The cost of Covid-19 one year later
By Dominic Omondi
| March 9th 2021
In 2019, most Kenyans were convinced that their economic and financial fortunes had hit rock bottom.
Central Bank of Kenya (CBK) Governor Patrick Njoroge, in a tweet, described it as a “brutal year all round.”
The year 2020 was supposed to be the year of rebirth. But the novel coronavirus that was first reported in the country on March 13, turned last year into a period of decay.
Known as Covid-19, the virulent disease violently shook the hitherto enviable health systems of Western economies, leaving in its wake an ignominious trail of death and misery.
In the pre-Covid era, many adult working Kenyans would join their friends or colleagues for a drink after a hard day’s work as they waited for traffic to clear before heading home.
But with the onset of Covid-19, which the World Health Organisation (WHO) declared a pandemic, changed all this.
Today, every Kenyan has to be home by 10pm and cannot leave until 4am the following day, a situation that has reduced business hours and snuffed the feeble life out of the country’s nascent 24-hour economy.
It was even worse in April last year when everyone was expected to be home by 7pm.
Some never attempted to step outside, fearing the crippling effects of the deadly virus lurking in the crowd.
One year later, the fear of the virus might have subsided, but its adverse effects continue to manifest in the form of closed businesses, lost jobs, pay cuts, destitution and bankruptcy.
Joy Kiiru, an Economics lecturer at the University of Nairobi, said the service sector, particularly transport, trade, hospitality, professional services and education, will not recover fully as long as the containment measures are in place and incomes remain low.
But there are those in these industries who had it easier. If you had a stable work-from-home infrastructure, then you could carry on with your job, while your children continued with their lessons online despite the schools being closed for nine months.
But for millions of poor Kenyans who do not have electricity in their homes, let alone internet connection, working from home or their children continuing with learning was a tall order.
And for those who were lucky enough to still have their jobs, including security and construction workers, it meant they were out there risking their lives.
Between April and July last year, 1.7 million Kenyans lost their jobs, according to official data. For two successive quarters - the second and third - the economy, measured by gross domestic product (GDP), contracted by 5.5 and 1.1 per cent respectively.
GDP is the monetary value of all the goods and services produced in the economy in a given year.
It was mostly the youth, poor and women, who eke a living in high-risk jobs such as waiters, bar attendants, cashiers and hawkers, who were affected the most.
A poll by the Kenya National Bureau of Statistics (KNBS) showed that while only 34.1 per cent of working-age males were out of work, more than half of the females were unemployed by the time of the survey in May.
Experts also fear that the nine-month closure of schools is likely to have lasting effects on human capital development. In terms of quantity, many students, especially girls never resumed school. Teen pregnancies were just one of the many reasons why a lot of girls never went back to learning.
In terms of quality, Kenya Certificate of Primary Education (KCPE) candidates recorded poor grades in the school-based assessments, exposing the huge learning gaps caused by the effects of prolonged school closures.
A report by the Kenya National Examination Council (KNEC) showed that more than half of the 1.1 million class eight candidates who sat the tests scored less than an average of 50 per cent mark in most of the subjects assessed.
“Majority of Class Eight learners performed below average. This is evidenced by the substantial proportions of learners who did not attain the minimum benchmark 50 per cent in most of the subject assessed,” read the Kenya National Examination Council (Knec) report. “Closing schools for one year caused more damage than Covid-19,” said Dr Kiiru.
Besides the dusk to dawn curfews, other containment measures that the government implemented to curb the spread of the disease include a raft of social and physical distance rules that saw all kinds of social and political gatherings prohibited.
In April last year, for example, the country banned all incoming and outgoing passenger flights. Domestic flights were also prohibited in what was aimed at restricting the movement of people.
With the ban on air travel, aeroplanes were grounded and the aviation sector was thrown into a tailspin. National carrier Kenya Airways deeply cut the salaries of its staff, with its CEO taking an 80 per cent pay cut. Nearly all the employees in travel agencies were sent on unpaid leave.
Some hotels such as Intercontinental, Fairmont the Norfolk, Radisson Blue and Intercontinental Hotel have never reopened since the ban was lifted.
Although pubs, night clubs and other entertainment joints were allowed to operate after a six-month hiatus, they have to close by 9pm, much to the dismay of all-night revellers.
The entertainment industry was the pillar of the country’s nascent 24-hour economy, with matatus, pharmacies, hospitals, fast food joints and supermarkets also catering to the needs of these revellers.
But now, as Covid-19 dims the world, these merchants of happiness – the carefree spirits that regaled Kenyans with songs, dances, comedy or skits – are staring at a bleak future.
