East African Community (EAC) member states have been urged to continue ring-fencing crucial export sectors from lockdown measures because the pandemic is far from over.
This advice is contained in a research report produced by the United Nations Economic Commission for Africa (UNECA), in partnership with TradeMark East Africa (TMEA) and African Economic Research Consortium (AERC) that was launched last week.
Titled; "Waving or Drowning? The Impact of the COVID-19 pandemic on East African Trade”, the report notes that whereas EAC economies have so far been resilient against the effects of the COVID-19 pandemic, they are “not out of the woods”.
This is because of the pandemic’s rapidly evolving nature and its spillover effects, which may still present a significant threat to trade and commerce within the region over the coming years.
Speaking during the launch of the report last week, TMEA chief executive officer Frank Matsaert alluded that the pandemic is going to be around for some time, thus the need to draw lessons and support countries to fully recover.
Matsaert explained that the report provides a good starting point for governments, private sector and other stakeholders to think about how to respond to the pandemic and its impact on trade, in the medium and longer-term, adding that evidence-based interventions are crucial for robust policymaking and programmatic responses.
According to the report, EAC exports have recovered to pre-crisis levels, despite the earlier sharp decline posted in April 2020, with most EAC member states’ exports surpassing their 2019 levels by the third quarter of the year. This came after governments eased lockdown restrictions and a broader global trade recovery started to take place.
The intra-EAC trade exhibited greater resilience than the extra-EAC trade, owing to greater diversification of intra-regional trade, according to director general of customs and trade at the East African Community secretariat Kenneth Bagamuhunda.
To maintain export resilience and growth, Bagamuhunda said the secretariat has drafted a forward-looking economic recovery plan that will address that.
The report said that the relative resilience of intra-regional trade attests to the importance of strengthening regional value chains (RVCs), particularly as the region moves into the implementation stage of the African Continental Free Trade Area (AfCFTA).
The United Nations Economic Commission for Africa, Sub-Regional Office of Eastern Africa director Mama Keita urged Eastern African countries to adequately prepare to take full advantage of the AfCFTA, and appealed to countries that are yet to ratify the agreement to do so to create the much-needed big market. She also urged the private sector to ready themselves to harness the opportunities to be presented.
Sharp contraction and collapse were registered especially in the accommodation and food services sub-sectors. An online survey carried out at the peak of the pandemic last year by the East African Business Council (EABC) shows that tourism suffered an average reduction in cash flows of 92%, logistics 75%, retail 63%, real estate 60%, financial 50%, construction 40%, ICT and event management 40%, manufacturing 36%, consultancy 24% while pharmaceuticals suffered 0% reduction in cash flows.
According to the report, the supply chain was affected mostly due to decline in sales, cross-border restriction, inadequate access to source of raw materials, laying off of staff, decline of export markets among others.
While nearly all EAC governments implemented a raft of stimulus measures to cushion business from the pandemic’s adverse effects such as subsidized loans from commercial banks, the report notes that financial sustainability of the launched stimulus packages remains unassured, further threatened by increased budgetary pressures due to a drop in fiscal revenues and rise in expenditures for compensatory social protection and health measures.
“Of particular concern now is the fact that some fiscal and monetary measures have already ended, despite ongoing fears of virus mutations and resumption of lockdown measures that threaten businesses’ sustainability.”
Kenya’s exports dropped by 33 per cent in April due to the 83 per cent decline in re-exports in comparison to the 2019 figures.
However, in the subsequent months, recovery was recorded in the export of manufactured products, machinery and capital equipment. Tanzania which did not lock down the economy experienced relatively strong export performance during the pandemic especially with increased mineral exports including gold exports alone that garnered $2.85 billion - a 33 per cent increase between January and November.
Uganda’s informal trade worst hit
According to the report, the pandemic has had a significant negative impact on informal cross border trade, which Anthony Mveyange, a research and learning director at TMEA, said remains adversely affected.
This report noted that informal cross border trade in Uganda declined precipitously from an estimated $44 million (about Shs 161 billion) in the first quarter of 2020 to just $1 million (about Shs 3.6 billion) in the months that followed. Even the reopening of Uganda’s borders in September 2020 did not revive informal cross border trade.
“Regional borders remain closed for most informal cross-border traders, impacting negatively on the livelihoods of the communities that heavily depend on such trade and exacerbating, particularly, the challenges faced by women traders,” Mveyange said.
The major challenges brought about by COVID-19 that informal cross border traders are grappling with include loss of income, increased financial stress and reversal of gains in women’s economic empowerment,
Prof Njuguna Ndungu, the AERC executive director thanked TMEA for supporting the development and implementation of the regional electronic cargo and driver tracking system, which enabled the issuance of the COVID-19 digital certificates which were recognized by partner states, which contributed to reducing border delays
“This is a good example of how we can use technology around us to resolve the coordination problems that may emerge,” he said.