Boston Consulting Group’s latest study reveals how businesses in East Africa can emerge stronger from COVID-19

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Nairobi, June 23, 2020 —A new study by the Boston Consulting Group released today recommends four actions for businesses in East Africa to ensure near-term business continuity and four potential opportunities to create advantage in adversity. The study also highlights how governments can support businesses in capitalizing on these opportunities.

COVID-19 has had significant economic impact across East Africa, from macro to consumer-level. Global shocks and local restrictions aimed at curbing the virus spread have severely impacted businesses across sectors, particularly for small and medium-sized enterprises. Consumers have already adjusted spending, primarily driven by household financial strain.

Mills Schenck, Partner and Managing Director from BCG’s Nairobi office said “Managing COVID-19 will be a journey for East African businesses, as true prevalence across the region remains unclear, yet the economic impact has already been severe. Business leaders will need to tailor strategies for uncertain disease progression scenarios, global market dislocations, and shifting consumer behavior.”

To ensure near-term business continuity, the study recommends that businesses take the following actions:

  1. Workers and workplace - Prepare to operate in the new reality
  2. Cash and liquidity management: Actively manage cash and liquidity
  3. Demand and supply stabilization: Ensure continuity of customers and operations
  4. Data-informed scenario planning: Maintain a dedicated team to track data, assess business impact, and plan for different scenarios

To create advantage in adversity, the study recommends businesses consider these opportunities:

  1. Capitalize on shifting supply chain dynamics: Future-proof supply chains, while capturing value from global businesses seeking to do the same
  2. Align portfolio with evolving consumer needs: Ensure value proposition aligns with needs by adjusting product, portfolio, and channel mix
  3. Invest in the digital customer experience: Make “no-regret” digital bets
  4. Explore M&A opportunities: Pursue strategies to save, grow, or extend the core

“Most East African countries are beginning to transition from “Flatten” to “Fight”, with open questions around the length of each phase, as well as the depth of economic impact and each sector’s recovery rate. BCG’s insights are key in ensuring businesses have a clear picture of the situation to enable them to strategically formulate and implement their recovery plans and establish more resilient practices” said Nik Nesbitt, Chairman of KEPSA.
Looking at macro-level impact in Kenya for instance, tea prices in the Mombasa Tea Auction declined by 18% year-over-year in May, reaching the lowest point since 2014; coffee sales declined ~50% in April compared to the previous month; and fresh cut flower sales declined ~40% in March compared to the previous month . On the supply side, global disruptions have led to shortages or delays for critical inputs, with consequent price increases. Some staple food prices have increased, including a ~19% rise for dry maize , a largely imported Kenyan staple, and a ~20% higher retail price for teff in Addis Ababa.

Small and medium-sized enterprises (SMEs) contribute significantly to East African economics and have been disproportionately impacted by COVID-19. According to a recent survey conducted by KEPSA approximately 78% of microenterprises and 85% of small companies in Kenya have reported a high to very high impact of the pandemic on their business versus 70% of large companies. A separate study in Uganda reveals only about 17% of microenterprises can withstand the current situation for over one year, compared to 33.3% small, 67.2% medium, and 90.5% large companies. Owing to the impact of the pandemic, the International Monetary Fund (IMF) revised its 2020 projection for the East African Community’s growth from 6.0% to 1.8%.

According to BCG experts, governments can support East African businesses to capitalize on opportunities. One example lever is to reduce barriers to trade across the region, enabling local manufacturers to scale and become more cost-competitive. This may include public infrastructure investments that countries such as Kenya are including in their recovery programmes. Another lever is to provide clear incentives to set up businesses and investments in priority sectors that have a potential regional or global footprint. This includes clarifying the regulations on special economic zones and export processing zones.

‘While the challenges ahead cannot be understated, we firmly believe that East African businesses can take decisive actions to ensure immediate continuity, while exploring potential opportunities to rebound ever stronger. Digital offerings can be a 'no regrets' move for businesses in the region, many of which are already pursuing this opportunity with Governments creating an enabling condition for digital business models.” said Patrick Dupoux, Head of Africa for BCG.

Notes to editors
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About BCG in Africa

Our presence in Africa includes five permanent offices in Casablanca, Lagos, Luanda, Johannesburg and Nairobi and 7 research centres. BCG projects on the continent cover a large spectrum of industry sectors including Financial Institutions, Energy, Industrial Goods, Consumer Products, Healthcare, Technology, and the Public Sector. Our mission in is clear — to create positive economic, social, and environmental impact on the continent

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