COVID-19: COMESA Business Council cites trade disruptions

The Common Market for Eastern and Southern Africa (COMESA) Business Council, through its special edition covering business insights of the COVID- 19 virus, has reported that there have been serious trade disruptions between country members, region and international trading partners due to the virus outbreak. The edition points out that China, the European Union, United Arab Emirates, and United States of America has a great role to play in the Comesa trade. However, it shows that China and the EU countries have shut down their manufacturing centres, closed its ports, and restricted movement of people which has resulted in a decrease in demand for COMESA commodities. Sellers of commodities in Comesa are being forced to offload products elsewhere at a discounted rate. The total value of products from Comesa’s major export destinations are include $15 billion from China, the European Union with $49billion, United Arab Emirates with $8 billion), and United States of America with $6 billion. The products exported to these markets include mineral products such as copper and copper wire, fuels, mineral oils, products of their distillation, bituminous substances, base metals, coffee, cut flowers, fabrics, women clothing, tracksuits, jerseys, preserved fish, olive oil, footwear, gold, vanilla, cloves, pepper, precious stones, fruits and nuts, nickel ores, ferro alloys, cotton, cobalt mattes, platinum, chromium ores, among other exported products. On the other hand, the total value of imports that Comesa’s sources from the international markets include $54 billion from European Union , China with $33 billion, United Arab Emirates with $12 billion, India with $11billion, and South Africa with $11 billion. The import products from these markets include industrial machinery, manufacturing, transport equipment, fabrics, motor vehicles, iron and steel, coal, insecticides, electrical energy, sulphur, medicaments, wheat, coaxial cables, powered aircraft, tractors, medical instruments among other products. Trade disruptions between Comesa and regional partners Air travel restrictive measures are some of the prominent restrictive measures that countries have begun putting in place. And this, the report says, airline cancellation is affecting not only the airline industry but ancillary industries like tourism, professional and business services. According to the International Air Transport Association (IATA), the global repercussions and losses to the aviation industry is projected to be $29 billion this year, a 4.7% industry-wide drop in revenue per passenger kilometre, with losses to the African airlines assumed to be as much as $40 million. The total value of products between Comesa and her major export destinations in Africa are as follows; South Africa (US$11 billion), Zambia (US$1.6 billion), DRC (US$1.6 billion), Kenya (US$1.2 billion) and Algeria (US$880 million). The products include vanilla, petroleum oils, copper ores, unmanufactured tobacco, cane sugar, gold, tea, nickel ores, cement, ferro-alloys, cobalt ores, beans, copper alloys, wheat flour, packaging material,medicaments, sulphuric acid, products of iron & steel, fertilisers, copper wire, maize and carbonates, among other products. On the other hand, the total value of import products sourced by Comesa from the region – South Africa(US$10 billion), Egypt (US$3 billion), Kenya (US$1.6 billion), DRC (US$1.6 billion), Zambia (US$1.5 billion). These products include petroleum oils, copper ores, cane sugar, petroleum gas, fertilisers, copper & copper alloys, tea, coal, gold, cement, wheat flour, frozen fish, maize and medicaments, among other products. Business recommendations It will be imperative for government and private sector to take immediate, proactive concerted measures to address and mitigate the drastic effects on businesses and the economy at large. The report recommends governments in Comesa to look at some measures, both monetary and non-monetary to support businesses at such a time. The World Bank Group has set aside $8 billion US as a stimulus package for financing companies in the wake of the pandemic to cushion its possible effects. And this will be imperative to ensure some companies in Africa are able to access the financing options through this vehicle. It recommends focus on a business continuity plan that takes into consideration the newer models of working from home, digital meetings, remote operations managements, virtual office spaces and the like. Focus on restructuring business models is another recommendation. In the manufacturing industry, the council recommends reviewing and redirecting existing resources to strengthen your internal processes and products to respond to the possible new demands in the markets presented by the industry dynamics in the wake of the pandemic. Focus on increased local production; with the current gaps in the local market, it further recommends. “Governments are urged to work with the industry to lower costs of local product and also strengthen the business environment through a domestic tax base that can allow industry to boost domestic production.” Focusing on access to credit and servicing of debt will become an issue as companies may fail to honor their obligations on time is another recommendation. “From a business perspective it is important to negotiate obligations with your creditors to attain some leeway or waiver or contract modifications. Some governments are negotiating with the financial services providers to provide a one-year leeway for affected companies to be able to renegotiate their obligations,” it recommends.

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COVID-19: COMESA Business Council cites trade disruptions