With the blows of Covid-19 raining on the entertainment industry, George Njuguna, popularly known as deejay Crème de la Crème, was forced to shift base to his home county of Kericho as a means to escape the high bills in Nairobi at a time when deejays’ incomes had been decimated.
A few artistes have been fortunate enough to find new ways of making money. Several deejays and artistes have followed suit, hosting virtual parties across various social media platforms.
Restriction of movement into and out of four counties last year also hit the transport sector hard, with their bad loans surging by Sh6.4 billion in the third quarter of last year as online taxis, matatus, tour vans, had limited business.
Data from the Central Bank of Kenya (CBK) shows that non-performing loans (NPLs) or loans that have not been paid for more than three months, increased by over a third to Sh27.5 billion in the three months to September.
But by December, the economy had started turning around. With the fear of succumbing to the deadly virus receding and being replaced by that of dying from hunger, Kenyans thought it was time to venture out.
A poll that was done in August last year by Twaweza, a non-governmental organisation, found that seven in 10 Kenyans named negative business and economic impacts when asked about the impact of Covid-19. This is compared to just a quarter who said they feared contracting the virus itself.
This, coupled with friends and families growing fonder of each other after a long period of separation, saw Kenyans revert to the earlier described Aristotelian disposition of being social.
So during the festive season, they bundled into their cars, swarmed around various bus stations, or booked air tickets to visit their loved ones in different parts of the country.
This saw the consumption of super petrol, which powers the engines of most vehicles on Kenyan roads, jump to an all-time high of 145,290 tonnes, official data shows.
The lifting of the ban on domestic and international passenger flights in September last year saw a lot of the wealthy take to the skies, with the quantity of jet fuel consumed by aeroplanes in December rising more than six-fold to 40,260 tonnes compared to 6,320 tonnes in April. The passenger services on the Standard Gauge Railway (SGR), which resumed after a two-month hiatus in May and June, saw 128,922 people use the train in December on the Nairobi-Mombasa route.
While a lot of urban dwellers visited their relatives in the countryside, a few went on vacation, boosting the tourism sector, which had been hit the hardest by the adverse effects of Covid-19.
They flocked into various hotels around the country, particularly at the Coast, pushing up bed occupancy rates to 26 per cent from a low of 10 per cent in May, according to a perception survey by CBK’s Monetary Policy Committee (MPC) - the apex lender’s highest decision-making organ.
A month later, bed occupancy rates declined slightly to 21 per cent as the people who had travelled for Christmas festivities returned home, respondents who included CEOs and senior employees of 120 hotel enterprises told CBK.
A surge in the movement of people was accompanied by an increased flow of money in the economy, with the total cash supply nearly reaching Sh4 trillion in the last month of December 2020.
In the period under review, cash outside the banking system hit a record Sh233 billion, while the value of transactions on mobile phones hit an all-time high of Sh605.6 billion.
The value of card payments on ATMs, credit cards, debit cards, and POS (points of sale) machines also rose to an all-time high of Sh70.9 billion, a 15 per cent increase from Sh61.7 billion in November and nearly double the transactions in April.
There has been a significant pick-up in economic activities from July, a situation that has been reflected in increased output and employment levels.
True, the economy did shrink in the third quarter by 1.1 per cent, but it was a significant improvement from the previous contraction of 5.5 per cent, with sectors such as electricity and water supply, transport and storage moving from negative to positive growth.
Others such as tourism, education, manufacturing, and transport remained in the red, but the contraction was much smaller compared to the second quarter.
Employment levels returned to the pre-Covid-19 levels, with 63.9 per cent of working-age Kenyans saying they had a job in the third quarter of 2019, helped by government-sponsored initiatives such as the Kazi Mtaani sanitation programme in informal settlements.
In the second quarter of last year, employment stood at 57.7 per cent.
Unemployment, by the strict definition of people who have been looking for work and have not found one, declined to 7.2 per cent in the period between July and September last year from 10.4 per cent in the second quarter.
However, it was still high compared to 5.3 per cent in the third quarter of 2019.
A survey done by the Kenya Association of Manufacturers (KAM) showed that about four in 10 of the surveyed firms had a positive outlook of the economy in the first quarter of this year compared to 17 per cent of manufacturers who expect a negative performance over the same period.
Experts, however, reckon the economy is still far from realising its full potential.
Scholastica Odhiambo, an Economics lecturer at Maseno University, said while the macro-economic indicators look strong, households are still struggling, with many companies yet to recover.
“When more people are still out of jobs, the fundamentals of an economy - production and consumption - suffer,” said Odhiambo, adding that with the prices of goods on the shelf rising, the purchasing power of households is eroded.
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