Canadian Investment Review

The Economic Impact of Ebola

Written by Andrew Lapping and Nick Ndiritu on Wednesday, November 19th, 2014 at 7:42 am

ebolaThe Ebola outbreak in West Africa over the last few months has been the worst seen in history. There have been isolated cases of the virus on the continent previously, specifically in the Democratic Republic of Congo (DRC), but none have been as severe.

Over the short term, the outbreak is likely to take a heavy toll on the three economies that are directly impacted, i.e. Guinea, Liberia and Sierra Leone. The World Health Organisation (WHO) reports 4033 people have died so far, with 8399 probable or suspected cases. The U.S. Centres for Disease Control and Prevention (CDC) claims cases in Liberia are doubling every 15-20 days, while those in Sierra Leone are doubling every 30-40 days. The CDC also estimates Liberia and Sierra Leone could see 1.4 million cases of Ebola within three months when under-reported cases are taken into account. If these projections are anything to go by, the Ebola outbreak is likely to become a bigger geopolitical threat if not addressed at the source. Above all this is a human catastrophe.

Despite these worrying projections, it is important to emphasise that, for now, the Ebola virus has not spread to other parts of Africa and although the risk of it spreading to other West African countries is high, Nigeria has shown that the risk can be contained or addressed if adequate measures are taken. Nevertheless, the continent as a whole is getting tainted by negative perception.

Ebola has come at an inopportune time for Africa – just when the message coming out of the continent is one of economic growth and potential. Long-term investors in Africa should be aware that there will be periods along the way where elevated risk perception can overwhelm the positive narrative. At such times, it is important to focus on the fundamentals of the businesses you are investing in to ascertain if there is any impact on their long-term intrinsic value and normalised earnings power.

Copyright 2017. Canadian Investment Review. All Rights Reserved.