What EAC can do to help citizens during these tough times

President Yoweri Museveni made a State of the Nation address this week where he reflected on the challenges Uganda has faced over the last three and a half years.  

Notable challenges were; locusts, landslides, armyworms, Covid-19, terror attacks and rising costs of living among others. The rising cost of living in Uganda was caused by demand for commodities surpassing supply, use of palm oil as fuel created shortage of products that use it as raw materials like soap and the conflict in Ukraine and Western sanctions on Russia caused shortages of wheat, fertilizer and fuel.

Kenya, Tanzania and Uganda are 34th, 53rd and 69th largest importer of wheat globally. Wheat is also the sixth, fifth and sixth most imported product respectively in these countries. This means that changes of wheat price will have a direct and significant impact on citizens and their ability to access staple food. Further Agriculture is a major contributor to the regions GDP averaging 25.7 per cent directly and a further 27 per cent indirectly through linkages with other sectors.

In Kenya the sector contributes about 24 per cent of the GDP, about 75 per cent of industrial raw materials and 60 per cent of export earnings. It is highly sensitive to price fluctuation of fertiliser and fuel which is a major input not only to the sector, but others like manufacturing, transport and logistics and tourism. It is crucial for the EAC member states to develop appropriate and pragmatic strategies to provide safety nets for its citizens against rising cost of living. They should also cushion the private sector more so Micro Small Medium Enterprises (SMEs). 

First, on the fuel price and being cognizant of its increased price globally, governments must move away from fuel subsidies, which are eventually borne by citizens through taxes as seen in Kenya through the Finance Bill 2022. A major area of savings is; the reduction of fuel tax accounting over 50 per cent of retail price which may reduce government revenue, but will be a shot in the arm for the private sector and revenue recovered from incremental economic growth.

The second is the reallocation of resources sectors that have potency for rapid socio-economic growth with the best example being startups. Startups are innovative ventures geared to solving problems, founded on some form of technology and have a scalable business model. Notable startups in Kenya are Twiga Foods, Mkopa Solar, Sendy and Cellulant among others.

Finally, reduction of cost of doing business through better efficiencies of regulatory and tax regime to be business friendly following business lifecycle which starts from; planning, launch, operations and scaling. Government must ensure all business regulations and taxes at each of these points as efficient and affordable to business.

The writer is MD of Viffa Consult