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COVID-19: Kenyans brace for tough times as economic shock looms

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ALJAZEERA 29 MAR 2020

Like many others in Kenya’s capital, Nairobi, Gerrard Ogut has decided to send his family to his village in the countryside for the foreseeable future.

“They’re safer there,” says Ogut, a father of three. Besides, “Life in the city just got unbearably tougher.”

Indeed, these are hard times for many Kenyans – not least because of the fear of contracting the new coronavirus, for which there is no vaccine or known treatment regimen, but also due to the crushing blow the pandemic could deliver on East Africa’s largest economy.

Kenya confirmed its first coronavirus case on March 13. Two weeks later, the number had risen to 31.

Amid fears of a major outbreak, the government of President Uhuru Kenyatta announced a series of sweeping measures to slow the spread of COVID-19, the highly infectious disease caused by the virus.

It shut borders and suspended most air travel, except cargo flights.

Kenya also asked government institutions, businesses and companies to allow staff to work from home, “with the exception of employees working in critical or essential services”.READ MORE

African nations impose restrictions as coronavirus crisis looms

Since then, Ogut, a 51-year-old casual labourer daily scouting for work at the factories dotting Nairobi’s industrial area, has been scraping by on his meagre savings.

“It has been a dry two weeks,” said Ogut, who on a good day used to make between 3,000 Kenyan shillings ($30) and 6,000 Kenyan shillings ($60) working as a small vehicular forklift operator.

“Where I’m stationed, we have mostly mattress, furniture manufacturers,” he added, before pausing momentarily. “How many people are thinking of buying those things at this time?”

Heavy pressure

Ogut is not alone in feeling the heat.

The coronavirus containment measures are expected to bring additional economic hardship in a country where only 17.9 percent of households have an internet connection and informal labourers account for 83.6 per cent of the total workforce.

These are mainly rate workers, day labourers and informal traders – and many of them are under heavy pressure to keep working in order to be able to put food on the table.

While urged to maintain physical distancing, the majority of Kenyans live hand to mouth and have barely been able to stock up on food and other items.

Meanwhile, in a country where labour laws are as weak as they are unheeded, many workers have either been let go or sent on unpaid leave as nearly all sectors of the economy – including tourism and flower and horticultural exports, Kenya’s key foreign exchange earners – have taken a beating.

“There are businesses that have placed employees on standby; some on half pay, others with no pay,” said Kwame Owino, chief executive officer of the Institute of Economic Affairs in Kenya. “Whole sectors of businesses are down.”

The crisis hit Kenya at a turbulent time, further exposing an economy already weighed down by rising public debt – standing at $60bn as of September 2019 – years of missed revenue collection targets and a budget deficit hovering at more than six percent of GDP.

This week, Patrick Njoroge, the governor of the Central Bank of Kenya, downgraded economic growth prospects for 2020 from 6.2 percent to a conservative 3.4 percent due to the pandemic, which has disrupted domestic production and supply chains as well as demand from the country’s main trading partners.

Njoroge also said Kenya would seek more than $1bn in emergency funding from the International Monetary Fund (IMF) and the World Bank to prop up its slowing economy in the face of the crisis.

Separately, Treasury Cabinet Sectary Ukur Yatani said on Tuesday that the government would review the national budget.

“We are looking at an underperformance in revenue, as a result of COVID-19, of about $658m in the remaining three months before the fiscal year ends,” he said.

Owino said the country’s economy may take longer to recover from the effects of the unfolding economic recession “not necessarily because of the impacts of this outbreak” but due “to the fact that Kenya’s economy had already slowed down and was a weak economy to start with”.

“Last year, we already lost jobs, and the recession in Kenya was going to happen, nevertheless. Now this only makes it worse.

And many businesses that were teetering on the verge of collapse will not make it back alive.”

Stimulus measures

To help cushion the economic blow, the government has introduced a series of stimulus measures, including reducing value-added tax and corporation tax.

It also asked senior public officers to take a pay cut, and introduced wage tax subsidies for those in more formal jobs, as well as financial support for businesses.

It has, however, faced criticism for doing little to directly support those who are most in need, including informal labourers who have to buy things as basic as water.

Health experts recommend frequent and thorough washing of hands with clean running water and soap as an important control measure to slow the spread of the disease, but nearly 80 percent of households in the country have no place for hand-washing in or near the toilet, according to the 2018 Kenya Integrated Household Budget Survey.

Owino said he expected the economic slump to be felt across the board amid fears that a global recession unleashed by the pandemic could also hit diaspora remittances by Kenyans abroad.

Even before the air travel restrictions, national carrier Kenyan Airways announced an $8m revenue loss following the suspension of flights to China, where the new coronavirus was first detected late last year.

“The economy at [Nairobi’s] Jomo Kenyatta International Airport dies for that period. And with it all, all the associated services at the airport until resumption,” Owino said.

On Friday, meanwhile, Kenyan police came under heavy criticism for using excessive force as the country imposed a dusk-to-dawn curfew to contain the spread of the virus.

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