Businesses have recommended tax reduction, Economic Recovery Fund expansion, loan restructuring among others as the effective measures to help them recover from Covid-19 effects.
The need is based on the fact that businesses’ sales and profits in agriculture, industry, and service have fallen by around 50 per cent due to the effects of Covid-19 in the first quarter of this year according to a new survey.
The survey was conducted by IPAR-Rwanda in partnership with the University of Aberdeen and Kivu International under the support of Canada’s International Development Research Center (IDRC).
The initiative aimed at assessing the impact of Covid-19 on Rwanda’s economy, businesses and households over a period of three years with the aim to provide timely evidence to facilitate socio-economic recovery.
At least 1, 545 businesses in agriculture, industry, and service sectors were surveyed in six secondary city districts namely Huye, Muhanga, Musanze, Rubavu, Rusizi and Nyagatare as well as Kigali city.
The preliminary findings from the first quarter of this year indicate that most businesses would like to benefit from the support measures, with the Economic Recovery Fund particularly.
The survey found that overall around five per cent of businesses interviewed in the survey received support from the Economic Recovery Fund.
" A slightly lower proportion of businesses in the Southern districts received support from the Economic Recovery Fund, at three per cent compared to the five per cent national average,” said Dickson Malunda, a researcher.
Agricultural businesses, researchers say, were more likely to benefit from the Economic Recovery Fund, with 11 per cent benefitting compared to 5 per cent for service sector businesses and industry businesses.
In terms of other support measures, the study shows that overall 66 per cent of businesses reported receiving national or local government measures issued in response to the Covid-19 crisis.
The support measures include deadlines extension for paying income tax, increased infrastructure investment, lowered interest rates, bank loans restructuring, a fast tracking of VAT refunds, waiver deferral of rent, mortgage or utility payments and others.
Over half of businesses reported that the support measures for businesses affected by Covid-19 was very high, above average, or average.
However, some respondents reported that the level of support for businesses affected by Covid-19 was below average.
" There is some regional variation in this, for example in the Western province, 62 per cent of businesses rated support very high, above average, or average, compared to 46 per cent in the Southern province,” explained Malunda.
A higher proportion of business in the industry sector received some measures of policy support compared to the services and agricultural sectors.
The Northern Province and Kigali have the highest proportion of businesses that have received support at around 70 per cent while around 54 per cent of businesses in the Southern province have received support.
For businesses that did not receive support, the main reason was lack of awareness, the assessment shows.
Recommendations for effective recovery
The survey reports that 70 per cent of the businesses have recommended Economic Recovery Fund expansion while 68 per cent recommended business loan restructuring as 60 per cent suggest tax reduction.
"Increasing awareness could be an effective way to increase the support that businesses access,” recommends the survey.
Meanwhile businesses have mixed views on how the current economic situation will evolve.
At least 25 per cent think it will get better while 38 per cent think it will get worse.
The rest either think it will remain the same (11 per cent) or 25 percent say they do not know.
Eugine Kayitesi, the Executive Director, IPAR-Rwanda says that over the three year period, data will be collected from 10,000 households and 4,500 businesses to provide up-to-date and relevant information to policy makers on the impact of Covid-19 on businesses and vulnerable households with aim to generate and propose policy solutions to the challenges faced by businesses and vulnerable households in Rwanda.
"Rwanda’s economy has been severely affected by the Coronavirus outbreak as a result of the lockdowns which have affected business operations making key sectors such as industry, manufacturing and services reduce their output and reducing household incomes due to loss of jobs, reduction of salaries and less business operations,” she said.
In May this year, Richard Tusabe, the Minister of State in charge of National Treasury said that Rwf250 billion would be invested into the Covid-19 economic recovery fund as the second phase of the fund which had received Rwf100 billion in the last fiscal year.