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The winners and losers in post-Covid-19 era Kenya

FINANCIAL STANDARD
By XN Iraki | January 5th 2021

The Storm is Over” by R Kelley is one of my favourite songs. And it seems with the roll-out of the Covid-19 vaccines, the storm is finally over.

But the echoes of Covid-19  will last longer. It will take time to deliver vaccines to all the citizens of planet Earth. One wishes the vaccines are as easily deliverable as their spread.  

Beyond giving relief to exhausted global citizens, the vaccines mark the start of the post-Covid-19 period.  

We hope to come together as families, friends, and neighbours again without having to worry about social distancing.

Covid -19 taught us what it means to be human such as sharing a simple embrace, and that we are not a nuisance to one another.  

Next time you sit in a matatu, train or plane, strike a conversation with the person next to you. And stop postponing visits to other people. 

We hope people will not overindulge going forward. Recall the celebrations after the lockdowns were lifted in some countries?

Normalcy will return eventually, but some things will never be the same. 

It’s in the economic sector where post-Covid-19 recovery will be felt most. Psychologists, sociologists and other experts will be left to pick up the pieces in their respective areas as people seek to holistically recover from the scars of the pandemic.  

The feel-good effect from the discovery and roll-out of the vaccines, pent-up energy and hoarding of investments as well as renewed consumption will open a flood gate of economic activities.

We could return to capital-intensive projects and with schools reopening, demand for goods and services is expected to pick up.

Schools are not just institutions to educate our children; they are also business centres. Check their budgets. Tourism and leisure will also pick up too. 

The bigger question, however, is if we are ready for post-Covid-19  economic recovery as individuals, firms and institutions.

Some made a fortune from Covid-19 from teleconferencing facilitators like Zoom and Cisco to makers of masks and online e-commerce providers such as Amazon.

Beyond our great expectations, the government has made remarkable efforts to revive the economy.

Covid-19 gave governments unusual control over economies despite all the hype on the market economy.

One of the closely watched post-Covid-19 events is how governments will steer their economies beyond stimulus packages.  

Who will benefit from the new recovery push? In my view, everyone is set to benefit because the economy is interconnected, and a rising tide raises all boats.

But some sectors could do better than others. We, however, should not read too much into the post-Covid-19 economic recovery; we are coming from negative growth ( contraction), but any growth is celebrated. 

The World Bank projects the Kenyan economy to rebound from around one per cent growth in 2020 to around 5.2 per cent this year. 

One of the lasting lessons of Covid-19 is discerning which sectors are recession-proof and which ones will still grow or remain steady during a recession. Anyone who has studied economics 101 should remember elasticity of demand.

Any product which is a necessity has low elasticity, meaning raising its price will not reduce the demand. Such products include medical drugs, food, and with Covid-19, oxygen and electronic communication.  

You may have noted some shrewd businesses adding unrelated businesses to their portfolio.

A good example is a car distributor running a restaurant. We can postpone buying cars but not eating.

This diversification may become more pronounced after Covid-19. Expect more entrepreneurs to run many small businesses instead of one big enterprise.

This is where central Kenya natives thrive compared with their Asian counterparts who prefer to focus on one line of business. Paradoxically, we could see the emergence of more big firms. Why? This is simply because Covid-19 killed many firms, and the few that survived are likely to be the fittest and could keep growing.  

Which sectors could star? Telcos will remain a sure bet as well as agribusiness, renewable energy, big data, logistics and transportation, health, religion, online learning, consulting, letting space and pets.

Have you noted the sudden interest in pets particularly dogs? Physical fitness services are also likely to be a big hit as we try to keep fit in case of another pandemic.

For the sophisticated, stock prices will gain more prominence than before. 

Conversely, physical banking, hotels, private education, air travel, oil and gas, and luxury-related businesses like glooming are likely to lose out.

Any industry where one can do it themselves will decline. Add theatre and performing arts.  

The beneficiaries of post-Covid-19 recovery are those likely to identify the change in behaviour and the subtle shift in consumers’ likes and dislikes.  It’s the golden age of behavioural economics. Happy New Year.

- The writer is an associate professor at the University of Nairobi

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