The East African Business Council (EABC), the apex body of the private sector in East Africa, ha recently conducted a survey asking its members, and non-members, how Covid-19 affected their business cash flows in their respective sectors.
The findings, published in the report “EABC Snapshot Survey On The Impact Of Covid-19 On Business And Investment In The East African Community Region” show that tourism, logistics, and retail suffered a significant reduction of cash flow of 92%, 75%, and 63%, respectively.
Other sectors affected include real estate, finance, construction, events management, ICT, manufacturing, and consultancy.
However, the pharmaceutical sector has recorded zero effect on cash flow, attributed to the fact that the Covid-19 pandemic has increased the demand for pharmaceutical products.
The reduction of cash flows may lead to the closure of businesses and investment projects and increase the rate of unemployment, EABC indicates.
Many of the respondents may lay off staff: 45.5% are still in a dilemma, while 36.4% have decided to lay off staff and 18.2% will not lay off their staff.
The spread of Covid-19 has also generated substantial uncertainty for EAC businesses, which may cause the closure of business and investments.
41.2% of the respondents said their business maybe not sustainable for more than six months, while 29.4% said their business may sustain between six months and one year. Few said their business will be able to sustain if the situation of Covid-19 pandemic continues.
The survey also asked the private sector what would be appropriate measures that the EAC Partner States should take to mitigate the impact of Covid-19 pandemic in the regional businesses.The EABC recommends:
- 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;
- Central banks need to extend lending facility to commercial banks (Releasing special fund);
- Central banks to lower Central Bank Rate to enable commercial banks to borrow at a lower rate at Central banks and lend to businesses at lower lending rates;
- Reduction of Corporate Tax Rate to 20%. This will enable businesses/companies to have cash which can be invested back to the businesses to boost the working capital to sustain businesses;
- EAC Governments need to consider granting an extension to businesses in filing their tax returns (Value Added Tax, Pay as You Earn, Excise Duty and Withholding Tax). This will give relief to businesses which 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 Covid-19 pandemic;
- Authorize companies in full compliance with the Covid-19 SOPs to continue in operation as compared to a complete lockdown of the factories.