Covid-19 lockdown exposes the soft underbelly of East Africa industries
The unprecedented global economic disruption that the Covid-19 pandemic has triggered has brought up urgent questions about the resilience of economies, with East Africa being no exception. We are faced with the daunting reality of the capacity of the region’s economies to recover from the severe short-term constraints and their ability to benefit from new opportunities.
The pandemic could not have happened at a worse time. The region was looking forward to consolidating gains from investments in domestic industrialisation agendas, expecting that the gains of the past two decades of stability and growth in the East African region service sector could start spilling over into other sectors, with manufacturing and agroprocessing sectors as top priorities.
That plan is now upended and the region is faced with a very real threat of our economies slumping into depression. As Columbia University professor and historian Adam Tooze states: “This is a period of radical uncertainty, an order of magnitude greater than anything we’re used to.”
East Africa’s transport, agriculture, hospitality, tourism and retail sectors have been jolted by the measures taken to combat the virus. Manufacturing has suffered too because of mandated working in shifts; and the impact of the lockdown, shorter working hours, new working models, closure of retail markets and disruptions in raw material supply chains. But undoubtedly the greatest threat to industries in these sectors re-opening is the mass unemployment that the pandemic has triggered, a consequence that will deny the economy the critical cash lifeline that oils commerce.
Msingi East Africa believes that industry resilience rests on an interlocking ecosystem where the forward and backward linkages of value chains works seamlessly at all times and that the symbiosis between demand and supply is healthy.
This is the logic that has informed all the government responses to the pandemic that sought to ensure that there is sufficient liquidity in the market to sustain commerce, even if this meant the UK government paying salaries for furloughed workers, or the US government giving relief cash to millions of its citizens. Msingi’s ambition is to work with other stakeholders and governments to support high-potential sectors in the region to become competitive and resilient and expand opportunities for employment.
The organisation’s chief executive Diana Mulili explains that as a sector transforms, it goes through a process of learning and adopting, before it adapts, responds and expands to create systemic longlasting change. “When faced with a crisis, some of these sectors may not have the foundations to survive because of systemic issues. In this case, a human health crisis along with a shock to the economy is truly testing the fragility of our regional industries,” she says, adding that industries that stay afloat are those that find solutions and innovate in times of distress.
Msingi’s long-term approach means that even as it pursues short-term emergency interventions in response to the pandemic, there should be a long-term view on how its industry programmes can adjust when needed. In the aquaculture and textiles & apparel (T&A) industries where the firm’s primary focus is, the immediate priority is survival, acceleration of post-Covid-19 recovery and reduction of impact on businesses and jobs.
Fish farms across East Africa are faced with reduced sales and lower fish prices, driven by a combination of constrained market access and reduced consumer purchasing power.
Mid-sized and larger farms are having difficulties sourcing feed due to import restrictions. Cross-border movement controls have affected access to large markets like the DR Congo, and the closure of restaurants has cut demand in cities and affected cage farmers. Appropriate access to working capital would
enable fish farms to maintain operations and access fish feed to help them survive. The T&A industry has suffered scarcity of raw materials because of disruptions in key source markets like China, India, and Pakistan. There have also been substantial risks to worker wellbeing and job security. But even in the face of adversity, T&A manufacturers have been very supportive of efforts to respond to the pandemic and converted their production facilities to produce personal protective equipment and masks.
Some short-term intervention Msingi is evaluating include crowding-in an SME support fund, wage subsidies to facilitate job retention, along with support for rent, utilities, and the increase in logistics costs required to bring the business back online. In the medium-term, both textile and apparel manufacturers should be included in the tax and other relief measures proposed by governments to cushion industries.
Reorganizing the business for new markets and opportunities post-Covid-19 is also essential for stability in the sector. Policy incentives and initiatives that have restricted or delayed development of the industry should be reassessed to add to the growth impetus once the pandemic is over. The role of regional value chains needs to be strengthened to improve the resilience of the East African economies as a whole.
The concerted response needed from government, donors and the private sector should be focused on ensuring all aspects of both aquaculture and T&A sectors’ value chain are robust and self-sufficient, both in the short term and in planning for the longer term, for the sectors to be resilient.
Ms Mulili, the interim CEO of Msingi East Africa, co-authored this article with and Mr Mandeep Shah, project manager, Business Development and Innovations at Msingi
