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How Covid-19 is impacting Kenya’s economy

Jackson OkothbyJackson Okoth
June 10, 2020
in Kenyan News, Editorial
Reading Time: 7 min

Image Source; AlJazeera


Stock Market

The first major economic impact due to COVID-19 was the volatility on the country’s stock market. Trading was halted at the Nairobi Securities Exchange (NSE) after the NSE 20 index dropped more than 5%, the first day a COVID-19 case was reported in the country.

At the close of Tuesday’s trading session on 09 June 2020, the bourse had fallen even more steeply with the NSE 20 share index shedding by more than 25% on a year to date (YTD) basis with the index hovering below the 2000 points.

Most investors have since the onset of the pandemic indulged in a net selling position with a preferred option of purchasing fixed income securities due to uncertainty in the market.

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READ;

Kenyan Stocks Plunge on Corona Virus Announcement

Foreign investors take out KSh 11.7 billion from NSE in Q1 2020

NSE Wobbles As Coronavirus Causes Investor Flight

Aviation

The Kenyan government temporarily suspended all international flights starting 25 March 2020 until further notice as a precaution against the deadly COVID-19 pandemic.

Consequently, Kenya Airways (KQ) has applied for a state bailout to avoid its collapse as aircraft were grounded and revenue sources cut-off. The suspension of international flights saw the airline send home most of its workers on unpaid leave as from 1 April 2020, the management team taking a 75% pay cut and the CEO getting an 80% pay cut.

According to a report by Deloitte titled Economic Impact of the COVID-19 Pandemic on East African Economies, for the past 3 months (January to March 2020), the airline has experienced 3.5 Million fewer passengers resulting in a US$ 0.73 billion revenue loss, risking 193,300 jobs and US$ 1.6 Billion in contribution to Kenya’s economy.

One job in the airline transport industry supports approximately another 24 jobs in the economy. As such, a collapse of the airline transport industry would translate to significant losses in other sectors of the economy.

READ;

Kenya Airways Seeks Govt Bailout to Survive COVID-19 Impact

KQ May Lose Up to 76% of Travel Market by December

KQ Requests Ksh7B Emergency Bailout from Treasury

KQ Sends Workers on Unpaid Leave

Manufacturing

The report notes that the COVID-19 pandemic presents a mixed impact on the services sector with certain sub-sectors likely to boost production to meet essential goods demand, while others may suffer depressed demand and production activity.

Food and health products manufacturing are likely to stay afloat. Food production will be boosted by the persistence of domestic demand for essential food items, while health products manufacturing will benefit from expected expansion in manufacturing of essential medical and protective equipment to deal with the unfolding pandemic.

READ;

Kenya Among Countries Set to Get Gilead’s Covid-19 drug; Remdesivir

COVID-19 dampens Kenya’s Economic growth prospects

SMEs worst hit by pandemic – Survey

Construction & Real Estate

The major interruptions on the construction and real estate sectors include shorter working hours, a decline in construction materials due to supply disruptions, and lower demand for housing.

According to the audit firm, public housing projects will also be impacted as the government pulls together funds to deal with the scourge and respond to emergency interventions.

Further ramifications on the construction and real estate sectors include a decline in project financing as lenders would be uneasy to finance construction projects because of the uncertainty surrounding the completion of projects. Government infrastructural projects are also expected to stall due to a shortfall in revenue collections as the government expands spending on the health sector to combat the virus.

Financial uncertainty is expected to dampen uptake of houses in the real estate sector in 2020. Given that real estate buying is often characterized by speculation, most investors are already counting losses as the COVID-19 pandemic impedes access to credit.

READ;

Nairobi Residential Real Estate Covid-19 update

Cytonn blocks investors from pulling cash out of its real estate fund

Housing Prices Decelerate For the Fifth Consecutive Quarter

Agriculture

A locust swarm affecting domestic agricultural production will likely hit hard agricultural growth in 2020. Further, weakened growth prospects for key trading partners in North America and Europe due to the COVID-19 pandemic is also expected to limit demand for Kenya’s exports of coffee and horticultural products over the short term.

The vegetables and fruits markets remain with minimal activities as exporters are shipping only 25% to 30% of their normal capacity. Kenya’s flower exports have so far recorded a more than 50% drop in exports with indications that production is currently at less than 10% and facing the risk of total collapse.

READ;

Oserian Sends 800 Workers on Unpaid Leave

Kenya’s Flower Industry Suffers Lack of Freight

World Bank Gives Kenya KSh4.5 Billion for Locust Fight

Tourism & Hospitality

Due to the restriction brought about by the pandemic, leisure and conference tourism, both external and domestic face possible collapse owing to travel restrictions which have completely stopped international tourist arrivals, while social distancing measures have affected domestic tourism and conferencing.

Given the tourism sector’s strong linkages with the wider economy, reduced tourist arrivals will impede consumption of various goods and services and the incomes of workers in related sectors. The Kenyan government has set aside KSh 500 Million to help the tourism sector recover post the coronavirus pandemic.

ALSO READ:

Kenya to Experience Slowest GDP Growth in East Africa in 2020

150 Million Jobs in Africa at Risk Due to COVID-19



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