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Virus effects on economy may force relaxation of controls

Sunday July 05 2020
economy pic

Kenyans filing tax returns at Kenya Revenue Authority, iTax Support Centre at Railways, Nairobi, on June 30. Data from the Treasury indicates that tax collection for April dropped by Sh20 billion due to the impacts of the pandemic on the economy. PHOTO | DENNIS ONSONGO | NATION MEDIA GROUP

By PAUL WAFULA

Last week, dozens of women who wash clothes for a living, popularly known as mama fua, held a solemn demonstration in Nairobi, protesting against their loss of jobs due to the Covid-19 pandemic.

But their protests went largely unnoticed since almost everyone in the country is experiencing their own pain as a direct or indirect consequence of the health crisis.

If there is any reason why President Kenyatta will be forced to relax the travel restrictions and measures imposed to deal with the pandemic, then it is their impact on the economy.

JOB LOSSES

All sectors of the economy are hurting, tax collections have dropped and hundreds of companies are retrenching staff in massive job haemorrhages to ever visit East Africa.

Kenya’s economy is projected to take a big hit from the pandemic, bigger than what the post-election violence and the global economic meltdown of 2007 did.

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Current projections by various institutions among them the World Bank, the National Treasury and other think tanks put the economy to grow at best at 2.5 per cent this year, and at worst to shrink to negative one per cent.

Latest tax numbers show that collections dropped by Sh20 billion in April, compared to a similar period last year.

Treasury data indicates that tax collections shrunk to Sh120.1 billion in April from Sh140.41 billion in same month last year, representing a 14.46 per cent drop. This is a sign of things to come if the current trend is not reversed. Both imports and domestic consumption have also slowed down as a result of the impact of Covid-19.

Though there is no official figure of the number of Kenyans put out of work so far, estimates suggest that the numbers could be racing towards the two million mark.

JOB LOSSES

By the beginning of June, at least one million had been fired. In the last one month, more companies that could not hold on anymore, threw in the towel and severed their links with their staff.

The worst hit are firms in the tourism, hospitality, aviation and horticulture sectors.

Hundreds of thousands of teachers in more than 1,932 private secondary and 8,000 private primary schools alongside those employed by school boards have gone without pay for more than three months. The security sector that employs hundreds of thousands of guards has also not been spared.

With schools, hotels and other sectors shut, their services are not needed.

More jobs are on the line in the marketing and media sectors as companies cut their marketing budgets.

Agriculture is expected to take more beatings given that demand for tea and coffee has gone down as restaurants and hotels the world over remain shut, even as local production increases due to better rainfall.

Small and medium-sized businesses are surviving on the edge, living one day at a time, as the economy flashes red, threatening to grind to a halt.

The economic pain the pandemic has caused the country was captured in the latest communication by Kenya Airways to its staff.

MAINTAIN OPERATIONS

“While we have all put in a tremendous amount of work to keep our business afloat, it has become increasingly challenging to [fulfil] our obligations and maintain operations,” KQ Group managing director Allan Kilavuka said in a memo to staff last week.

“Our short and medium-term projections indicate that we must inevitably reduce our operations before we begin to scale up again,” the company added as it dropped the bombshell that it was starting another round of retrenchments.

“After a comprehensive review, a decision has been reached to carry out an organisation-wide rightsizing exercise which will result in a reduction of our network, our assets, and our staff,” Mr Kilavuka said.

“Effectively, we have commenced a phased staff rationalisation process, which we expect to conclude by Wednesday, 30th September 2020,” the memo added.

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