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Kenya’s economy resilient but more unequal due to COVID

February 25th, 2021

The recent report by the Financial Sector Deepening Kenya (FSD Kenya) in February 2021 on: State of the Economy: Focus on the impact of COVID on women and education, reveals that Kenya’s economy remains resilient compared to other peer economies despite the challenges brought by COVID-19 pandemic.

But despite the positive indications, the country’s growth trajectory is still uncertain owing to the fact that COVID-19 may linger longer up to mid-2022.

And even though Treasury expected the economy to grow by 5.2%, other experts predict that it will expand at least by 4.5% while others are more optimistic and put 2021 growth at 6.1%.  According to the report, the repercussions of a contracting economy will be dire since the most affected areas are labour intensive and offer formal employment. These include tourism, education; wholesale and retail trade, as well as the manufacturing sectors. The country therefore will experience an increase of unemployment because many people in the formal sector might lose their jobs.

The other area which the report highlights is the middle- and upper-income earners who are likely to experience short term resilience. And the low-income earners might not be as lucky. Their income vulnerabilities could lead to “heightened social and economic insecurity including food insecurity for the poorest and most vulnerable populations.”  And many of the low-income earners may end up in the Micro, Small and Medium Enterprises (MSMEs) sector.

On inflation, the report says that it remains relatively low at 5.2% and could remain so in the short run. But this prediction has been negated by the recent decision by Government to increase fuel tax.  And it is only a matter of time before inflation becomes another nagging problem in the already vulnerable economy.  And the poor will be most affected since the major driver of the overall urban inflation has largely been food inflation.

It might be worse if the country experiences drought and a prolonged locusts invasion this year, or if the global crude prices increase as economies recover from COVID-19. Any of these variables could put pressure on the shilling and might lead to further depreciation.

In terms of education, we all know that COVID-19 has had its toll on the sector. In Kenya, the most affected has been on low-cost privately owned schools that many poor parents prefer to use to educate their children due to the lack of public schools, the lack of space in public schools or concerns about the quality of education in public school. The report states that over 60% of education in Nairobi happens to be in the low-cost private schools which are located in informal settlements. Although Government has been trying to refute this, several other studies corroborate the findings.

Research by Open Mapping of Kibagare, Deep Sea and Githogoro slums in Westlands Sub-County reveals that out of the 282 schools in the sub-county, only 19 were public schools. The rest are low-cost private or informal schools.

The report on the State of the Economy: Focus on the impact of COVID on women and education also gives details on how COVID-19 lockdowns have affected the low-cost private schools. More than 95% of the low-cost private schools rely on fees and as a result of this, they have had no any other means of paying the teachers. This has made the majority of them to struggle to re-open.

Since 83% of the households that use the low-cost private schools as a means of educating their children earns less than Ksh. 15,000, the only solution therefore should be a bailout just like the way large corporations are being given. The collapse of these schools and the absence of public schools means that the very poor will suffer most from the pandemic. Already we are witnessing the impact of school closures on girls. They have become victims of sexual abuse and are witnessing high cases of teenage pregnancy in the country. And with limited space they have also become a target to domestic abuse.

On the gendered impact of COVID-19, women have borne the greatest brunt of the pandemic. The report highlights several issues that have affected women during the crisis. These are high cases of domestic violence against women, lack of safety and home-based care of COVID patients.

The area where women are also affected, but many people hardly think of, is that women have far more responsibilities in every household than men. Some of these responsibilities are never monetised. Imagine if the government could monetise home-based care for COVID-19 patients, it could reveal the important role women are playing in health care system.

On other hand, most cultural norms in the country seems to consider children as the sole responsibility of the woman.  Chores like cooking, cleaning, collecting water or firewood, or washing clothes are a woman’s job. Yet, some taboos deny them access to justice.

Since the economy is struggling under the burden of Covid-19, there need to focus on the MSME sector as we re-examine our economic growth amidst all the resilience. This sector has become the refugee centre for those losing jobs in the formal sector.  If there is any mitigation strategy for the prevailing tribulations, it must be in form of incentives to MSMEs, perhaps a fiscal intervention like the removal of turnover tax.

Going forward, the government should consider subsidies and grants to patents to most of the MSMEs products and the entrepreneurs. And also, to provide credit guarantees to the low-cost schools by enhancing partnerships to build facilities in these schools. Finally, on women, the government should address child pregnancies, provide legal aid, safe houses and medical care for survivors of abuse, and provide cash transfers or food to those under extreme conditions.

The writer is a professor of entrepreneurship at University of Nairobi’s School of Business. Twitter: @bantigito @FSDKe 

This article was first published by the Business Daily newspaper. Read the original article here.

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