• The existing damage and potential damage from the coronavirus is so devastating that the government must put together a stimulus package to save Kenya and its people.
• Already, the effects of the pandemic and measures against it are causing debilitating effects on the economy.
Image: FILE
Our beloved country is in the grip of multiple socioeconomic crises of unprecedented proportions. Never since Independence have we had to juggle such concurrent critical threats to our national well-being, all converging amidst extremely challenging economic times. Currently, our health, wealth and well-being as a nation are yet to successfully tackle another significant threat to our food security, the locust invasion.
The government should be praised its efforts thus far in responding to the coronavirus. Commendable measures initiated so far include: restricting entry into the country to Kenyan citizens and residents only and requiring entrants to self-quarantine; advising on health and hygiene measures, including hand-washing, social-distancing and usage of masks;
And enhanced testing internally and at various points of entry into the country; suspension of learning in all educational institutions; advising Kenyans to use cashless transactions; restricting unnecessary public congregations; closing open-air markets in various counties; closure of morgues and requiring burial within 24 hours in various counties to avoid unnecessary and lengthy congregations; recommending both public and private sector allow employees to work from home; and restricting non-essential travel both locally and internationally.
However, more can be done through a collective and unified national effort with a 360-degree view of the problem. As with every prescription, the side effects of government interventions have to be carefully managed lest we cure one disease, Covid-19, but create yet another more deadly disease to replace it in the form of an economic meltdown. This would become a case of the medication becoming more dangerous than the disease itself.
For example, whereas the government has put in place emergency measures to reign in the coronavirus, these measures potentially could cause an economic downturn of disastrous proportions— unless parallel and concurrent measures are put in place to stabilise the economy, cushion ordinary Kenyans and minimise the economic and social effects of containment of the virus.
With the projected rise in infections in Kenya and worldwide, we anticipate the Kenyan government and others globally will take even more stringent measures to protect their citizens. These measures will potentially lead to partial and in extreme cases total lockdown in various countries, and Kenya may not be an exception. Already, the effects of the pandemic and measures against it are causing debilitating effects on the economy.
Cases in point include the following: The Nairobi Securities Exchange was hit as soon as the first case of coronavirus was reported in Kenya, with panicked investors making indiscriminate sales, resulting in total market capitalisation shrinking by Sh120 billion in one of the largest declines in a single day in the history of the NSE.
By March 16, the NSE wiped off more than Sh500 billion in paper wealth for investors. The tourism industry, which in 2018 earned Sh157 billion while employing 1.1 million Kenyans directly and indirectly, is expected to experience significant losses in jobs and revenue, given the measures already taken to shut down borders and restrict entry to lock out the virus and slow down transmission.
The 30-day ban on all international conferences and those that have more than 15 participants will further diminish the sector's performance. Several counties have banned nightclubs and social gatherings, while several beaches have been closed. Already several hotels, lodges, tour operators, restaurants, entertainment centres and recreational facilities are reporting closures, limited operations and inevitably job losses likely to be in their thousands.
Kenya’s approximately 50,000 institutions with a student enrolment of 18 million and 350,000 teachers and lecturers support millions of businesses that provide supplies to them. The business owners now risk losing their livelihoods apart from the obvious disruption to learning, with the closure of the institutions.
With most countries locking out airlines from countries that have reported the coronavirus, the aviation sector will also be hit. Kenya Airways, for example, has been forced to stop or in cases limit flights to China, Rome, London, Paris, the US, Geneva, South Africa and all other countries that have reported the virus.
It estimates it is losing at least Sh800 million a month, noting the situation could change dramatically in coming days as more restrictions in global travel take hold. This will also significantly undermine importers, exporters, tourism and the availability of essential goods including medicines and other supplies, not to mention the knock-on effect of job losses and price hikes necessitated by resultant shortages.
In the period between March 12 and 16, more than 37 cargo ships that supply goods to Kenya and the rest of the region failed to dock at Mombasa port, having cancelled their arrivals. Mombasa is the gateway through which Kenya, Uganda, South Sudan, Rwanda, Burundi and parts of Tanzania, Ethiopia and the Democratic Republic of Congo import their goods.
This portends a surge in prices of consumer goods, including critical supplies such as medicines, in the entire region. It will also impact clearing and forwarding businesses, the transport and warehousing sectors among others, which will also potentially lead to business closures and job losses.
Kenya’s approximately 50,000 institutions with a student enrolment of 18 million and 350,000 teachers and lecturers support millions of businesses that provide supplies to them. The business owners now risk losing their livelihoods apart from the obvious disruption to learning, with the closure of the institutions.
Flower exports from Kenya to the EU markets have dropped by 50 per cent in the last couple of weeks due to the financial crisis. There are more than 100 flower farms in the country that directly employ over 200,000 workers. This decline in demand has caused losses of more than 1,000 jobs in the flower farms in Naivasha alone.
This will have a ripple effect on other supporting sectors such as agro-chemicals, transportation and cargo services. The mass closure of open-air markets countrywide also spells disaster for millions of ordinary village folk, farmers and households who rely on these markets not only as a source of livelihood but also as a source of food and daily supplies.
