross border trade in order to support businesses generally and the public health services sector in particular during the COVID-19 pandemic.24 If AfCFTA is ratified and implemented, Africa stands to enjoy similar benefits throughout its intercontinental market.
African businesses located in countries that have already ratified the AfCFTA should consider new trading partners with businesses located in other countries who have similarly ratified the agreement. We expect that the combination of supply chain disruptions from COVID-19 and the trading start date of the AfCFTA agreement will result in the negotiation of new supply agreements across the continent after the pandemic is lifted.
Regulatory Disclosures and Filings
African businesses with regulatory filings may be affected by COVID-19 restrictions especially social distancing policies may result in delayed filings. Businesses may be required to consider the effect of COVID-19 on their budgets and income for any financial disclosures that may be made. We encourage regulators to issue extensions on any deadlines for regulatory filings in consideration of COVID-19.
Some Recommended Considerations/ Actions
- Follow policy decisions made by African municipal and national governments to support businesses.
- Consider new trading partners with African companies under the AfCFTA agreement.
- Engage legal counsel for advice on dealing with regulatory entities.
We encourage African businesses affected by coronavirus to consider and institute some of the measures recommended in this material and engage legal counsel to ensure legally compliant strategies. Businesses should keep up to date with all news and insights during COVID-19 and order their engagements accordingly as we all assess the scale and impact of this outbreak on African businesses and global markets.
1. Rosamond Hutt, The Economic Effects of COVID-19 Around the World (World Economic Forum, 17 February 2020), available at https://www.weforum.org/agenda/2020/02/coronavirus-economic-effects-global-economy-trade-travel/, accessed on 19 March 2020.
2. Yen Nee Lee, 6 Charts Show the Coronavirus Impact on the Global Economy and Markets so far, (CNBC Markets, 11 March 2020), available at https://www.cnbc.com/2020/03/12/coronavirus-impact-on-global-economy-financial-markets-in-6-charts.html, accessed on 19 March 2020.
3. Alana Semuels, As COVID-19 Crashes the Economy, Workers and Business Owners Wonder if Anything Can Save Them From Financial Ruin, (Time, 18 March 2020), available at https://time.com/5805526/coronavirus-economy-layoffs/, accessed on 19 March 2020.
4. Gabe Alpert, Government Stimulus Efforts to Fight COVID-19 Crisis, (Investopedia, 18 Macy 2020), available at https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723, accessed on 19 March 2020.
5. Pippa Stevens, Oil Falls 24% in 3rd Worst Day on Record, Sinks to More Than 18-year Low, (CNBC Markets, 18 March 2020), available at https://www.cnbc.com/2020/03/18/oil-plummets-to-near-18-year-low-on-pace-for-worst-month-ever.html, accessed on 19 March 2020.
6. World Health Organization, More Than 600 Confirmed Cases of COVID-19 in Africa, 19 March 2020, available at https://www.afro.who.int/news/more-600-confirmed-cases-covid-19-africa, accessed on 21 March 2020.
7. African nations have begun to institute border and travel restrictions to curb the spread of COVID-19 within their territories. Bukola Adebayo, African Countries Shut Doors Against Europe, America to Combat Coronavirus, (CNN World, 17 March 2020), available at https://edition.cnn.com/2020/03/16/africa/africa-coronavirus-travel-restrictions-foreigners/index.html, accessed on 19 March 2020. Nations such as South Africa and Nigeria have proposed economic stimulus packages for individuals and businesses to cushion the effect of COVID-19. Please see Thando Maeko, Ramaphosa Pledges COVID-19 Economic Stimulus Package, (Business National, 15 March 2020), available at https://mg.co.za/article/2020-03-15-ramaphosa-pledges-covid-19-economic-stimulus-package/, and Alonso Soto, Nigeria Central Bank COVID-19 Stimulus to Reach $2.7 billion (Bloomberg, 18 March 2020), available at https://www.bloomberg.com/news/articles/2020-03-18/nigeria-central-bank-covid-19-stimulus-to-reach-2-7-billion, accessed on 19 March 2020.
9. World Health Organization, Getting Your Workplace Ready for COVID-19, 27 February 2020, available at https://www.who.int/docs/default-source/coronaviruse/getting-workplace-ready-for-covid-19.pdf, accessed on 21 March 2020.
10. International Labour Organization, Labour Standards in Africa, available at https://www.ilo.org/africa/areas-of-work/labour-standards/lang--en/index.htm, accessed on 19 March 2020.
