Covid-19 pandemic cuts household spending in East Africa

Arusha. Household spending in the East African Community (EAC) bloc is down by 20 per cent due to Covid-19.

The fall has negatively impacted on the region’s manufacturing sector, according to the East African Business Council (EABC).

Globally, the merchandise trade fell by 30 per cent as the global pandemic impacted heavily on industrial production. This emerged during a live web-based video conference (webinar) at the weekend on the impact of the virus to the 2020/2021 EAC budgets.“

The 20 per cent reduction in household spending is a result of Covid-19 across the region,” the regional business leaders observed. Household spending is the amount of final consumption expenditure made by resident households to meet their daily needs. They include food, clothing, housing (rent), energy, trans-port, durable goods, health costs, leisure and others.

The Covid-19 pandemic, which was first reported in China last December, was first reported within the EAC region in mid-March this year.

Over 70 deaths have been reported in the region but its devastating impact on the EA economies especially tourism is monumental.

EABC estimates that six million people out of a total population of 177 million in the six-member bloc will directly suffer from the impact of the virus, dropping deeper into poverty.

The bloc imports 94 per cent of its industrial inputs from outside the region, a trend the business body insists should change.

Currently, the manufacturing sector contributes 9.7 per cent of the East African region’s Gross Domestic Product (GDP). It was projected to rise to 25 per cent by 2032 but is already one of the critical areas hardest hit by the pandemic.

The webinar, which attracted business leaders from across the region, assessed the impact of Covid-19 on the EA manufacturing.

The slowdown of manufacturing was also attributed to inadequate supply of industrial inputs, previously imported. In order to boost the sector, EAC states were urged to fast track payment of Value-Added Tax (VAT) refunds to ensure manufacturers address the cash flow constraints and remain afloat.

The six member countries in the Community were also urged to reduce VAT to spur consumption of locally produced goods.