From The Desk Of Sachen Gudka – Chairman of Kenya Association of Manufacturers and the Vice Chair, COMESA Business Council.
Coronavirus is our wake-up call. No one could have predicted its disastrous impact. But that is the nature of disasters; most are sudden, unpredictable and leave in their wake unimaginable misery and loss. We have been quite rudely awakened to the essentiality of disaster resilience.
Anything that we do from now on, any buildings, any plans and any developments as a country, has to be done through a disaster resilience lens. Any policies developed and implemented should be able to answer the questions; ‘Will they help us get through the next disaster shock with minimal loss? Will they help us bounce back fast enough and set us on our feet to recover quickly? And more importantly, if we are ever to be left with no options but to close our borders, can we sustain ourselves?’
At the moment, efforts to reduce exposure and spread of the virus has seen nations restrict the movement of people and goods. Businesses are now forced to contend with potential revenue loss due to this global supply chain disruption. For instance, Europe’s hardest-hit country, Italy, is currently under lockdown. This has affected transport, art and entertainment, retail and hotels and restaurants sectors that account for nearly 23% of Italian GDP (CNN Report). The US has also announced a 30-day ban on travel from Europe due to the virus.
The disruption of the global supply chain has also seen local manufactures anticipate challenges in diminishing stock, constraints to fulfil clients’ orders, hikes in the cost of raw materials as transport cost rises and increased costs of finished products.
There is also an indication that prolonged delays in restoring full production in affected source markets will hamper Kenya’s efforts towards building local economic resilience, especially when it comes to manufacturing.
However, these solutions are within our grasp. We can forge the resilience of local industries by enhancing our local value chain – from raw materials to finished products. By doing so, we can shelter the manufacturing sector from industrial and trade risks arising out of external shocks. This way, Kenya can source raw materials and intermediate products locally, before turning to international markets.
To enable this, it is critical that the government fast tracks finalization of Local Content Guidelines and the approval of the Local Content Policy. Additionally, the government needs to expand the scope of the Local Content Bill, 2018 to feature all sectors within manufacturing.
At present, due to the anticipated economic effect, the Government could also clear outstanding VAT refunds to enable businesses to continue production in case of shortages, cushion SMEs by reducing VAT and Corporate taxes and Zero-rate VAT (0%) on essentials including soaps, tissues, sanitizers and staple foods. In the meanwhile, manufacturers should keep to their contractual obligations in terms of price with the consumers in mind.
To make it easy for consumers and local producers to source material within the country, KAM has launched an online directory with locally available goods and industrial inputs and this is available to the public. Other manufacturers such as Pwani Oil, have reduced the prices of essential goods such as soaps and cooking oil by 5% to cushion the consumer.
I have no doubt that Kenya will bounce back from this. We are a strong nation. Our history is marred with disasters and setbacks of all kinds, yet here we still are. But it is time we identify what makes us strong and bolster it; and minimize what weakens us. If agriculture is our backbone, then we should strengthen our food security and all the apparatus that are tied to making our agricultural sector thrive. If natural resources are bountiful for us, we should replenish and maintain them. This includes building technology and industries, within their value chains, that makes them thrive and boost their usefulness. We need to bulk up our ability to produce what we need locally, be it raw, intermediate or finished goods.