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Jobless left out from tax breaks as firms benefit

BUSINESS
By Moses Michira | March 27th 2020

Young people march along Uhuru Highway at a past event to create awareness on youth unemployment. Experts say the unemployed have not been cushioned from pandemic. [File]

Opinion is divided on whether President Uhuru Kenyatta’s proposals will help households and businesses navigate the tumult caused by the coronavirus pandemic.

Top among the concerns is that the economy is largely driven by the informal sector, which might not benefit from the policy interventions outlined.

Millions of workers, including hairdressers, flower farm labourers and waiters, have lost jobs but their plight was largely ignored, meaning many of them could soon be staring at sleeping hungry.

Precious Kwamboka, a hairdresser who lives and works in Nairobi’s Pipeline estate, shared her frustrations on lack of business.

She did not receive a single client for the past one week. In her thinking, beauty has fallen down the ladder of priorities mostly because of the requirement of maintaining social distancing.

“It is looking very gloomy now, I do not even know how I will buy food or pay rent,” she said.

But on the other hand, economists feel that the macroeconomic measures, including reduction of taxes, could have a trickle-down effect and cushion the economy in the tough months ahead.

Private sector representatives hold that the measures announced, including easing access to credit, will support businesses amid projections that demand for their products could be subdued.

Not even the political class could agree on the implications of the measures on the economy, including the fact that agriculture, the country’s mainstay, was ignored.

Quite reassuring

Ugunja MP Opiyo Wandayi described the President’s interventions as “well thought-out, quite reassuring”, but did not explain how the measures would address the man on the street.

“(They) should be able to cushion the mwananchi against the adverse effects of the coronavirus pandemic,” he said.

Bungoma Senator Moses Wetang’ula said there should have been a package for the agricultural sector, which should support food security, a basic requirement.

Mohamed Wehliye, a financial adviser, tore into the President’s proposals, saying tax breaks can never have an impact on people who have been rendered jobless owing to the ravages of coronavirus.

“How will tax cuts help folks who lose their jobs? If this goes on, very many people will go home,” he said, in reference to the wave of lay-offs by companies due to loss of business.

Many businesses, he added, are closing down hence would not benefit from lower taxes in the end.

Stimulus packages

Major economies, including the US, Germany and the UK are considering huge stimulus packages, and directly sending money to their populations as part of the interventions to avert recessions.

The wisdom in putting money in people’s pockets is that they would keep spending even though their incomes have been disrupted, essentially sustaining production.

But with a tiny economy as Kenya, which is struggling to provide more basic services, cash transfers might only happen on a much smaller scale.

Kenya National Chamber of Commerce and Industry (KNCCI) said in a statement that the private sector was happy with the stimulus measures.

“It will go a long way to save jobs and income, cushion the economy from the Covid-19 aftershock and keep businesses afloat,” said Richard Ngatia, the KNCCI president.

He added that by lowering of the Central Bank Rate to 7.25 per cent from 8.25 per cent, commercial banks are expected to lower lending rates, which means more money for borrowers.

Covid 19 Time Series

 

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