29/05 Impact of COVID-19 on East Africa - Recommended Reading

29 May 2020 Ryan Bourque

Each week we are sharing some of the interesting articles we've read recently on the impact of the COVID-19 crisis in East Africa.

1)  The Kenya National Bureau of Statistics is conducting a series of surveys to understand the socioeconomic impact of COVID-19 in the country.

A number of findings from the first survey - of 15K+ Kenyans - are worth highlighting, as they reveal the extent to which the lockdown is disrupting the labour market & affecting livelihoods.

  • Work: 43.2% of respondents were “absent from work” – and half of the absentees cited lockdown as the primary reason. In addition, many of those still in work reported significantly reduced hours (e.g. 23 hours per week less for workers in construction; 12 hours per week less for workers in manufacturing).
  • Transport: Across Kenya, the cost of transport has risen 51.7% on average.
  • Rent: 21.5% of households who are usually able to pay rent were unable to last month. The main reason why these households could not pay rent was reduced income. Only 8.7% have received any relief from their landlords.
  • Health: Around a fifth of households reported having a member with a pre-existing medical condition (e.g. hypertension, diabetes).
  • Education: Around a quarter of households with members who usually attend school were not using any method to continue learning from home.

2)  A group of trade experts have written a piece in African Business to highlight the importance of supporting informal trade during the COVID-19 crisis.

Out of Africa’s 54 countries, 44 have announced land & port closures in order to inhibit the spread of the virus. These measures have virtually halted small-scale / informal cross-border trade, the value of which often exceeds the value of formal trade between countries on the continent. In response, some informal traders are aggregating their goods and paying a bundle fee to truck drivers – but this is pushing up the price of staples in border areas & resulting in major tailbacks at crossings (e.g. the reportedly 35km-long queue at Malaba on the Kenya – Uganda border). So – what five things can governments do to enable “safe” informal trade?

  • Partially reopen informal cross-border trade (i.e. traders are allocated certain days of the week to travel).
  • Secure cross-border trade against COVID-19 – by encouraging hand-washing and ensuring border officials wear protective gear. Uganda is disinfecting every truck that enters the country.
  • Explore digital solutions – by tracking informal traders via GPS on their phones & incentivising the use of mobile money instead of cash. In Kenya, the government has forced mobile companies to eliminate fees for small mobile money transactions.
  • Address new logistical constraints – by aggregating the goods of informal traders, subsiding additional transport costs and expanding warehouse facilities at borders (to reduce the number of cross-border trips and thereby decrease congestion).
  • Extend relief to informal traders directly – since they are often excluded from traditional social safety nets. East Africa has proved this is possible & effective with mobile money cash transfers.

3)  A recent post in OECD’s “Development Matters” blog details how Africa has an opportunity to industrialise on the back of COVID-19.

Africa continues to import finished goods ($232B p.a.) and export raw materials ($174B p.a.) While some nascent industries are generating excitement (e.g. pharma in Kenya & Uganda / textiles in Ethiopia & Senegal), manufacturing still hovers at just 10% of GDP across the continent. Industrialisation will require strong government leadership. For example – in Ghana, high-ranking officials drew up the industrial policy for the automotive sector & led the pitch to investors. This approach has now attracted the likes of Volkswagen.

During the COVID-19 crisis, government leaders need to ruthlessly target their limited resources to both:

  • Preserve existing gains in manufacturing (via selective stimulus packages, crafted in dialogue with private sector)
  • Roll out rapid industrialisation strategies (by conducting a quick market assessment; prioritising 1-2 sub-sectors; identifying investor bottlenecks; ensuring co-ordination between relevant ministries; and adopting a flexible / iterative approach)

This is an optimistic piece that suggests government buy-in re: industrialisation may increase as a result of COVID-19 – as countries seek to rebound quickly and build-up economic resilience.