Disrupted supply chains drop EAC sales by 56%

The Covid-19 pandemic has hit hard businesses and investments in East African States as sales and cash flows remain constrained.
A new survey shows that supply chains in East Africa witnessed a decline of nearly 60 per cent in sales following the Covid-19 pandemic.
All the East African Community partner states namely Burundi, Kenya, Uganda, Rwanda, Tanzania and South Sudan have recorded cases of Covid-19.

As a result of this outbreak, member states took some measures such as travel bans, curfew and lockdowns which have negatively impacted business and investments in the region.
East African Business Council (EABC) conducted a snapshot survey to check the status of businesses focusing on the impact of Covid-19 on the cash flows, supply chains and business sustainability.

Commenting about the business environment in the region, Mr Peter Mathuki, EABC’s executive director said: “We recommend the regional member states to consider a coordinated approach in mitigating the impact of Covid-19.”
Mathuki further said the EABC is steadfast to continue advocating for improved trade regulatory environments in the EAC region in light of the Covid-19 pandemic.

Findings
According to the survey done on businesses and investments released on April 30th looking at the areas of supply chain affected most were decline in sales to nearly 56 per cent.
Additionally, increased cross border restrictions rated at 55.9 per cent. This was followed by the challenges to source raw materials at 44.1 per cent.
Other ways in which businesses have been affected are; reduction in the export market and laying off staff both rated at 17.6 per cent, delay of contracts and reduction of spending by customers at 14.5 per cent.
EABC recommends that the partner state should allow free movement of goods across borders.

“There is a need for removal of all other charges of equivalent effects (such as Import Declaration Fees-IDF and Railway Development Levy-RDL for imports of raw materials, capital goods, intermediate goods and essential goods,” EABC recommended.
This will provide relief to manufacturers/producers and make such goods available at affordable prices.
According to respondents of the survey, the reduction of cash flow will continue disrupting value chains and may lead to the closure of businesses and investment projects.

“This is destined to increase the rate of unemployment unless EAC partner states come up with appropriate measures to mitigate the impacts of Covid-19 pandemic,” Mr Peter Muthariaka, EABC executive director said.
To mitigate the impact of the reduced cash-flow, EABC recommends that regional governments should allocate enough funds to cater for outstanding Value Added Tax (VAT) refunds and domestic debts.
“The payment will give businesses the needed liquidity to boost their working capital during the Covid-19 period,” EABC recommended.

Sectors hard hit
Cash flow reduced: The survey established that tourism, logistics, and retail have significantly experienced a higher percentage of reduction of cash flow of 92 per cent, 75 per cent and 63 per cent, respectively.
Other sectors affected include: Real estate, Finance, construction, Events management, ICT, manufacturing and consultancy. However, the Pharmaceutical sector has recorded zero effect on cash flow.

The pharmaceutical sector has instead has witnessed increased demand for their products which were regarded as essential.
According to respondents of the survey, the reduction of cash flow will continue disrupting value chains and may lead to the closure of businesses and investment projects.
Governments should allocate enough funds to cater for outstanding Value Added Tax (VAT) refunds and domestic debts.

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