Border closures and plummeting demand have put a strain on Kenya’s key export sectors, but the country’s sizeable tea industry has seen little of the disruption caused by Covid-19 to other sectors. Tom Collins reports.
Covid-19 is testing the Kenyan economy, and the projections are grim. The Central Bank of Kenya (CBK) has cut this year’s growth projection from 6.2% to 3.4%, while the IMF projects growth of just 1%.
A nationwide dawn-to-dusk curfew and a ban on all movement in and out of Nairobi, Mombasa, Kwale and Kilifi – the four areas worst hit by coronavirus – means that many of the country’s businesses are working below optimal capacity and some are at risk of bankruptcy.
Border closures and plummeting demand have put a strain on key export sectors, threatening the country’s foreign exchange reserves if global lockdowns continue. The CBK has eased banking regulations to encourage domestic lenders to support struggling sectors, yet the industry is struggling under the weight of loan defaults and most banks are exercising caution during this difficult period.
A government economic stimulus package comprising tax relief and VAT reductions is a welcome relief for many in the private sector, yet others would like support to go much further.
Lacking the firepower to comprehensively support the economy, the Kenyan authorities are seeking combined support of over $1bn from multilateral lenders. The World Bank has approved an initial $50m to support the country’s response to Covid-19 – in March, Patrick Njoroge, the central bank governor, told a news conference that the government is seeking a further $750m and $350m from the IMF.
If the outbreak of Covid-19 continues in Kenya as projected, the government may seek further support from last-resort lenders. Private sector bears the brunt
The three sectors most affected by Covid-19 are aviation, horticulture and tourism, says Carole Karuga, CEO of the Kenyan Private Sector Alliance (KEPSA).
Kenya Airways (KQ), which has returned to government ownership in the face of mounting debts, is suffering from the grounding of flights due to widespread travel bans intended to stem the spread of the deadly virus.
It has already furloughed most of its workers, cut all salaries by as much as 80% and approached the government for a bailout of an undisclosed sum. The disruption to air cargo has decimated Kenya’s export-led flower sector, which in 2017 accounted for 11% of all exports at a value of $688m. Amid scenes of British and […]