Covid-19: Economic recovery for Kenya

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published on 27 October 2020 | reading time approx. 7 minutes

 

It is now 7 months going into 8 months since Kenya confirmed its first case of covid-19. The Government has during this time taken radical measures to contain and manage the pandemic. These measures include robust testing, contact tracing, treatment response and applying lock down measures especially in key counties namely Nairobi and Mombasa.

 

 

 

As of 25 October 2020, Kenya has recorded approximately 49,721 confirmed cases of covid-19, with 902 associated deaths. On a positive note, there have been approximately 34,209 recoveries. It is worthy of note that the relaxation of the lock down measures towards the end of the month of September, 2020 has led to the improvement in the economy but unfortunately with an increase in the number of infections. 

 

Presidential directives and current measures

In response to the pandemic, the Ministry of Health issued Interim Guidelines on Management of covid-19 in Kenya that made recommendations for comprehensive prevention and case management strategies. The guidelines gave comprehensive recommendations on infection, prevention and control, patient triage, emergency medical services, case management and laboratory testing algorithm. Further, the President issued directives gradually that led to the closure of learning institutions, businesses and markets, cancellation of social gatherings, movement restrictions, supervision of burials and reduction of crowding at hospitals.

With a view to re-opening the economy that had largely suffered for close to 6 month's lockdown, on 29 September 2020 the President issued the following directives that are currently in force. It is worthy of note that the directive on education is undergoing changes:

 

  • Curfew time was adjusted from 11pm to 4am, the said curfew is to apply till the end of November;
  • The prohibition against the operation of bars and sale of alcoholic drinks in bars and eateries were vacated;
  • The closing time for all bars, restaurants and eateries is 10PM every day and with strict adherence to protocols issued by the Ministry of Health;
  • Religious gatherings are now limited to 1/3 of venue seating capacity;
  • Weddings and funerals are now allowed to a maximum of 200 people;
  •  The resumption of in-person learning in learning institutions has resumed for grade 4, class 8 and the fourth year of secondary education. learning institutions are only re-opened when learner`s health and safety is guaranteed and must be predicated on strict adherence to the health protocols and guidelines as issued by the Ministry of Health. Full resumption of in-person learning is expected from the beginning of 2021. We have noted that the international schools have not resumed in-person learning so far.
  • The National Treasury has been requested to consider retaining VAT at 14 percent until the 1 July 2021. Currently therefore the VAT is still at 14 percent.
  • The National Treasury has been requested to consider retaining the Income Tax Rate (PAYE) at 25 percent until the 1st January 2021.
  • The National Treasury has been requested to retain Resident Income Tax (Corporate Tax) at 25 percent until the 1 of January 2021.
  • The National Treasury has been requested to maintain the 100 percent tax relief for persons earning a gross monthly income of up to KES24,000 beyond 31 December 2020.
  • The National Treasury has been requested to consider retaining the reduction of the current turnover tax from 3 percent to 1 percent for all micro, small and medium sized enterprises.
  • The National Treasury is directed to expedite the ongoing rollout of the credit guarantee scheme in partnership with participating banks and development partners as approved by cabinet.

The above notwithstanding, it is clear that the President together with the Ministry of Health may move to make further directives with a view of managing the effects of the pandemic on businesses and also the general health of the public.

 

Positive Effects of the Directives

Tax Impact

Several tax measures have been decided by the Kenyan government in order to cushion the affected individuals and businesses from the negative impact of the covid-19 outbreak:

  • 100 percent tax relief for low income earners (namely, persons earning gross monthly income of up to KES 24,000 [USD226]);
  • A payment of additional income for a person earning a monthly income of KES 24,000
  • Decrease of the top Pay-As-You-Earn (PAYE) rate from 30 percent to 25 percent;
  • Decrease of the value-added tax (VAT) rate from 16 percent to 14 percent with effect from 1 April 2020
  • Decrease of the resident corporate income tax from 30 percent to 25 percent.

The President of Kenya assented to the Tax Laws (Amendment) Act, 2020 on 25 April 2020 thus bringing into force the above amendments to various tax laws.

 

Enhancement of the employee safety

The Directorate of Occupational Safety and Health Services (the Directorate) published the Occupational Safety and Health Post-covid-19 Return to Work Advisory (the Advisory) on 29 June 2020. The Advisory provides the basic requirements to all workplaces in Kenya to keep workers returning to work on the re-opening date and thereafter safe and healthy, and for both the employer and employee to work to prevent the spread of covid-19 in workplaces. The Advisory requires employers to, inter alia:

  • Assess Non-Essential Work and Working from Home capabilities and document the same, and issue specific protocols involving safe working from home to mitigate the spread of covid-19;
  • Sensitise their workers on safe passage and commuting to work, with the aim of minimising the spread of covid-19;
  • Implement a Workplace Safety and Health culture that focuses on prevention and mitigation of covid-19;
  • Obtain or expand the Work Injury Insurance to include exposure to covid-19;
  • Ensure employees obtain medical examinations to get clearance on covid-19 and Certificates of Fitness (where applicable) for the safe resumption of work. Where an employee tests positive, the medical practitioner shall furnish the medical report to the Directorate within 14 days;
  • Come up with ways to support mental health and mental wellbeing of employees;
  • Not to dismiss, discriminate against or disadvantage an employee suspected and confirmed to have covid-19;
  • Ensure the safety of workers with pre-existing medical conditions in the workplace; and
  • Continuously monitor and evaluate the impact of covid-19 on Workplace Safety and Health conditions and regularly update the Directorate on specific interventions that require the attention of the regulatory authority on occupational safety and health matters.

