Virus lockdown on the informal sector would be very disruptive

Without a doubt, the coronavirus pandemic is bound to hurt our economy badly. Tourism and travel are, perhaps, the most exposed.

On the demand side, shocks are bound to be felt if things get worse and as the government is forced to implement quarantines, lockdowns and stay-at-home orders, with negative consequences for spending in shopping malls, hotels and restaurants. If conditions don’t improve, we might witness widespread instability in the macroeconomy in response to reduction in import demand, loss of consumer confidence and stagnant aggregate demand.

We are beginning to hear calls in European capitals for bailouts for companies. Yet, in our context, the most vulnerable segments to quarantines and stay-home- orders will be the citizen who either works in the informal sector or is self-employed.

Indeed, in the event that the government is forced to implement protracted quarantines and stay-at-home orders, these people will experience a massive disruption to their livelihoods. It is a pertinent issue, indeed, because the informal sector and small businesses is the place where the majority of the urban population live.

When you travel in a matatu or bus ferrying people to workplaces in Nairobi in the morning, the majority of those workers will be hair stylists, fitness instructors, disco bouncers, employees of companies offering cleaning services and car wash bazaars.

The majority of the typical worker in Nairobi today is a motor vehicle mechanic, a hawker of second-hand clothes and fake Chinese Hi-Fi equipment, a worker in an M-Pesa outlet, an employee at a call centre, telephone repair shop or photocopying and document binding stall.

In the city’s central business district, the formerly ubiquitous shops owned by Kenyan Asians have disappeared, displaced by 10-by-10 so-called ‘exhibitions’ selling clothes and shoes from Thailand and Turkey.

Clearly, how do you enforce stay-at-home orders in a context where the option of going to work or staying home is starvation? You can’t force ‘Mama Mboga’ to keep off Wakulima Market and expect her to survive in the chaotic life of Nairobi, can you?

We must all pray that the situation improves, because the social distancing measures being implemented in the developed West may not work here too well. Try them here and see massive disruption of livelihoods of large sections of the urban society with huge negative implications on security in our major cities.

In the West, I read about proposals to reduce payroll taxes for citizens forced to stay away from the workplace because of social distancing. The formal job sector here is just too small for that.

Enforcing social distance measures is also made complicated by the disorganised of housing and public transport systems. Slum dwelling have been growing at a phenomenal rate. Instead of seeking to develop an organised commuter transport system providing scheduled services in all parts of the city at affordable rates by ferrying large volumes every day, we have allowed chaotic, crowded matatus to dominate the sector.

City authorities long gave up the idea of building markets, hence the rapid growth and expansion of hawking. Kiosks are mushrooming in an unplanned manner. Show me how feasible it is to keep all those hundreds of hawkers out of work without causing massive social misery to the hundreds of thousands of informal sector workers who eke a living from working there.

The policy implications are clear. We must come up with new ideas of how to implement social distancing without wrecking social misery to sectors that employ majority of our people.

I must confess that I found the ideas of the former chief economist at the International Monetary Fund, Raghuran Rajan, not only fresh but also relevant to our situation.

In a recent paper, he said after implementing measures to contain the spread of the virus, governments must consider supporting informal sector workers, whose livelihoods are bound to be disrupted by quarantines and social distancing.

A former governor of the Reserve Bank of India, Mr Rajan has also proposed new fiscal measures, including loan guarantees, to support small and medium businesses.

Which begs the question: But do we really have the capacity to roll out widespread cash transfer programmes in the informal sector? In the first place, we don’t have even rudimentary statistics on the sector. Determining who is eligible for the support or not would be a big headache.

In the war against the Covid-19 pandemic, we have to stay away from the infected people. The sweeping measures announced by President Uhuru Kenyatta at the weekend are a good starting point. Transparency and public education remain paramount.

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