The list of economic sectors impacted by the coronavirus is inexhaustible. But for example, the often-overlooked boda boda sector is estimated to comprise about 500,000 motorbikes transporting 14.4 million people every day. Earnings translate to Sh146 billion annually. Job losses in this sector would impact millions of Kenyans. This is not to mention farmers, fisherman, construction workers, water vendors and many others whose livelihoods are being impacted by the coronavirus.
it appears 30 to 50 per cent of Kenyans fall into the high-risk category that could lose their livelihoods or be adversely affected
It is therefore clear the coronavirus poses an existential threat not only to the physiological health of Kenyans but also to the well-being of all economic sectors and society at large. The effects will be far-reaching with a devastating impact upon our livelihoods
According to the Kenya National Bureau of Statistics, Kenya’s active working population employed in the formal sectors comprises about 17.9 million out of which 6.5 million are part-time, casual or seasonal workers who are at high risk of lay-offs as a result of the downturn.
Another 7.1 million informally employed Kenyans are engaged in the traditional economy and directly or indirectly supply goods and services to the formal sector and households. They too risk losing their livelihoods due to depressed demand for goods and services and restrictions to control the spread of the virus.
Based on the above situation analysis, it appears 30 to 50 per cent of Kenyans fall into the high-risk category that could lose their livelihoods or be adversely affected. They could require government interventions in the form of an economic rescue package. Apart from the direct economic impact, the companies and organisations that provide goods and services, employment and pay taxes will also be greatly affected.
THE MEASURES
Several countries have already recognised the negative economic impacts of the coronavirus and constructed safety nets to reduce its severity. Countries such as the USA, the United Kingdom, Japan, Italy, Germany and Japan have put rescue measures in place focused on their citizens directly, and stimulus packages of tax rebates and incentives to stimulate their economies and prevent a financial crisis. Some measures include financial, salary and credit support for small and medium-sized enterprises, increasing unemployment benefits for those laid off and tax breaks for corporates.
Considering the magnitude of the problem potentially affecting as many as 50 per cent of the population, I urge the government to urgently come up with a rescue plan and an economic stimulus package. Here are feasible suggestions on how the impact of interventions can be effectively managed.
One, enhance national capacity for e-commerce. To minimise movement and physical interactions whilst retaining delivery of goods and services and keeping businesses afloat, to facilitate ‘reduced physical contact’ trading and delivery of goods and services by tested and health-certified personnel operating under protection. This would minimise movement yet keep the economy vibrant.
Two, increase countrywide internet access. According to the Communications Authority of Kenya, mobile phone penetration stands at 100.1 per cent [Number of Active Sim-Cards vs. the Total Population]. Universal mobile phone penetration backed by 89.7 per cent active Internet users as of June 2019, E-Commerce is viable for a large part of Kenya’s population. The government should, therefore, consider incentivising telecommunications service providers to significantly lower the cost of internet services and cloud hosting to increase nationwide access.
Three, enhance national capacity for e-learning. To reduce students' exposure whilst retaining delivery of quality education, the government should equip schools with e-learning facilities or alternatively centralise the service within the Ministry of Education and make it accessible to learners by increasing Internet access countrywide in collaboration with telecommunications services providers.
Four, cushion low-income earners. About 6.5 million workers are either casual, seasonal or part-time employees in the formal sector and another 7.1 million informally employed in the traditional economy who directly or indirectly supply goods and services to the formal sector and households. Most of these 14 million Kenyans are low-income earners who live in informal settlements or rural settings and are at the highest risk of losing their livelihoods as a result of the downturn.
Five, adjust tax threshold upwards in the short-term to increase take-home salaries of low-income earners; subsidise maize millers and producers of essential foodstuffs and other commodities offering them at highly subsidised rates to retain consumer affordability of essential commodities; incentivise petroleum producers and marketers to bring down the cost of fuel and reduce the cost of transport and manufacturing and hence, lowering prices of manufactured goods; offer tax-breaks or waivers to employers to eradicate possible lay-offs; lower interest rates to reduce the cost of borrowing and encourage uptake of loans; undertake free screening of coronavirus in high-density population areas and provide social workers in the informal settlements.
The tax cuts should target high employing sectors such as manufacturing, construction, education, tourism, wholesale and retail, communications and telecommunication. Government should consider allowing companies to retain VAT remittances during a specified period for payroll expenses and cushion against job losses; defer remittances of employee income taxes to support payroll expenses and spur growth and increased investment; incentivise banks to put moratoriums on loans or offer debt-restructuring or deferment during the crisis, and consider reducing the corporate income tax from 30 per cent to 15 per cent
Six, any government intervention to avoid job losses and keep the private sector afloat must make SMEs central because they employ more than 80 per cent of the working population and are central to economic growth. The government should consider a loan guarantee scheme to gain access to fast and affordable credit and cushion them against the economic downturn.
Seven, levels of government should reduce their budgets and redirect spending expenditure to stabilising the economy. The savings can be used to fund the proposed economic stimulus programmes. For example, the Auditor General reported that in 2018-19 all the 47 counties spent a total of Sh16.2 billion on foreign and local travel, while during the same period the national government spent nearly Sh12 billion on local and foreign trips. Thes are unwarranted and instead should fund a stimulus package.
I conclude with a famous quote from Frances J Berigan, "Citizens do not measure development in such abstract indexes as gross domestic product or gross national product. Consciously or unconsciously they measure development in terms of the defences you have constructed against their most natural adversaries such as hunger, ignorance, poverty and disease"
Management consultant specialising in strategy formulation, implementation and control