  

Economic Stimulus Measures

On 17 March, the Central Bank directed banks to waive bank fees for individuals who move money between their bank account and mobile wallet came into effect. The upper limit for mobile money transfers by SMEs was also increased with a bid to reduce the physical contact with physical notes and coins. On 18 March, authorities reached a deal with commercial banks to restructure nonperforming loans caused by covid-19 layoffs etc.

 

The Central Bank has so far adopted policies to ensure that the interbank market and liquidity management across the sector continues to function smoothly. The Treasury also announced a $5 million package to support the tourism industry.

 

In developing a post-covid-19 economic recovery strategy by expanding opportunities for local enterprises, the government issued a list of compulsory items for local procurement to promote the "Buy Kenya Build Kenya" initiative. An example of this is the production of masks locally. The growth of ecommerce flourished and more innovation has been experienced in this space thus boosting business for both small and medium enterprises to large enterprises.

 

Legal Processes

The Courts have quickly adopted they use of technology by introducing virtual court sessions which have proven quite efficient. We also have on board the e-filing of documentation that has become well established and is improving at a remarkable rate. Government Authorities have also adopted technology, thereby reducing the backlog and the queues that have been a nightmare for the public for years.

 

Existing Major Restrictions

Immigration

The international flights to Kenya resumed beginning 1 August. However, there are strict requirements for travelling to Kenya: Travellers arriving in Kenya must carry a PCR test with them which was taken a maximum of 96 hours before their arrival in Kenya. Travellers cannot have a body temperature above 37.5° C, and there can be no cases of persistent coughing, respiratory problems or other flu-like symptoms.

 

Before departure, travellers must fill in a Travellers Health Surveillance Form on the website of the Kenyan Civil Aviation Authority. This form contains a QR code which is scanned on arrival by a customs clerk. The form is used for passengers that only started displaying coronavirus symptoms when the flight already took off.

On arrival, travellers from certain countries must spend 14 days in quarantine. Travellers from countries of which the Kenyan government believes that the risk of spreading of the coronavirus is low to average do not need to go into quarantine. There are currently 147 countries included in this list. Each day, the Kenyan Health Department makes a new assessment of the risk profile of these countries.

 

Sporting Activities

On 30 June, the Cabinet Secretary of Sports, Culture and Heritage, Hon. Amb. (Dr.) Amina Mohamed appointed the Resumption of Sports Advisory Committee to draw up protocols for the resumption of sporting activities in Kenya following the covid-19 pandemic. The General Guidelines spell out the safety measures to be taken during the sporting events.

 

The Guidelines issued are expected to be reviewed from time to time as the covid-19 Pandemic evolves. As it stands, sports federations across the country are finding it hard to meet the stringent covid-19 safety measures, as the Ministry of Sport pushes all federations to submit a calendar of events for the year 2021.

 

Re-opening of Learning Institutions

The seven-month covid-19 imposed closure of schools finally came to an end on Monday, 12 October 2020 when a section of learners resumed classes. This is after the press release issued by the Ministry of Education which announced a phased reopening of schools, starting with the Competence Based Curriculum (CBC) Grade 4, Class Eight and Form Four candidates. Education Cabinet Secretary, Professor George Magoha said the revised 2020 school calendar will see the second term for Grade 4, Class Eight and Form Four run for 11 weeks from 12 October to 23 December. Learners will then break for a one-week holiday, from 24 December and resume on 4 January, 2021, up to 19 March. The Kenya Certificate of Primary of Education (KCPE) and Kenya Certificate of Secondary Education (KCSE) exams that are ordinarily taken at the end of every academic year (usually in October/November) will for the first time be taken in March 2021.

 

Schools offering the international curriculum had also been directed by the Ministry of Education to offer in-person learning commencing 12 October 2020. Consequently, international schools initially reopened for final year and key transition years/grades, with all other year groups due to resume on 26 October 2020. However, the covid-19 positivity rate has since spiked from 5 percent at the time of the announcement to 14 percent currently. This has forced the Ministry of Education to postpone further re-opening of other year groups and grades as they work out a mechanism for reclosing and reopening schools to stem the resurgence of community transmission. As it stands, the resumption of other year groups apart from final year grades has been vacated as the Kenya Association of International Schools continues to engage the Ministry of Education to ensure proper adherence to covid-19 health guidelines.

 

The press release issued by the Ministry of Education highlighted the covid-19 guidelines and protocols to be adhered to by the learning institutions.

 

In conclusion

There seems to be a major desire from both the government and the private sector to get back the economy on its feet. From a high level analysis, there seems to be a huge compliance of health measures by businesses.

On 3 September the Forbes Magazine listed Kenya among countries open for both tourism and business. It has been reported that the tourism sector is slowly returning back to business with an increase of persons traveling for pleasure both local and international.

 

While it is too early to confirm full recovery of the economy, it is safe to say that Kenya is indeed in the process of recovery from an economic perspective. There are available and growing business opportunities in Kenya, but the same can only be pursued subject to compliance with relevant directives and guidelines.

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