MULILI & SHAH: Need to lay out post-Covid-19 strategies for

In Summary

• East Africa’s transport, agriculture, hospitality, tourism and retail sectors have been jolted by the measures taken to combat the virus.
• The greatest threat to industries in these sectors reopening is the mass unemployment the pandemic has triggered.
• Cross-border movement controls have affected access to large markets like the DR Congo.

The unprecedented global economic disruption that the Covid-19 pandemic has triggered has brought up urgent questions about the resilience of economies. We are faced with the daunting reality of the capacity of region’s economies to recover from the severe short-term constraints and their ability to benefit from new opportunities.

The pandemic could not have occurred at a worse time. The region was looking forward to consolidating gains from investments in domestic industrialisation agendas, expecting the gains of the past two decades of stability and growth in the service sector to spill over into other sectors, with manufacturing and agro-processing sectors as 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.”

TOURISM

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, due to 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 the greatest threat to industries in these sectors reopening is the mass unemployment the pandemic has triggered, which will deny the economy the critical cash lifeline that oils commerce.

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 in a bid to ensure there is sufficient liquidity in the market to sustain commerce, even if this meant the UK paying salaries for furloughed workers, or the US giving relief cash to millions of its citizens.

Governments and other stakeholders ought to support high-potential sectors in the region to become competitive and resilient and expand opportunities for employment. There should be a long-term view on how industry programmes can adjust.

In the aquaculture and textiles and apparel (T&A) industries, for instance, 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.

RAW MATERIALS
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.

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, converting their facilities to produce personal protective equipment (PPE).

Short-term intervention worth pursuing include an SME support fund; wage subsidies to facilitate job retention; support for rent and utilities; and the increase in logistics costs required to bring the business back on track. In the medium-term, both textile and apparel manufacturers should be included in the tax and other relief measures by governments to cushion industries.

Reorganising the business for new markets and opportunities post-Covid-19 is also essential for stability in the sector.

The role of regional value chains need to be strengthened to improve the resilience of the economies. The concerted response from government, donors and the private sector should be focused on ensuring all aspects of the aquaculture and T&A sectors’ value chain are robust and self-sufficient, both in the short term and in planning for the longer term.

Ms Mulili is the interim CEO of Msingi East Africa. Mr Mandeep is the project manager, Business Development and Innovations, at Msingi.