New approaches and new forms of collaboration will be crucial to increase overall resilience of the regional manufacturing sector during the ongoing COVID-19 pandemic. Peter Mathuki, the CEO of the East African Business Council (EABC), stressed on Friday, April 24, while noting that the pandemic is accelerating the change of global value delivery models, with unprecedented consequences for manufacturers and supply chains. He told The New Times that despite all, there are opportunities in harnessing leading practices and catalyzing a regional joint response. Mathuki said: “A coordinated EAC approach on dealing with combating COVID-19 is urgent and necessary. Due to our geographical proximity and interdependence it’s inevitable that we deploy a coordinated approach as a region. If one partner state defeats the pandemic and others or one partner state doesn’t, it will affect all of us as a region.” The EABC Chief Executive then listed nine ways in which the regional body believes that, if considered, will go a long way in boosting the manufacturing sector. Nine ways of harnessing potential of region’s manufacturing sector amidst COVID-19 First, he said, there is a need for EAC Partner States to push for ‘Buy East Africa Build East Africa’ (BEABEA). As noted, partner states need to provide support to key industries to expand their capacity and establish new industries to manufacture import substitutes in the region. This will cushion EAC economies from the negative impact of COVID-19. Priority industries to focus on such support include textiles, pharmaceuticals, and agro-processing. Secondly, regional governments need to commit to doing business with the regional business community and ensure that institutions such as the East African Development Bank are recapitalized to be a lending arm through offering affordable credit lines to manufacturers. Third, the EABC notes that governments in collaboration with the private sector should devise alternative means of sourcing products locally and explore new markets. Additionally, EAC governments should consider offering fiscal incentives to heavily affected sectors to prevent them from total collapse. Partner States are also encouraged to implement coordinated and synchronized fiscal and monetary measures to mitigate the effect of COVID-19 on the region’s macroeconomic and financial stability. Partner States are urged to consider incentivizing or waving taxes, administrative charges for companies that have changed production lines amidst COVID-19 to produce protective gear and products for example, sanitizers, face masks, health and safety equipment, among others. Partner States are further urged to emphasize sustainable EAC regional value chains integration and development from raw materials, intermediate goods and production of finished products with a view of reducing industrial and trade risks arising out of external shocks. In order to sustain job creation and expand the manufacturing base, regional countries are also urged to procure medical and public health products manufactured locally. Then, as noted, there is a need for removal of all other charges of equivalent effects (such as Import Declaration Fees-IDF & Railway Development Levy-RDL) for imports of raw materials, capital goods, intermediate goods and essential goods. This, it is noted, will provide relief to manufacturers or producers and make such goods available at affordable prices. Finally, it is noted, EAC partner states should design a post COVID-19 recovery plan which contains incentives that will attract relocation of investors in the manufacturing sector to East Africa. Projections for sector amidst pandemic Globally, as noted, there is consensus that the coronavirus crisis will get worse before it gets better. And, for East Africa, there will be negative economic side effects “because most of the markets to which we source our inputs and intermediate goods” have substantially been affected by COVID-19. According to forecasts from Oxford Economics, global industrial production is expected to fall sharply in the first half of this year 2020 and to contract by 3 per cent for the year. The negative impact and disruption already felt by service sectors reliant on social consumption such as tourism and hospitality, it is noted, is also spreading to manufacturing. According to EABC, despite the sharp deterioration in the near-term outlook, a strong recovery is expected towards the end of 2020 and into 2021 as lockdowns end, consumer and business spending resumes, and massive policy stimulus kicks in. Interventions by manufacturers during pandemic In a bid to address supply-side constraints from the international market for essential products to be utilized in the fight against COVID-19, many EAC manufacturers have changed their production lines to manufacture the much-needed essential items. These include manufacture of sanitizers, personal protective equipment for the health workers as well as those to be used by the general public. At the policy level, some countries are supporting entities that set up production lines to manufacture essential items through fiscal incentives aimed at ensuring that businesses remain afloat. “Whereas in the long run manufacturers producing such essential items may not be affected to a large extent, there is need for policy makers in the region to assess the current situation,” Mathuki said. “Policy makers need to come up with quick wins for the industry as well as develop a post COVID-19 strategy that will mitigate against the negative impacts on the entire EAC manufacturing sector. Statistics from the EAC suggest that the overall manufacturing sector contribution to GDP in the region is averagely 9.5 per cent. It is was projected to grow to about 25 per cent by the year 2032 through the implementation of the EAC industrialization strategy and policy 2012-2032. But with the outbreak of COVID-19, Mathuki said, it is highly likely that this will disrupt the pace at which manufacturing was growing and contributing to the GDPs of regional countries. “And therefore, mitigation measures need to be put in place to avert the negative trends.”
