How COVID-19 has impacted the Kenyan Economy

A pandemic cannot visit a society without it having nothing but negative consequences on the economy. As we still live within the COVID-19 pandemic, it is important to examine some of the devastating impacts the virus has had on Kenya’s economy since March of 2020. Hopefully though, these consequences will be over and done with before mid of 2021 given some of the positive news on vaccines we started 2021 with.

Slowed business activity

In many parts of the world the first response towards containing the spread of SARS-COV-2 was to implement total lockdowns in cities, provinces, counties or even shutting down entire nations. China Italy, France, Spain, South Africa and many others opted for lockdowns at various levels. As expected, a total lockdown meant businesses shut down their premises, workers sent home except for those working on essential services. The impact of locking down jurisdictions was therefore dire, leading to many losing their sources of livelihood.

Kenya however took a different route. Instead of locking down the country, President Kenyatta opted for curfew where the first time it was announced Kenyans were required to lock themselves indoors between 7 PM and 9 AM, but the curfew hours would later be changed to be between 11 PM and 5 AM, then later be changed again to be between 10 PM and 4 AM, the latter being the curfew hours that is still in force as of this publication.

The curfew hours can’t be said to have impacted business activities as total lockdown did elsewhere in the world, but still given that Kenya is a developing nation, those curfew hours affected very many businesses. Bars, Clubs, Restaurants the Transport industry and basically any business that operates at night has been adversely affected.

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At the beginning of the COVID-19 in Kenya, BFA Global ran a quick anecdotal survey of how small and medium businesses were affected by the pandemic. They noted how ” SME owners had experienced dramatic falls in business activity and revenue due to restrictions arising from the pandemic, and are struggling to pay their employees and stay afloat”. These were not just the businesses that operate at night, but even those that operate during the day including Salons and Barber Shops, Fashion Stores, Hotels, Schools and several others closed shop.

Job Losses

As the pandemic caused havoc in the economy occasioned by slowed business activity, a number of businesses struggled to stay afloat. Although many of those businesses tried as much as they could to ensure their staff stayed on the pay roll, a lot more had to send their employees home as they couldn’t afford to pay them any salaries. An article published by the BBC on job losses in Kenya cited Kenya Bureau of Statistics as saying that within three months of the pandemic in Kenya, some 1.7 million Kenyans had lost their jobs. As noted by Development Initiative on their paper on Socioeconomic impacts of Covid-19 in Kenya, “Data from World Bank shows that in 2019 Kenya had a labour-force participation rate of 75%; this rate fell to just 56.8% in April 2020”.

The job losses saw a number of people relocate from their urban dwellings to settle in rural areas, open up sales businesses particularly those of selling farm produce, or just give up on life completely. A private school visited by the author had its teachers that had lost their jobs get employed at a fashion distribution store as sales representatives and clerks. When schools reopened last week, the same school was surprised to realise that a good number of those teachers had quit teaching altogether to find themselves other sources of income, a predicament that forced the school to hurriedly look for new teachers, even as the school struggles to operate given that majority of parents are yet to pay school fees for their children.

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The COVID-19 impact at the Nairobi Securities Exchange

A lot has been written on how COVID-19 impacted the informal sector of the economy, but that may lead someone to think the formal sector was spared. Far from it. In the corporate world, the transport companies including Kenya Railways and Kenya Airways laid off their workers. As reported by The East African in June last year, Private Schools, Malls, and several other companies had laid off at least one million workers due to COVID-19.

These consequences found their way to the Nairobi Securities Exchange. A research done by FA Joab O. Odhiambo of University of Nairobi found that of June last year, the Nairobi 20 Share index had dipped by more than 30 points in a span for only three months. “Since the first reported case, a majority of foreign investors who had made huge investments in Kenyan securities at the Nairobi Stock Exchange, started disposing off their securities fearing a market collapse, leading to a huge slump on the securities prices traded at the Exchange”, noted Odhiambo on his paper.

The paper by Odhiambo also noted the effects COVID-19 has had on the country’s currency. When the pandemic was officially announced in Kenya in March 2020, 1 US dollar exchanged for Kshs 102, but over time, the shilling has continually lost value against the USD where as at now 1 USD exchanges for Kshs 110.10.

The sharp deterioration of the shilling against the dollar has been accelerated by the reduced diaspora remittance, reduced exports, and the general disruption of the global supply chain.

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General Impact on the GDP

Towards the end of 2019, it was expected that Kenya’s economy would grow by figures ranging between 5% and 6% , but the reality of the COVID-19 saw economists estimate the final growth to have stood at a paltry 1.5%. An abstract on the paper The Impact of COVID-19 on the Kenyan Economy by Leo Kipkogei Kemboi of Institute of Economic Affairs Kenya that was published on September 4, 2020 summed Kenya’s economy for 2020 as follows, “Over the 30 years, the years 1992, 2008, and 2020 will be the most difficult in recent Kenya’s history”.

The slowed economic growth if not carefully mitigated may have a negative feedback effect on the already ailing business environment.

Odipo Riaga
Managing Editor at KachTech Media
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