11. Sectors such as oil and gas and mining in countries with strong natural resource markets, usually have labour unions to ensure collective bargaining and protect their interests. For example, in Nigeria, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association (PENGASSAN) represent oil and gas workers in the country. In South Africa, the principal union for miners is the National Union of Mineworkers (NUM).
12. Section 2.1 of the NDPR
13. The Johannesburg and Nigerian Stock Exchanges have suffered losses due to uncertainties related to COVID-19. Please see Larry Classen, COVID-19 Crash: R2.3trn Wiped Out, (Moneyweb, 16 March 2020), available at https://www.moneyweb.co.za/news/markets/another-covid-19-crash/, and Peter Egwuatu & Nkiruka Nnorom, COVID-19: Stock Index Crashes 15.3% YtD, (Vanguard, 16 March 22020), available at https://www.vanguardngr.com/2020/03/covid-19-stock-index-crashes-15-3-ytd/, accessed on 19 March 2020.
14. Baker McKenzie, The Impact of COVID-19 on Key African Sectors, 10 March 2020, available at https://www.bakermckenzie.com/en/insight/publications/2020/03/the-impact-of-covid19-on-key-african-sectors, accessed on 19 March 2020.
15. The United Nations Economic Commission for Africa has encouraged African nations to seize the opportunity presented by COVID-19 disruptions to deepen continental trade. Femi Adekoya, Intra-African Trade Could Help Mitigate the Impact of COVID-19 on Nigeria, Others; (The Guardian, 18 March 2020), available at https://guardian.ng/business-services/intra-african-trade-could-help-mitigate-impact-of-covid-19-on-nigeria-others/, accessed on 19 March 2020.
16. Leanne de Bassompierre, African Free-Trade Deal on Track Despite Coronavirus Disruption, (Fin24, 12 March 2020), available at https://www.fin24.com/Economy/Africa/african-free-trade-deal-on-track-despite-coronavirus-disruption-20200312, accessed on 19 March 2020.
17. Many African countries have closed their borders or issued travel restrictions as part of COVID containment strategies. Bukola Adebayo, African Countries Shut Doors Against Europe, America to Combat Coronavirus, supra at note 7.
18. For example, Nigeria's restriction of rice importation through its land borders resulted in retaliatory restrictions of its exports to neighbouring countries. Fakoyejo Olalekan, Border Closure Retaliation: Ghanaian Traders Union Shuts Nigerian Shops. To Clamp Down on More (Nairametrics, 1 November 2019), available at https://nairametrics.com/2019/11/01/border-closure-retaliation-ghanaian-traders-union-shuts-nigerian-shops-to-clamp-down-on-more/, accessed 19 March 2020.
19. For example, the Nigerian Federal Government recently announced cuts to its 2020 budget in order to account for the effect of COVID-19 and the oil price war on its budgetary estimates. Oladeinde Olawoyin, Coronavirus: Nigeria Cuts Oil Benchmark to $30, Slashes Capital Budget By 20%, (Premium Times, 18 March 2020), available at https://www.premiumtimesng.com/news/headlines/382605-coronavirus-nigeria-cuts-oil-benchmark-to-30-slashes-capital-budget-by-20.html, accessed on 19 March 2020.
20. Thando Maeko, Ramaphosa Pledges COVID-19 Economic Stimulus Package, supra at note 7.
21. Alonso Soto, Nigeria Central Bank COVID-19 Stimulus to Reach $2.7 billion, supra at note 7.
22. CBN Circular to Deposit Money Banks and the General Public on: CBN Policy Measures in Response to COVID-19 Outbreak and Spillovers, March 16 2020, available at https://www.cbn.gov.ng/Out/2020/FPRD/CBN%20POLICY%20MEASURES%20IN%20RESPONSE%20TO%20COVID-19%20OUTBREAK%20AND%20SPILLOVERS.pdf, accessed on 19 March 2020.
23. Adetayo Adetuyi & Nnanke Williams, Considerations for the Implementation of the African Continental Free Trade Area Agreement, 27 February 2020, available at https://brooksandknights.com/2020/02/27/considerations-for-the-implementation-of-the-african-continental-free-trade-area-afcta-agreement/, accessed at 21 March 2020.
24. European Commission, Message by Ursula von der Leyen, President of the European Commission, on the Latest Measures to Address the Coronavirus, available at https://europa.eu/!Dq37YP, accessed on 23 March 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.