East Africa is facing shortages of raw materials and capital and consumer goods because of the coronavirus outbreak, according to the East African Business Council (EABC).
In a briefing the EABC said the East African Community – comprising Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda – were already facing declines in imports from China.
Kenya’s imports from China have plunged by Ksh58.64bn in the first two months of the year, a fall of 36.6% compared to the same period in 2019.
EAC states are likely to experience rising prices for Chinese products caused by supply shortages in the medium and long-term.
“Given the fact that China is among the EAC’s largest source of imports, the outbreak of Covid-19 has disrupted supply chains in all EAC partner states,” said the briefing.
“With the decrease in imports from China, there is a likelihood of disruptions in the supply of household products, raw materials, intermediate and capital goods.
“The disruption in the supply of household products will have a negative impact on consumers through hiked prices, and wholesale and retail businesses in the region.”
The briefing said some EAC states had registered a decline in export values, which has been blamed on a fall in demand from Asia, mainly China.
“For instance, Rwandan sellers of coffee, chilli and other products valued at approximately $10,000-$20,000 sold on Alibaba’s T-mall e-commerce platform are currently stuck, struggling to ship their goods to China,” said the briefing.
It urged EAC states to diversify their sources of imports by seeking alternative affordable sources of supply aside from China.
Total EAC imports grew by 19.2% to $38.3bn in 2018, from $32.2bn in 2017. Imports from the EU were worth $4.3bn. Imports from the rest of the world declined but still constituted 44.3% of total imports.
The primary source of imports from the rest of the world were Asia and the Middle East. EAC imports from China increased by 6%, from $6.9bn in 2017 to $7.3bn in 2018. EAC exports to China increased by 22%, from $1.5bn in 2017 to $1.9bn in 2018.
The increase was attributed to the sourcing of goods like transport equipment, including materials for the construction of standard gauge railways, roads, airports, and ports.
“The Covid-19 epidemic is likely to impact the EAC construction and infrastructure projects given their connection to China in terms of either investment or contractors. With the disruption of the flow of capital goods from China, most of the projects which are being constructed by Chinese companies will slow down,” said the report.
The outbreak has seen a decline in cargo volumes passing through EAC and international ports.
The briefing said foreign direct investment (FDI) into East Africa decreased by 15.9% to $5.7bn in 2018, from $6.8bn in 2017. FDI was concentrated in manufacturing, construction and services, with China and India continuing to be the major sources of FDI.
Meanwhile, the implementation of the African Continental Free Trade Area (AfCFTA) in East Africa could lead to economic benefits worth $1.8bn for the region.It would boost intra-African exports by more than $1.1bn and create more than 2m new jobs, said a report.
The report – Creating a Unified Regional Market - Towards the Implementation of The African Continental Free Trade Area in East Africa – was jointly published by the UN Economic Commission for Africa and Trademark East Africa
Betty Maina, Kenya’s minister for trade and industrialisation, said that to maximise benefits from the AfCFTA, greater attention must be paid towards supply chains in agricultural commodities and processed food products to scale them up to continental level.
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