The economy or health? Kenya’s Covid-19 dilemma

The sharp increase in Covid-19 infections since the reopening of the country has put policymakers on the horns of a dilemma; with the difficult choice being whether to save lives or the economy.

New daily infections now average 1,000, and the positivity rate stands at 14 per cent – almost three times the World Health Organization (WHO) recommended level of five per cent.

The country has recorded 12,000 new infections this month alone, but it is the more than 200 deaths in about 28 days that is turning the global pandemic into a local crisis.

Just when the economy is starting to breathe again after the first lockdown sent it to its knees, a possible second shutdown, or escalation of movement restrictions, is on the cards.

President Uhuru Kenyatta yesterday said he will be convening an extraordinary summit on November 4 “to consider the evolution of the disease as well as the epidemiological models on how Covid-19 may propagate in our country in November and December.”

President Kenyatta on September 28, lifted the tough containment measures that had crippled the economy, allowing the reopening of schools, bars and churches after closure at the height of the pandemic in March and April.

Tough times ahead

“We are headed for tough times ahead,” Health Cabinet Secretary Mutahi Kagwe said last week.

The country is at a crossroads. Any form of lockdown or restriction of movement could have devastating effects on an economy that is smarting from the sharp dip caused by a strict shutdown.

The Kenya National Bureau of Statistics (KNBS) says the GDP contracted for the first time in 12 years in the second quarter.

According to figures released by KNBS early this month, Kenya’s GDP shrank 5.7 per cent between April and June compared to a growth of 4.9 per cent in the first three months of the year.

“The poor performance was characterised by substantial contractions in accommodation and food services, education, taxes on products and transport and storage,” KNBS said.

According to the agency, the containment measures adversely impacted economic activity, considerably constraining production and, in some cases, causing a complete halt.

KNBS data shows a decline of 83.3 per cent in the accommodation and food industry, giving credence to those opposing any forms of new economic restrictions.

The slowdown in the economy was manifested in reduced activity at the Nairobi Securities Exchange (NSE), which saw the NSE 20-Share Index drop by 26 per cent from 2,633.3 points in June 2019 to 1,942.1 in June 2020, while the shilling lost significant ground against major currencies like the dollar (5.13 per cent), Sterling pound (2.95 per cent) and the Japanese yen (7.47 per cent).

Small and Medium Enterprises (SMEs) recorded a 41 per cent drop in revenue during the lockdown, with more than 60 per cent of their workforce losing their jobs.

Global credit ratings agency, Fitch, last week said the coronavirus shock poses significant downside risks to Kenyan banks credit profiles, forecasting the country’s GDP growth to “slow to one per cent in 2020 – a record low since 2008.

With Central Bank of Kenya Governor Patrick Njoroge having exuded confidence that the economy “will rebound in the months of June to September, with a growth of more than three per cent for the year”, any talk of fresh restrictions will not be taken lightly by the National Treasury mandarins.

Dropped their guard

Most of the economic incentives given to businesses by the Treasury lapse at the end of the year, with other measures like loan moratoriums already off the table. 

Businesses and enterprises that initially supported lockdown measures have largely dropped their guard.

“I find it ironical since it is those businessmen which pleaded with the President to re-open the country because of the hardships they were facing,” Mr Kagwe said on Sunday, warning of possible escalation of restrictions.

Politics is also a determining factor. The launch of the Building Bridges Initiative (BBI) report makes it widely unpopular to enforce movement restrictions. With the growing community infections, the political class has been fingered as one of the virus accelerators.

Mr Kagwe has called them out in his briefings, but appears helpless in enforcing the Ministry of Health protocols.

“The rise we are witnessing has been triggered by wanton violation of containment protocols and advice from experts. People, including the youth and politicians, are behaving as though everything is normal. We are behaving badly,” he said, citing the heightened political activities.

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