Economy starts to feel the heat of coronavirus crisis

Wednesday March 18 2020
Mutahi

Health Cabinet Secretary Mutahi Kagwe speaks at Mbagathi Hospital in Nairobi during the launch of an isolation and treatment centre for COVID-19 on March 6, 2020. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP

By PAUL WAFULA

Kenya’s economy is likely to take a big hit as the country pulls all stops to lock the Covid-19 out of its borders.

Health Cabinet Secretary Mutahi Kagwe Friday announced a 30-day ban on all international conferences and those that have more than 15 foreign participants as part of efforts to deal with the virus that is devastating economies and cities across the world.

The impact of the virus that started in China is now being felt thousands of kilometres away and is set to be felt in every nation that has a direct relationship with the Asian nation.

“The government has, with immediate effect, banned all meetings, conferences and events of international nature in Kenya,” Health Cabinet Secretary Mutahi Kagwe said yesterday.

“The tourism sector is going to be severely affected,” he said, handing hotels and players in the tourism industry a second blow.

Those that are likely to count losses include the Mara circuit and the Kenya Open golf tournament sponsored by Absa.

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Organisers of the golf tournament said they respect the decision of the government and support all efforts that safeguard the country against the possible entry of the Covid-19.

“I have conveyed the Government of Kenya’s decision to the European Tour and they have assured us of their full support and we will be announcing new dates for the championship in due course,” Mr Peter Kanyago, the chairman of the Kenya Open Golf, said in a statement.

There are also hundreds of conferences lined up in various hotels in Mombasa, Naivasha, Kisumu and other major towns that are set to be affected.

The Kenyan shilling has already caught the fever and has tumbled to trade at a three-month low of 102.9 against the dollar.

This is after the Central Bank of Kenya (CBK) started buying dollars to increase its stockpile and boost its foreign currency war chest in preparation for the bad days ahead.

Kenya pays for most of her imports, especially oil, in dollars and increases in global oil prices have an immediate impact in Nairobi.

Kenya depends on China for various imports, among them electronics, clothing, mobile phones and an assortment of household items.

The industries also source a number of raw materials from China. Kenya is now also importing food, especially fish and cereals, from China.

Latest data from the Kenya National Bureau of Statistics (KNBS) shows imports from China are valued at an average of Sh30 billion a month.

Italy and the rest of Europe are some of the most important nations to Kenya’s tourism industry and the ban on travel has seen hundreds trapped in Kenya and thousands others unable to travel.

Various players across the globe are warning that the virus and the travel advisories that have come with it could plunge the global economy into a recession.

In Kenya, the impact is spreading fast and has started being felt in various sectors that depend on imports, travel and shipping.

Four big cargo ships that supply goods from China have failed to dock at Mombasa port for the second month in a row following the coronavirus outbreak.

This points to a possible surge in prices of consumer goods in the region.

Mombasa is the gateway through which Kenya, Uganda, South Sudan, Rwanda and parts of Tanzania, Ethiopia and the Democratic Republic of Congo import their goods.

The Kenya Ports Authority says that the port of Mombasa receives three big dischargers (imports) from China under Evergreen Line and one Cosco ship every month. These four ships have not called since the Covid-19 outbreak.

Kenya Airways will also take one of the biggest hits among the players in the tourism industry.

The airline had four flights every week to China, which it suspended in January.

This means it has already lost out on an opportunity to fly at least 4,000 passengers in the last month alone.

This could translate to over Sh300 million in ticket sales.

A return flight costs between Sh50,000 and Sh100,000 on average, depending on when you book and the flying package.

The Kenya Private Sector Alliance (Kepsa) has asked its members to calculate the economic impact of the coronavirus outbreak to give an indication of how its members will be affected.

The airline said the china route is important to its business because it flies about 7,000 passengers per month (Nairobi to China).

“The collated input will inform the development of a rapid response mitigation plan to minimise the impact of the outbreak on the Kenyan market. It will also allow the private sector to measure the impact of the expected global slowdown of trade on Kenya,” Kepsa chief executive officer Carole Karuga said.

An unknown number of the employees working in various departments at the China Road and Bridge Corporation (CRBC), which operates the Standard Gauge Railway (SGR), are also stuck in China following the outbreak.

Most had travelled to celebrate the Chinese New Year with their families that was between January 25 and February 8. However, the outbreak caught them when they had not yet retuned.

Overseas Development Institute (ODI), a UK-based think tank, says in a recent study that that Kenya, Tanzania, Rwanda, Burundi and Uganda are among the world’s 97 economies that are most exposed to a Chinese slowdown either directly or indirectly.

The losses would be more if you factor in the cargo revenue given that most of the passengers who ply that route are either business people or Chinese workers returning home.

Kenya Airways said it suspended its service to and from Guangzhou, China starting Friday, 31, January 2020.

“We continue to closely monitor the situation across our network for any developments that may necessitate a change in our schedule,” the airline said in a response to Saturday Nation.

“China is arguably the largest trading partner with Africa and Kenya therefore its significance cannot be downplayed. From a Cargo perspective, China is also a key cargo origin and a main feeder to the regional freighters,” the airline said.

The Foreign affairs ministry has also issued a travel advisory to all Kenyans against visiting countries with mass infections.

“Kenyans are advised against non-essential travel to countries experiencing the outbreak. This is in view of the expanding geographical [reach] of the outbreak across the world,” the ministry said in a statement.