How businesses in East Africa can emerge stronger from COVID-19 pandemic – Report

How businesses in East Africa can emerge stronger from COVID-19 pandemic - Report
Aerial shot of the Nairobi CBD. PHOTO| COURTESY

Governments in the East African region are being advised to come up with additional measures including incentives to enable businesses capitalize on opportunities in the face of the COVID-19 pandemic.

A new study by the Boston Consulting Group released on Monday recommends that governments reduce barriers to trade across the region, enabling local manufacturers to scale and become more cost-competitive.

“This may include public infrastructure investments that countries such as Kenya are including in their recovery programmes,” reads the report.

Another proposal is for the provision of clear incentives to set up businesses and investments in priority sectors that have a potential regional or global footprint. This includes clarifying the regulations on special economic zones and export processing zones.

“While the challenges ahead cannot be understated, we firmly believe that East African businesses can take decisive actions to ensure immediate continuity, while exploring potential opportunities to rebound ever stronger. Digital offerings can be a ‘no regrets’ move for businesses in the region, many of which are already pursuing this opportunity with Governments creating an enabling condition for digital business models,” said Patrick Dupoux, Head of Africa for BCG.

To ensure near-term business continuity, the study recommends that workplaces prepare to operate in the new reality and actively manage cash and liquidity.

Businesses are also advised to ensure continuity of customers and operations in order to stabilize demand and supply as well as maintain a dedicated team to track data, assess business impact, and plan for different scenarios.

To create advantage in adversity, the study recommends businesses to consider
capitalizing, align portfolio with evolving consumer needs, invest in the digital customer experience and pursue strategies to save, grow, or extend the core.

“Most East African countries are beginning to transition from “Flatten” to “Fight”, with open questions around the length of each phase, as well as the depth of economic impact and each sector’s recovery rate. BCG’s insights are key in ensuring businesses have a clear picture of the situation to enable them to strategically formulate and implement their recovery plans and establish more resilient practices” said Nik Nesbitt, Chairman of KEPSA.

Mills Schenck, Partner and Managing Director from BCG’s Nairobi office said “managing COVID-19 will be a journey for East African businesses, as true prevalence across the region remains unclear, yet the economic impact has already been severe.”

“Business leaders will need to tailor strategies for uncertain disease progression scenarios, global market dislocations, and shifting consumer behavior,” said Mills.

Small and medium-sized enterprises (SMEs) contribute significantly to East African economics and have been disproportionately impacted by COVID-19.

According to a recent survey conducted by KEPSA approximately 78% of microenterprises and 85% of small companies in Kenya have reported a high to very high impact of the pandemic on their business versus 70% of large companies.

A separate study in Uganda reveals only about 17% of microenterprises can withstand the current situation for over one year, compared to 33.3% small, 67.2% medium, and 90.5% large companies. Owing to the impact of the pandemic, the International Monetary Fund (IMF) revised its 2020 projection for the East African Community’s growth from 6.0% to 1.8%.

Looking at macro-level impact in Kenya for instance, tea prices in the Mombasa Tea Auction declined by 18% year-over-year in May, reaching the lowest point since 2014; coffee sales declined by 50% in April compared to the previous month.

At the same time fresh cut flower sales declined by 40% in March compared to the previous month. On the supply side, global disruptions have led to shortages or delays for critical inputs, with consequent price increases. Some staple food prices have increased, including a 19% rise for dry maize, a largely imported Kenyan staple, and a 20% higher retail price for teff in Addis Ababa

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