Time to dig deep to soften impact on frail economy

In announcing the directives that will virtually put Kenya on a mini-lockdown starting Monday, the government, not unexpectedly, has asked ordinary Kenyans and businesses to sacrifice a lot economically in the fight against the Covid-19 pandemic.

Kenyans will play their part because they have seen how absolutely devastating the disease can be. But they worry about how they will survive the immediate future.

And they have, in this instance, only their government to turn to. Governments are voted in to provide leadership, protection and succour, particularly in such trying times. Rich countries are throwing serious money at the problem. Kenya, too, will have to redirect resources from elsewhere to ease the burden of sacrifice that is being asked of Kenyans.

From Monday, public service vehicles (matatus, buses and mini-vans) have been directed to carry 60 per cent of their normal capacity to facilitate the social distancing necessary in the fight against the virus.

This translates to a material loss of their revenues when other costs associated with this business remain the same.

The natural instinct of the business owner will be to pass on the full costs to the 60 per cent passengers that will be on board. Supermarkets are also being asked to extend their hours of operation, meaning extra costs because of extended or extra shifts and use of electricity.

Bars and entertainment places like clubs must close by 7.30pm, meaning that clubs and nightclubs will remain closed.

Again, owners will be having discussions with staff about salaries and wages, the expectation being that they will not be paid for the hours they do not work. The UK, in issuing similar directives on Friday, offered to pay up to 80 per cent of the salaries of the workers.

Banks have signalled a willingness to, where necessary, renegotiate payment terms on personal loans. This is helpful, although we recognise that this is not a waiver — merely a postponement of the payment.

It would have been a lot more helpful if a full moratorium was given, for instance, on interest for the period it will take for the virus to be subdued and the recovery process starts.

It is also somewhat cheeky to remove charges on mobile cash transfers of below Sh1,000 and not review the charges paid to merchants for goods and services.

This deliberate oversight coming as people are being exhorted to use mobile services for their transactions! The surge in the usage of digital payments obviously will imply more revenues through transaction charges.

If these institutions want to extend a helpful hand to Kenyans at this trying moment, they should do it like they mean it.

The government’s key challenge, however, is how to mitigate the impact of the pandemic on the overall economy.

An economy already starved of development revenues, one that is dependent on an anaemic private sector staring at an even worse prospect (the lucrative horticulture and hospitality sectors are on their knees) will be devastated with more job losses and factory closures.

The private sector must be supported to keep people on their jobs, even with reduced pay.

They need big incentives — tax rebates, direct cash injections to cover recurrent costs like salaries and other overheads, waivers on electricity costs, and so on.

The safety net that social networks provide through cash remittances from wage earners to folks in the rural villages and elsewhere will be shredded, exposing another area that the government needs to plug.
All these, together with the direct cost of testing, preventing and treating Covid-19, will mean a significant reallocation of public resources. The government must have the courage to do this, because this is a war that must be won.

Tom Mshindi is the former editor-in-chief of the Nation Media Group and is now consulting. [email protected], @tmshindi