East Africa: EAC Edges Towards Brighter Future

THE East African Community (EAC) partner states are gearing towards a bright future economically, after months of stuttering due to Covid-19 pandemic.

Experts say Tanzania is leading in the post Covid-19 economic recovery, especially with the resumption of tourism and air transport services.

Recommencement of air travel has already shown a boost in bilateral trade between Tanzania and Kenya. Air travel between the neighbours stopped after Kenya slapped a ban on Tanzania aircrafts with the latter retaliating in the same way.

The East African Business Council (EABC) has expressed its appreciation to the Tanzania Civil Aviation Authority (TCAA) and Kenya Civil Aviation Authority (KCAA) for facilitating the agreement on air services resumption in the EAC region.

EABC Executive Director and Chief Executive Officer (CEO), Dr Peter Mathuki said the Covid-19 pandemic has hit hard businesses and investment in the East African bloc, with disruptions on global supply chains testing the resilience of business ecosystems and reducing intra EAC trade.

Dr Mathuki called upon EAC partner states to liberalise the regional airspace, such that regional and international cargo carriers can pick consolidated products for export from each EAC partner state to destinations, where they have substantial and consistent demand.

"There is a need for speedy authority operations especially at border-crossing areas to avoid overcrowding of traffic, taking into consideration road safety issues for freight and passenger movements," said Dr Mathuki.

The recovery strategy for businesses in the EAC, also recommends a strengthened partnership between the public and private sectors for business rebound as well as a coordinated regional approach on handling Covid-19.

In that view, apart from resumption of air travel, EABC in collaboration with GIZ Programme 'Support to East African people-centred and market-driven co-operation' has developed a business recovery strategy after surveying how businesses in the region have been affected by the pandemic.

The strategy proposes key measures to mitigate the effect of the pandemic and launched a strategy report titled, 'Impact of Covid-19 to Business and Investment in the EAC and Proposed Recovery Measures to the EAC Economies.'

The survey sought to find out how Covid-19 has affected businesses in the region by looking into the impact on five critical areas - cash flow, supply chains, employees, projected period of business sustainability and areas companies are seeking support.

The survey found that sectors such as tourism, logistics and retail have significantly experienced a higher percentage of cash flow reduction, which stood at 92 per cent, 75 per cent and 63 per cent respectively.

Drawing its findings from responses from over 100 EABC members and private businesses from different sectors in the region, the survey reveals that businesses have also been left battling with a reduction in the export market and customer spending.

The survey found that about 56 per cent of businesses reported a decline in sales, 56 per cent of businesses were also affected by the increased cross border restrictions, while challenges to source raw materials saw 44.1 per cent of businesses grappling to stay afloat.

The state of unemployment in the region has also escalated with 36.4 per cent of the respondents revealing that they have been forced to lay off their staff. The uncertainty from the pandemic has seen 41.2 per cent of the respondents say their business may not be sustainable for more than six months.

The recovery strategy for businesses in the EAC, proposes various recovery measures to mitigate the impact of the Covid-19 pandemic that include a need for stimulus funds to help the most adversely affected sectors to recover steadily, EAC partner states to implement a coordinated and synchronized fiscal and monetary measures to mitigate the effect of Covid-19 on the region's macroeconomic and financial stability.

Resumption of air transport is going to spur regional tourism, intra-EAC trade and bilateral trade between Kenya and Tanzania offering steady business and economic rebound.

In 2019, the value of Kenya's exports to Tanzania stood at approximately USD. 336 million while imports at USD.275 million, according to the Central Bank of Kenya.

"EABC has been pushing for a coordinated approach on the resumption of regional air services over the last two months since the partner states started considering reopening their borders. With the two countries re-opening their airspaces to each other, we are confident that this will increase demand for travel services, ease movement of people and integrate logistics value chains for exports of goods, open access to a larger market and boost regional tourism," Dr Mathuki said.

Comparing March-July 2020 to last year the same period, analysis indicates that the value of Kenya's exports to Tanzania decreased by -9.8 per cent while imports decreased by 29.4 per cent.

Dr Mathuki urges the EAC partner states to consider waiving landing fees, reducing excise duty on aviation fuel, navigation, landing, parking and Covid-19 related fees, to the high cost of air travel. Uganda is scheduled to resume international flights on 1st October. Rwanda resumed international flights on 1st August 2020.

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