Home Covid-19 Impact of COVID-19 on Agriculture & Manufacturing Sector in EAC

Impact of COVID-19 on Agriculture & Manufacturing Sector in EAC

by Wanjiku Mbugua
Impact of COVID-19 on Agriculture & Manufacturing Sector in EAC

The East African Business Council (EABC) is calling for an increment in the Covid-19 stimulus packages to the agriculture sector by EAC Partner States and the establishment of an East Africa Community (EAC) Food Reserve to improve agricultural productivity and coordination of distribution of food across borders, amid the pandemic.

The new study by the East African Business Council (EABC) with the support of the African Economic Research Consortium (AERC) and Bill and Melinda Gates Foundation recommends an increase of the COVID Stimulus Package to the Agriculture Sector, from a paltry USD 3.14 million (0.002% of the total stimulus, to USD 157.2 million at least 10% of total stimulus).

This is set to promote a deliberate shift from rain-fed agriculture and from low energy to high energy technology-based agriculture to improve agricultural productivity and household income as well as ensure food security.

According to the study, the Covid-19 containment measures by the East African Partner States had far-reaching effects as their impact drifted a sizeable number of agricultural households (over 15 million) into poverty (less than $1 a day) especially those engaged in smallholder production of perishable commodities such as fruits and vegetables

Further, the study accessing the impact of Covid-19 on the agriculture sector in the region revealed; the number of food-insecure people in the region increased from 59.3 million in 2019 to 65.1 million in 2020 with the food gap in the region increasing by 13.5% in 2020.

The closing of borders was reported to have led to reduced agricultural imports and delays in international food assistance. Farmers were also reported to struggle to access sources of finance to enhance food security in the maize, coffee, horticulture, tea and rice value chains.

The study reveals that in the first three Quarters of 2020, Rwanda and Uganda, suffered from a retracted growth of -2% and -4.7%, respectively. This however changed and saw the two countries recover in the last quarter of the year. It notes that Tanzania and Kenya’s agriculture sectors registered positive growth, throughout the Pandemic, however, the growth was low (below 5%) and inconsistent.

The report outlines that apart from Kenya and Tanzania, food reserves were not functional. This, even in the presence of strong Regional Policy and Strategy documents, including the EAC Food and Nutrition Security Action Plan (2018-2022), which espoused for the establishment of regional food reserves by developing and harmonizing policies, laws and guidelines governing the establishment of national and regional food reserves.

The study is also calling for the establishment of a 1 billion EAC Food Reserve to coordinate a regional response in times of crisis and get food where it is needed more quickly, across borders.

A pandemic regional response plan and a common strategy to combat the threat to food security, caused by pandemics has also been highly recommended.

Speaking during a webinar validating the studies, Mr. Dennis Karera, EABC Vice

Chairman noted that the studies will contribute to developing macro-economic policy options for consideration and adoption by EAC Partner States.

“Despite the disruption caused by the pandemic, the region remained resilient and we are currently seeing signs of recovery,” he said.

On the same front; a similar new study accessing the impact of Covid-19 on light manufacturing in the region by EABC & AERC revealed that the strict Covid-19 measures affected the revenue earning ability of most factories since the demand was suppressed.

With non-essential industries operations limited, companies were forced to restructure the employment terms through layoffs and salary cuts.

The disruption of usual supply chains, as well as transportation, led to an increase in the cost of inputs and a dip in company turnovers and sales due to reduced demand.

The study also noted that restriction of international movements across borders reduced exports and securing of international markets.

The report recommends for EAC Partner States to establish special refinancing schemes in commercial banks at lower interest rates and governments giving loan guarantees to reduce business and financial risks to commercial banks as well as the expedition of payment of outstanding VAT and other tax refunds to manufacturing companies to increase their cash flow.

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