The extent of losses in key economic sectors due to coronavirus in Tanzania
Dar es Salaam. Players in the tourism industry across East Africa were grappling with a cash flow drop of 92 percent as Covid-19 ravages economies, a new study has revealed.
The East African Business Council (EABC) snapshot survey on the impact of Covid-19 on business and investment in EAC, shows that tourism is followed by the Logistics sector, which has registered a drop in revenues by 75 percent.
Tanzania Chamber of Commerce Industry and Agriculture (TCCIA) also took part in the survey.
With a 63 percent drop in cash flow, the Retail sector comes third in the line of businesses that have been hit the hardest by the novel coronavirus.
Other sectors and the percentage of their drop in cash flow in brackets include: Real estate (60 percent), Finance (50 percent), Construction (40 percent), Events Management, ICT (40 percent), Manufacturing (36 percent) and Consultancy (24 percent).
The EABC collected the data using an online survey whereby questionnaires were sent out to EABC members and non-members from different sectors across the region.
According to the response from the respondents, the reduction of cash flows will continue disrupting value chains and may lead to closure of businesses and investment projects. It may also increase the rate of unemployment if EAC partner states do not come up with appropriate measures to mitigate the impacts of the pandemic.
Already, 55.9 percent of businesses surveyed in the study reported declines in sales while 55.9 percent also said they have seen increased cross border restrictions and challenges as 44.1 percent of the interviewed companies said they were facing a challenge in the sourcing of raw materials.
Some 17.6 percent of the companies reported a reduction in their export market share while 14.5 percent were facing a challenge of delay of contracts and reduction of spending by customers.
Disseminating the study findings in Dar es Salaam yesterday, TCCIA president Paul Koyi said the survey sought to establish the extent and the expected impact of the spread of the pandemic on business cash flows, sales, and employees and also intended to find out which sectors in EAC have been affected more by Covid-19.
“The survey also intended to get views of business owners on what should be done to mitigate the impact of pandemic on businesses and investments in the EAC as a whole,” said Mr Koyi.
He added: “The findings are expected to inform the EAC’s policymakers and the private sectors on appropriate measures that EAC Partner States should take in order to mitigate the impact of the pandemic in the region.”
The outbreak of Covid-19 – which was first reported in the Chinese city of Wuhan in December last year (2019) - has created a global social and economic crisis that has had a deep impact in the world’s economy.
The outbreak has led to an embargo on global travel restrictions, curfew and lockdowns which are causing negative impacts on business and investments in the region and the world as a whole.
The spread of Covid-19 in EAC in particular has also generated substantial uncertainty for EAC businesses as 41.2 percent of the interviewed respondents said their businesses maybe not be sustainable for more than 6 months while 29.4 percent said their business may sustain between 6 months and 1 year. Few said their businesses will be able to sustain if the situation of Covid-19 pandemic continues.
To mitigate the impact of the reduced cash-flows in EAC’s businesses and investments, the study recommends that EAC governments should allocate enough funds to cater for outstanding Value Added Tax (VAT) refunds and domestic debts in order to give businesses the needed liquidity to boost their working capital during the pandemic.
Other recommendation include: reduction of Corporate Tax Rate to 20 percent to enable companies to have cash which can be reinvested in the businesses to boost the working capital.
Banks
Meanwhile, bankers say they were working with their clients on individual level to ascertain the kind of help that they may need.
Tanzania Bankers Association (TBA) chairman Abdulmajid Nsekela said banks have not taken common measures to address challenges resulting from coronavirus.
“Every bank has its own system of addressing challenges facing their customers. You cannot generalize that everyone failing to repay loans is because of Covid-19 impact. There are those who are really affected by the coronavirus and there are those who are doing more business than ever,” said Mr Nsekela, who is also the chief executive officer of CRDB Bank.
He said the banks were dealing with their customers depending on the respective issues they face.
“What a bank does is to evaluate individual customer’s challenges in relation to what is happening in their projects and decide accordingly,” he added.
