President Uhuru Kenyatta is confronted with tough choices as he mulls reopening the economy; keep Kenya on lockdown and risk a depression; or reopen and risk a public health crisis.
Experts warn it will be difficult to expand economic activity while minimizing the health risks for the people who are not able to work remotely, begging the question; is it worth it?
According to the International Monetary Fund (IMF), whether the economy reopens or not, the global economy will still face a recession worse than the Great Depression of the 1930s.
As Uhuru plans to lift restrictions, there are risks the move could end up generating new COVID-19 explosions and force the Government to impose even tougher lockdowns. Therefore, the President could lift the lockdown on a large scale by imposing strict rules on the wearing of masks, social distancing, and other sanitation rules applied in every business.
But that could backfire given how casually the populace has treated the danger posed by coronavirus. Notably, however, more Kenyans are stepping into their workplaces and traffic jams are back in Nairobi, signaling people are dropping their guard.
Investment analyst Aly-Khan Satchu puts up a defense against any rushed decision to reopening the commercial space, asserting the move should be pinned on aggressive testing.
“What is clear is that we cannot be Mimic Men and we cannot afford a complete lockdown strategy. I urge the authorities to be more aggressive around their testing and their identification of potential hot zones,” he poses.
“We need to open our economy in a smart way. We need to open what can be opened. Concentrate on agriculture and feeding our people in what will be a negative GDP year.”
Satchu said nations are headed towards a “Herd Immunity” strategy like what has been adopted by Tanzania despite global condemnation. But he warns that the risk of reopening the economy could far outweigh the benefit. “The challenge is this… tourism is dead for this year and much of next, in my opinion.
That is a big chunk of our GDP. We cannot afford not to take the risk because the economy is already very soft and problems on the streets elsewhere in the world will arrive here,” he said.
“Jobs will be lost; that’s a given. The overarching question is whether we have the bandwidth to work out which jobs we can save and which new jobs we can (create?).”
Economist Samuel Nyandemo emphasised that what is needed is a careful and efficient reopening that is designed to both save lives from COVID-19 and protect the economy.
He argued the decision to reopen must carefully weigh economic benefits against the risk of accelerating the pandemic’s spread with focus given on food, air travel and construction. He advises the Government to give priority to candidates as it plans to reopen schools.
Head of Research at Genghis Capital Ltd. Churchill Ogutu argues that broadly, the lost demand that has been incurred will take time to be recovered or, worse case, be lost forever. He warns that the risk is not worth reopening the economy.
“COVID-19 is primarily a health risk and in the absence of vaccine, we may run the risk of higher contractions in a premature reopening,” he said. Ogutu said the workings of the economy are not like flickering on a switch and we may not see a recovery in the jobs already lost or the reduced income to recovery in a short period of time.
“Besides, variables such as business investments and trade hinge on foreign markets and as such, I don’t expect the demand will pick up instantaneously,” he said.
Global rating firm Fitch Rating forecasts Kenya’s GDP growth to slow in 2020 followed by 4 per cent growth in 2021.
However, the material downside risk for 2020 growth is pinned on the extent and duration of the coronavirus outbreak and the consequent lockdown measures.
“The economic fallout from Corona will cause a shock to Kenya’s near-term growth with negative implications for corporate balance sheets and households’ financial standing and, ultimately, for the banking sector’s asset quality and profitability metrics,” the Fitch report said.
“In addition, loans to the agricultural and trade sectors are expected to weaken further due to an unprecedented locust invasion ongoing since early 2020. These risks have led to a revision of the outlook to negative for our ‘b’ assessment of the operating environment for banks in Kenya.”
Experts contend opening of the economy may help it regain some of what it has lost in the past few months, but warns businesses are not ready for the risk that comes with it.
People may return to the workforce and unknowingly spread the virus if they aren’t given proper protective gear.
Data suggest that about 40-50 per cent of people infected with COVID-19 may be asymptomatic.