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Africa's COVID-19 vaccine financing gap opens opportunities for China, Russia

On the day that the first consignment of COVID-19 vaccines arrived in a rainy South Africa, the U.K. jabbed around 280,000 people to take its total number of vaccinations to 9 million.

Since Feb. 1, Britain and other high-income countries such as Israel and the United Arab Emirates have continued their vaccination programs apace, while even relatively rich African countries such as South Africa continue to lag. This stark divide in access to vaccines to combat the pandemic underscores structural problems in the developing world, and in Africa in particular, where there are significant barriers to financing the procurement of life-saving inoculations, according to industry players. Shortfalls in both funding and supply are also creating opportunities for China and Russia to export their vaccines to Africa as they seek to strengthen commercial and political relations with the continent.

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Multilateral development financial institutions such as the World Bank and the African Development Bank will be crucial to bridging the financing gap, which is particularly significant in West, East and Central Africa, said Robert Besseling, CEO at Pangea-Risk, a specialist intelligence company focusing on Africa.

Funding provided through such institutions is typically concessional, and in some cases it comes in the form of grants.

The involvement of a development financial institution provides important reassurance for private investors and the commercial banking sector to get involved on the funding side, Besseling said, as it not only mitigates repayment risk but also the reputational risk connected with extending financing in parts of Africa.

He said lenders are concerned about the risk of corruption of funds or that vaccines go to political elites rather than frontline healthcare workers or vulnerable people. Development banks are better placed to ensure that funds are distributed as intended, or absorb the shock if something were to go wrong, he said.

Africa's goal to vaccinate 60% of its 1.2 billion population against COVID-19 in the next two to three years will require significant external support. A majority of African countries will rely on external help to pay for vaccines, said Deepak Dave, chief risk officer of the African Trade Insurance Agency. He estimates that between six and eight African countries could, over an extended period, come up with financing to pay for a vaccine program for their own populations. Those include Mauritius, Botswana, Tunisia and South Africa, he said.

Continent is 'stretched'

While coronavirus vaccine programs are underway in most developed economies, many African countries are facing a long wait. So far, of Africa's 54 nations, only Egypt, Morocco, Guinea and the Seychelles have started rolling out vaccines to their populations, according to John Nkengasong, director of Africa's Center for Disease Control and Prevention, or Africa CDC, speaking at a briefing Jan. 28.

As of Feb. 1, only 0.02 doses per 100 people had been administered on the African continent; in comparison, this number was 5.77 for North America and 3.39 for Europe, according to data collated by Our World in Data. The highest number in Africa was recorded in the Seychelles, which has a population of under 100,000 people.

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Africa CDC has estimated that the continent will need to vaccinate almost two-thirds of its population to achieve herd immunity, which will require 1.5 billion doses, if a double shot regime is used, and cost between $10 billion and $15 billion, according to Bloomberg News.

"We now have an entire continent that is stretched from a financial point of view," said Duarte Pedreira, head of emerging and frontier markets at U.K.-based Crown Agents Bank. Even those African governments that started the pandemic with healthy reserves have now exhausted them in dealing with the pandemic, he said in an interview.

The IMF in April approved immediate debt relief for 18 African nations, while more than 30 countries on the continent have now made requests through G-20's debt service suspension initiative.

Donor-led facilities such as Covax, an initiative co-led by the World Health Organization, and supply agreements made by the African Union, are important for Africa, but they will not meet the continent's vaccine needs, especially in the short term.

Pedreira said reaching Africa's vaccine goal and subsequent economic recovery will require significant political drive from governments globally, through more support and capital for development financial institutions and increased foreign aid budgets. National export credit agencies that offer government backed-financing for companies' international activities will also need a boost.

China and Russia see 'real opportunity'

China and Russia are likely to fill the gaps in Africa by providing vaccines at favorable pricing or as donations, said Pangea-Risk's Besseling. "They are seeing a real opportunity to extend their commercial, diplomatic, political and geopolitical security relations with the African continent," he said.

China, which has invested heavily in Africa over the last decade, has a "once-in-a-lifetime opportunity" to consolidate its influence on the continent, said Pedreira. China is deploying personal protective equipment and also vaccines in Africa at "a very accelerated pace," he said, adding that this could "further its advantage on the continent for generations to come."

Importantly, China has the firepower to finance those efforts and provide flexibility for countries on their debt repayments, he said.

China has already signed debt service suspension agreements with 12 African countries and provided waivers of matured interest-free loans for 15 under the G-20 debt service suspension initiative, its Nairobi embassy said Jan. 18, according to Reuters.

Egypt and Morocco have started rolling out China's Sinopharm vaccine, while Guinea has begun using Russia's Sputnik V jab.

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South Africa received its first consignment of vaccines Feb. 1 via an Emirates Airline delivery, two months after the U.K. began its vaccination program.

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The Serum Institute of India Pvt. Ltd. is also behind multiple bilateral orders of the AstraZeneca PLC vaccine to Africa, including from South Africa, although the country has reportedly paid higher prices than others due to its status as an upper-middle-income country, according to Reuters.

Unlike Pfizer-BioNTech or Moderna Inc., the vaccines from Russia, China and India can be stored at normal refrigerator temperatures, which is especially suitable for African countries.

Efforts to export vaccines to Africa are driven by a "hearts and minds" strategy, Besseling said. While the vaccines are unlikely to come with conditional ties, they will put countries delivering them in a favorable position when securing future commercial agreements, trade deals and mining concessions, he said.

"I would not be surprised if a country accepting huge Sinopharm vaccine deliveries will, over the next 5 years or so, be signing deals to have Chinese naval forces deployed on their territory or offering more lucrative concessions to Chinese mining companies," Besseling said.

Closing the vaccine gap

Africa has a number of other sources available to secure vaccine supplies. The Covax facility has committed to provide 600 million donor-funded doses to Africa, covering 25% of its population, by the end of the year.

To supplement this facility, the African Union has secured a provisional 270 million vaccine doses from manufacturers for member states, covering an additional 11% of the continent. Support from the African Export-Import Bank, which will facilitate payments by providing advance procurement commitment guarantees of up to $2 billion, will help governments to secure financing for those deals.

African governments will also be able to apply for a portion of a $12 billion World Bank vaccine support facility made available for developing countries, which they can use to finance the purchase and distribution of doses committed through Covax or the African Union, or secure additional vaccine deals.

Only an initial 30 million vaccine doses are expected to start arriving in Africa through Covax in March, while 50 million doses will be available between April and June through the African Union agreement.

The African Development Bank, Afreximbank, Africa CDC and Gavi, which coordinates the Covax facility, did not respond to requests for interviews.