WITH the outbreak of Covid- 19, the East African Business Council has advised the East African partner states to consider allowing free movement of both essential and non-essential goods within and outside the region.
The outbreak of coronavirus has increased restriction on the movement of goods and people across borders threatening the livelihoods of traders and their families, and reduced revenue for partner states.
Also, this has caused a significant disruption in the global value chains with China being the hub of manufacturing for most business operations.
The EACBC said in its report on the impact of Covid-19 on trade that the spillover effect of this disruption has been felt by other African economies and largely by East African businesses being suppliers and importers of goods and services in the global economy.
As part of the immediate recovery strategy, the EACBC counseled partner states to consider full liberalisation of open skies for free movement of cargo within and out of EAC.
Also that member states look for alternative markets for EAC imports and exports to reduce dependency on a few countries.
On average, EAC countries source 6 per cent of their total imports from the region, and supply 20 per cent of their total exports to the region.
The cross border trade has emerged as a remedy that could reduce this adversity through flow of essential goods like food, medical supplies and other hygiene products.
“Its importance to the economies of EAC is due to the characteristic nature of crossborder trade being conducted informally and mostly occupied by the vulnerable, small, unregistered traders,” the report said adding that this contribution is estimated to account to an average of 50 percent of the Gross Domestic Product (GDP) in EAC economies.
Similarly, with about 76 percent of informal cross-border trade being accounted by women, it has been seen to have significant discrete gender impacts.
This female-intensive sector highly contributes to the economy through ensuring food security but has broad poverty and development ramifications.
A significant portion of trade between East Africa and the rest of the world largely constitutes of primary commodities with huge prospects in exporting finished products.
According to the EAC Trade and Investment Report 2018, formal trade among the EAC partner states largely constitutes of chemicals, textile, iron and steel.
Agricultural commodities also form a large portion with significance in food items like rice, maize, sorghum, coffee, tobacco, wheat and other cereals.
However, manufactured goods such as cement, petroleum, textiles, sugar, confectionery, beer, salt, fats and oils, paper, plastics and pharmaceuticals are also traded across the Region.
“Although movement of cargo is not restricted, some Partner States have limited the movement to essential goods only.
This has the potential of reducing the trade value of intra-EAC trade,” stated the report.
Informal crossborder trade represents produced goods and services, which directly or indirectly do not pass through the regulatory framework for taxation and other procedures set by Partner States.
Its importance in poverty reduction in EAC is significant as women SMEs constitute about 74 percent of the traders.
On medium and long term recovery strategy, the private sector body urged partner states to consider improving the business and regulatory environment to ensure formalization of businesses in the partner states.
More emphasis should be put by the EAC partner states to push for ‘Buy East Africa Build East Africa’ as significant measures aimed at promoting regional markets.
Also, partner states need to provide support to key industries to expand their capacity and establish new industries to manufacture import substitutes in the region.
The EABC Chief Executive Officer (CEO), Dr Peter Mathuki, said in a special report on snapshot survey that in order to mitigate the impact of the reduced cash flow, EABC urges EAC governments to allocate enough funds to cater for outstanding Value Added Tax (VAT), refunds and domestic debts.
The payment will give businesses the needed liquidity to boost their working capital during the Covid-19 period.
He noted that the research findings have led to proposals that central banks need to extend lending facility to commercial banks and release special funds, lower Central Bank Rate (CBR) to enable commercial banks borrow at a lower rate and lend to businesses at lower lending rates.
A call has also been made to reduce the Corporate Tax Rate to 20 per cent so as to enable businesses to have cash that could be invested back to the businesses to boost the working capital to sustain them.
EAC governments have been asked to consider granting an extension to businesses in filing their tax returns, to wit, VAT, Pay as You Earn, Excise Duty and Withholding Tax), to give relief to businesses that would not be able to meet their tax filing obligations as per the period specified in the law, as they struggle to mitigate the impact of the Covid-19 pandemic
