Kenya’s economy could be staring at a crisis in the coming weeks as the effects of the deadly Coronavirus continue to be felt.
Kenya confirmed two more cases, bringing to three the number of cases so far confirmed in the country since Friday last week.
Following in the footsteps of other nations reeling from the effects of the virus, President Kenyatta unveiled a series of strict measures Sunday, to curb the further spread of the virus, that has killed over 4000 people globally.
Civil servants and employees in the private sector are to work from home or remotely with the exception of those serving in critical or essential services such as security, health, communication, energy, water and transport.
But what does the partial lock down mean for East Africa’s largest economy.
Thousands of businesses are trying to figure out how to stay operational in a virtual world.
According to Ken Gichinga, Chief Economist, Mentoria Economics, for many companies, instructing office workers to stay home solves only part of the problem.
He observes that small and medium businesses are critical to the growth of the economy and with many Kenyans surviving on daily wages for food and sustenance, working remotely is a disruption in itself with fears of businesses shutting down.
“A lock down would be very disruptive for this economy because unlike in Europe or America, many Kenyans survive on daily wages for food and sustenance. Our savings rate as a country is very low which means it would be nearly impossible to survive a lockdown” he argues.
Whilst working from home is welcome, Gichinga says it will not have maximum returns for all sectors. He notes that remote work is optimally productive for white collar jobs.
He says if discipline is observed, productivity in the government institutions will not be affected as compared to the private sector which comprises small private businesses that are counting losses owing to shortage of key imports and raw materials.
“For example, software developers can write code from wherever they are, all they need is internet. But workers in a bakery need to physically be at the shop” he adds.
He warns that the situation is bound to get dire if the government does not to craft an economic rescue package akin to the one rolled out during the banking crisis in 2018.
His sentiments come in the wake of huge stimulus packages rolled out by various governments to cushion their economies.
For instance, the US has cut interest rates to almost zero and launched a $700bn stimulus programme in a bid to protect the economy from the effect of coronavirus.
Other countries include UK, Japan, Eurozone, Canada, Switzerland and some Gulf nations.
Stock markets have plunged in recent days amid fears that economic paralysis will wipe out corporate profits and spark a global recession.
In Kenya, Nairobi Securities Exchange suspended trading Friday after the market went on a free fall, losing almost 6 percent of its value following confirmation of Kenya’s first case.
Gichinga says the economic outlook is evolving on a daily basis depending on the spread of the virus, hence the need for comprehensive measures to protect businesses.
“First of all, the government needs to put together a fiscal stimulus package to ensure there is enough liquidity to keep the economy moving”, says Gichinga.
Kenya government has already committed Ksh 500 million to fight the virus.