Lean times ahead as economy feels coronavirus heat
By Macharia Kamau | March 14th 2020
Kenya’s economy could be staring at hard times in the months to come as the effects of the novel coronavirus hit home.
It has already been dented by the disease, limiting exports from the country and resulting in numerous cancellations by would-be tourists. This puts in jeopardy the Sh700 billion exports and tourism earn the country annually.
Yesterday’s confirmation of a Covid-19 case in Kenya is expected to further aggravate the situation, with more economic sectors set to suffer.
This is as the government puts in place radical measures to try and contain the spread of the virus as well as the panic reaction by the market.
Following the confirmation by the Ministry of Health, the stock market crushed as investors attempt to make fast exits, resulting in the Nairobi Securities Exchange (NSE) suspending trading. Yesterday’s trading session was halted at 2.38pm, 22 minutes earlier than the usual 3pm closing time, with the Exchange noting that the law allows it to suspend temporarily if the benchmark NSE 20 Index decreases by more than five per cent. Normal trading will resume on Monday.
Market capitalisation declined to Sh2.042 trillion when trading was halted, a 5.5 per cent drop from Sh2.162 trillion at the close of the market on Thursday. It had dropped by a near similar margin on Thursday when stocks listed at NSE lost Sh118 billion of their value during the day’s trading session.
The East Africa Community too suspended the Ordinary Meeting of the Summit of East African Community Heads of State that was scheduled to take place later this month.
“Due to the outbreak and rapid spread of the Novel Coronavirus the East African Community has postponed the 21st EAC Summit until further notice. All other meetings and activities of EAC that require large gatherings have also been suspended,” said the EAC.
A report by the Kenya Private Sector Alliance (KEPSA) earlier this week noted that 61 per cent of businesses have felt the effect of Covid-19 on their operations, with many of the companies preparing for closure.
Also on the line are Kenya’s exports. The country exported goods valued at Sh540 billion in 2018 to different countries that are now fast closing their exit and entry points as they try to contain the spread of the disease or keep it at bay.
This has led to a series of cancellations of flights to markets that buy Kenyan products. Hard hit are exporters of fresh produce, including vegetables and flowers. Some of these have been left to rot as producers had already moved them to Jomo Kenyatta International Airport (JKIA) and packed them ready for lifting.
The Kenya Flower Council this week reported several cancellations of flights, with exporters left with produce that had been packaged and only awaiting loading onto cargo planes.
Flowers earned the country Sh120 billion last year.
Countries that form some of the key markets for Kenyan flowers and fresh produce are restricting movements and meetings, which has meant reduced buying for potential customers of Kenya’s produce.
Tourism is among the sectors already reeling from the effects of the pandemic since it was first reported in December and visitors started cancelling travel plans for fear they would expose themselves to the virus. About 89 per cent of players say they had been affected by coronavirus.
Other than the numerous cancellations by tourists that had already made bookings, the government has also banned international conferences in the country for the next one month, which will hurt the industry.
The industry’s predicament is expected to worsen following yesterday’s developments.
The industry is already experiencing difficulties and last year registered the highest increase in Nonperforming Loans (NPL). The Central Bank of Kenya (CBK) in a recent report attributed the 11.2 per cent increase in NPLs to low business turnovers.
Industry earnings stood at Sh163 billion in 2019 from the about two million tourists that visited Kenya.
Speaking yesterday, Tourism Cabinet Secretary Najib Balala said the sector would definitely “be hit badly”. He had on Thursday said the ministry had set aside Sh500 million to help in recovery once the pandemic was contained globally.
Businesses that retail imported goods are staring at tough times as they run out of stocks and cannot replenish.
This is a Chinese factories remain closed and even in instances where the traders are able to place orders from regions that were not hard hit by the virus. They have to pay more for the products as well as shipping.
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