AfricaPress-Tanzania: AS the world battles corona virus, the East African Community (EAC) partner states’ private sector is crafting strategies for mitigating the economic effects of the deadly Covid-19 that has caused negative impacts on business and investments.
A survey conducted by the East African Business Council (EABC) has established that tourism, logistics and retail sectors have significantly experienced a higher percentage of reduction of cash flow of 92 per cent, 75 per cent and 63 per cent, respectively.
Other affected sectors include real estate, finance, construction, events management, Information Communication Technology (ICT), manufacturing and consultancy.
According to the survey, reduction of cash flows will continue disrupting value chains and may lead to the closure of businesses and investment projects as well as increase the rate of unemployment, unless EAC partner states come up with appropriate measures.
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.
The former East African Legislative Assembly (EALA) member disclosed that based on data analysis, Covid-19 has affected companies in decline in sales (55.9 per cent), increased cross border restrictions (55.9 per cent) and challenges to source raw materials (44.1per cent).
Other ways in which businesses have been affected are reduction in the export market and laying off staff (17.6 per cent), delay of contracts and reduction of spending by customers by 14.5 per cent.
Recommendations to mitigate the above are that EAC partner states allow free movement of goods across borders.
This comes as some truck drivers in the region experience strict restrictions at some points of entry in member states’ borders.
The private sector associations and corporate body is of the view that there is a need for removal of all other charges of equivalent effects, such as Import Declaration Fees (IDF) and Railway Development Levy (RDL) for imports of raw materials, capital goods, intermediate goods and essential goods.
“This will provide relief to manufacturers/producers and make such goods available at affordable prices. EAC partner states should reduce the standard VAT rate to at least 12 per cent during the Covid-19 period. This will protect consumers across the EAC against high prices and enable them to access consumable goods and services at affordable prices and hence an increase of sales,” said the CEO.
Under conditions of economic stagnation, enterprises’ uncertainty is to continue and business poses a major challenge and places a significant impact on employment.
Forty five per cent of respondents are still in a dilemma on whether to maintain or lay off staff; 36.4 per cent have decided to lay off staff and 18.2 per cent will not do so.
EABC has urged EAC partner states to consider temporary removal of employment taxes and levies, such as Skill Development Levies (SDL) so as to encourage employers to retain the existing workers and stop downsizing in the midst of the Covid-19 pandemic.
Dr Mathuki said that EABC commends partner states governments and private sectors for their efforts and measures towards mitigating the impact of Covid-19 on EAC economies.
