The rapid spread of COVID-19 has paralysed societies worldwide. With 281 confirmed cases, densely populated informal settlements in urban centres such as Nairobi and Mombasa, combined with a public healthcare system that is already under pressure, Kenya might be staring at a looming disaster. There are already concerns that the virus is spreading to the interiors of the country, with 21 of the 47 counties in the country now having at least one confirmed case of COVID-19.
Current context of COVID-19 in Kenya
Kenya has a population of 49 million people, with
36% of people living below the poverty line. In the annual budget for 2019–20 the Government of Kenya emphasised on the Big Four sectors — Agriculture, Manufacturing, Construction, and Healthcare. The COVID-19 crisis puts Kenya’s ambition in every single one of those sectors at risk. A
McKinsey & Company analysis estimates that Kenya’s GDP could shrink by 5% if the worst-case scenarios of the spread of COVID-19 are realised. The value of the loss ranges from $3 -10 billion, driven largely by the fall in domestic consumption demand.
The government’s response has been measured. Kenya has restricted movement in and out of the Nairobi metropolitan area, and Kilifi, Kwale and Mombasa counties; a nation-wide curfew from 7 pm to 5 am, and shut all eateries and bars. Government advisories have strongly discouraged gatherings of all forms -social and religious. Essential services continue to operate, and the economy continues to function albeit at much-curtailed levels. A complete lockdown would have brought all economic activity to a standstill, and that seems to be something Kenya can ill-afford at this stage.
For the salaried class in the formal sector, the government announced tax waivers. These measures are aimed not only at spurring demand for goods and services, they could also have a significant effect in buoying public sentiments. The government has also announced a reduction in the corporate income tax rate from 30% to 25%. Kenya also announced that it would clear $130 million worth of pending bills, which will go a long way in improving liquidity in local businesses, and the government must attempt to ensure that the enhanced liquidity passes on to informal enterprises. Fiscal measures announced by the government is expected to cost Kenya about $700 million in tax revenue, and will no doubt worsen the already large budget deficit that stands at 5.6%.
The informal sector, employing 84% of Kenya’s labour force, will bear the brunt of the COVID-19 mitigation measures announced by the government. While everyone acknowledges the need to adopt self-quarantine and social distancing measures at such a time, it is obvious that workers who have no stable income and are not covered by formal safety nets (such as pensions or any form of wage protection) are the ones that the government need to provide for. The government needs to use a combination of ‘social distancing’ measures and additional fiscal measures that provide them immediate comfort and security through this period when they will inevitably suffer a significant income shock. On these lines, Kenya announced an additional $100m for cash transfers to vulnerable groups
across the country – the elderly and disabled. The government has also piloted a feeding and income support programme to households in urban informal settlements. The proposed enhancements to cash transfers addresses an immediate priority - putting money in the hands of families to cushion the impact of a drastic fall in domestic consumption.
Recommendations for government actions going forward
Recognising that even a ‘flattened’ COVID-19 transmissions curve may have a long tail, and potential spikes (or a
second wave, as many fear), more needs to be done and these steps will inevitably demand a larger fiscal outlay. Ideas for key government priorities are:
- Test more: ‘Testing and isolating’ is the method that worked for richer countries such as South Korea and Singapore. While the upfront investment required for mass testing may be prohibitive, Kenya needs to start testing more aggressively, and this is an area where it can rightfully call on the international community for greater support. Kenya has just received nearly 38,000 testing kits that it will deploy immediately. In the medium-term, the government will need to turn its attention to the state of public healthcare in Kenya - this crisis presents the perfect opportunity for the country to review the state of its devolved health sector.
- Keep the economy going: Kenya has a median age of 20 and 93% of its population are younger than 55. A country with these demographics simply cannot afford a total lockdown, and may even have reason to believe that its tactics in confronting COVID-19 can be different from other societies with aging populations. In partnership with major industry players, the government should carry out a sectoral analysis to identify those that can be sustained even if they were to run at reduced levels of activity. The Kenya Private Sector Alliance (KEPSA) is already in discussions with the government about maintaining jobs and livelihoods and mobilising private sector resources to support the government in ‘building back better’. Keeping supply chains of essential commodities and supplies will be vital here. This is also the time to maximise the potential of innovative digital technology to make supply chains smarter and effective in last-mile distribution - reaching pockets of need.
- Further expand the social safety nets: A prolonged fall in domestic consumption demand can tank the economy. Fiscal measures introduced by the government will play a role in supporting poor families across the country. The income shock to families can very easily turn into a crisis of malnutrition across the country, especially at a time when the regular healthcare infrastructure is already under stress. Kenya’s National Safety Net Programme (NSNP) covers nearly a million families, and this is the time to deliver cash assistance to those enrolled, as well as to rapidly expand coverage. The proven and trusted existing infrastructure also means that this would be an excellent mechanism to channel substantial amounts of additional international assistance.
- A long-term recovery programme: The recovery from the crippling economic slowdown could take up to two years. In this time, income inequalities will get exacerbated and public expenditure will come under tremendous pressure. The World Bank Group has announced a $160 billion package to support developing countries in health systems strengthening and economic recovery over the next 15 months. Other major bilateral donors, especially China, will soon step up to announce their own assistance packages. Kenya has also initiated discussion with major debtors, including China, to suspend debt repayment to support economic recovery. In order to take advantage of these opportunities, Kenya needs to develop a sure-footed domestic economic recovery plan driven by public expenditure.
The COVID-19 crisis will test the resilience of our globalised world. As a pandemic in this era, the virus, as well as the related anxieties and the unhelpful misinformation surrounding it, are destined to spread further than in previous such instances. Fighting this pandemic is that much harder for it. The economic costs of COVID-19 will be prolonged and will disproportionately affect the most vulnerable among Kenyans. A crisis of these proportions is an opportunity to rethink policy – and the right time to bring together all major stakeholders in Kenya to jointly fight this global pandemic.
About the author: Suvojit Chattopadhyay completed an MA in Governance and Development at IDS 2008-2009 and currently works with Adam Smith International, implementing public sector reform projects in the East and Horn of Africa region. He is based in Nairobi.
Image copyright:
Valter Campanato/ABr / CC BY 3.0 BR
