The East African Business Council (EABC) has released the Webinar report of a meeting held last month on the impact of Covid-19 on manufacturing in the region, with key recommendations on how to help the sector gain footing.
The manufacturing sector has been negatively impacted by the 20% reduction in household spending as a result of COVID19 across the region among other challenges.
The report observed a slowdown in the manufacturing sector as a result of inadequate inputs and raw materials previously imported from countries that have hugely been affected by COVID-19.
The report observed that there is a need for the manufacturing sector to enhance its production capacity through producing substitute products that were initially being imported from outside the region.
As a result of low production, operational costs for manufacturers have also increased. Employers are incurring high costs on labour as they seek to comply with health measures such as social distancing and acquiring Personal Protective Equipment (PPE).
“Due to the outbreak of COVID-19, there has been the resurgence of Non-Tariff Barriers (NTBs) at EAC border posts of Rusumo, Namanga, Malaba, Busia among others due to restrictions of movement of cargo and truck drivers imposed by the EAC Partner States as a result of complying to health guidelines,” the report notes.
On a positive move, it was noted, manufacturers have repurposed some of their production lines to produce the much-needed essential items to fight Covid 19 such as sanitizers, face masks, and other PPEs.
Central Banks in the region were also applauded for adopting various monetary measures aimed at increasing liquidity in the EAC economies. Such measures include lowering the Central Bank Rate (CBR) and Reducing the Cash Reserve Ratio (CRR).
There is also a Regional Coordination Committee on COIVD-19 charged with coordinating various initiatives against the pandemic in the region. The Committee has so far developed a COVID 19 response plan, coordinated a Joint Meeting of Ministers responsible for Health, Trade and EAC Affairs.
EAC Secretariat has also developed Administrative Guidelines to facilitate the movement of goods and services during COVID 19 pandemic, which have eased the movement of goods in the region.
To address the restrictions and long queues for truck drivers who are moving cargo across the borders, the region has come up with a common health certificate with designated testing facilities.
EAC in collaboration with its partners trained laboratory experts on COVID-19 laboratory diagnosis, procured mobile laboratories with test kits and distributed the same to the Partner States. Training has already been extended to the staff at points of entry at airports borders.
Due to the impact of COVID-19, Africa is projected to enter into a recession and hence serious dialogue is needed.
EABC report recommends a coordinated approach to tackle the challenges facing the sector such a joint initiative to urgently address NonTariff Barriers (NTBs) related to COVID-19 to enable manufacturers to access regional markets.
“This will substantially address among other costs those attributed to the relay driving by truck drivers and costs of escorting cargo to final destinations,” the report said.
There is a need to fast track payment of VAT refunds to ensure that manufacturers address cash flow constraints and remain afloat. EAC Partner States were also asked to reduce VAT to spur consumption of locally produced goods and promote the consumption of locally manufactured products in the region through public procurement.
Other recommendations include the region coming up with post COVID-19 stimulus packages for the industrial sector. This is to cushion against the losses incurred as a result of covid19. One such cost is that attributed to repurposing production lines to produce the much-needed essential products.
Focus should also be put on local production and reviewing the necessary policies geared towards the promotion of locally manufactured products, where local means the EAC region. One such instrument can be Buy East Build Africa (BEABEA).
EAC Partner States were also asked to defer payment of taxes such as VAT on imported raw materials and machinery. EAC Partner States need to limit new measures on COVID19 that could negatively impact the businesses.
There is a need to call on the International community to increase the financial space. This includes debt relief. At the AU level, envoys have been appointed to fast track this process.
Governments should expand on their local sourcing to boost the manufacturing sector in the region. The states should set up an emergency rescue fund on Covid-19 specific to SMEs.
EAC Partner States should adopt moratorium on charges of taxes as well as repayment of loans during the period of COVID-19, the report recommends.
