- Most governments around the world have put both economic and social measures to cushion their population from the adverse effects of the scourge.
- Studies indicate that funding liquidity is central to the efficient and stable functioning of the financial system.
Covid-19 is not the first disease outbreak to disrupt supply chains. The severe acute respiratory syndrome (SARS), measles, swine flu, Ebola, and avian flu all resulted in trade interruptions. But none of these epidemics disrupted global trade and domestic supply chains like Covid-19.
The devastating effects of Covid-19 have included disruptions in labour supply, increased debt burden, job losses, business collapse, loss of livelihoods and deaths of over five million people around the world.
According to Price Waterhouse Coopers(PWC), supply chain resilience is critical to economic recovery. An effective supply chain system ensures higher efficiency rates, quality control, better customer relationship and service, faster production cycle, reduced production costs and an overall improvement in the financial performance of an organisation.
Most governments around the world have put both economic and social measures to cushion their population from the adverse effects of the scourge. In Kenya, the Central Bank of Kenya (CBK) took unprecedented policy actions to provide ample liquidity to core funding markets and maintain the flow of credit.
Studies indicate that funding liquidity is central to the efficient and stable functioning of the financial system, benefiting not only those who depend directly on core markets but also the economy as a whole.
To mitigate the adverse socio-economic and financial impact of the pandemic, the government through the central bank instituted fiscal and financial measures, including reducing income tax rates for individuals and corporates, lowering turnover tax and value-added tax, immediate payment of suppliers and tax refunds, increase in tax relief, and increase in financial transfers to vulnerable groups.
In addition, a number of monetary measures were instituted such as lowering the cash reserve requirements and extending the maximum tenor of repurchase agreements from 28 to 91 days, working with banks and payment service providers to waive charges on mobile money and mobile banking transactions, and asking banks to renegotiate terms and restructure loans for borrowers, who face difficulties in servicing their loans as a result of the pandemic.
President Uhuru Kenyatta recently announced the suspension of credit reference bureau (CRB) listing for defaults on loans below Sh5 million.
As a result of these fiscal and monetary interventions, a number of sectors built resilience in the midst of the pandemic. For instance, the monthly volume of person-to-person cash transactions increased by 87 percent between February and December 2020, including an increase in diaspora remittances.
Over the same period, the volume of M-Pesa transactions below Sh1,000 increased by 114 percent, while 2.8 million additional customers were added to the mobile money transactions. During this period, online business-related transactions recorded significant growth.
Contracts are today negotiated online through video conferencing, universities resorted to online teaching, retail outlets encouraged online ordering and door-to-door delivery among other online transactions.
According to the Kenya National Bureau of Statistics(KNBS), the economy remained resilient despite the temporal containment measures, including a ban on local and international travel and cessation of movement in and out of some counties. The economy was supported by accelerated growth in agricultural production, construction activities, and health services.
The pandemic has taught us many indelible lessons. Most countries today are looking inward and reconsidering their supply chain strategies.
Governments in developed economies have increased their call to businesses to carefully address processes that will ensure resilience in the face of future disruptions to global supply and industry value chains.
Most multinationals are restructuring their outsourcing strategies for the supply of essential inputs for domestic operations to mitigate the risks of external disruptions from any future disruptions.
In Japan, for instance, the government allocated $2.2 billion to Japanese firms operating in other Asian countries to relocate to Japan.
In the United States, a bill was introduced US to take on the ensuing cost implications of companies that choose to shift their production base from China. Also, India is exploring ways to attract manufacturers from China through a reduction in corporate taxes, among other incentives.
For full recovery to be realised, the Kenyan government must improve domestic supply chains by encouraging delocalisation of industries to the counties to tap the unexploited resources and for equitable resource distribution.
Players in the logistics, transport and supply chain industries must deploy innovative measures in inventory management and distribution, engage in strategic partnerships with other stakeholders and intermediaries across the value chain.
Panya, lecturer at Jomo Kenyatta University of Agriculture and Technology and trainer in procurement and contract management