Innovative industry aids Kenya’s Covid-19 response

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While the Kenyan authorities have remained in a heightened state of vigilance against Covid-19 since the first local case was recorded on March 13, private sector manufacturers have been adjusting operations to ensure supplies of much-needed medical equipment are available.  

As of April 7, Kenya had reported 172 cases and six deaths, out of a global tally of 1.43m cases and 82,000 fatalities. 

Mindful of the burden that a high number of local infections would add to the country's health care infrastructure, the government has imposed strict quarantine and social distancing measures to limit community transmission. 

A mandatory nationwide curfew is in place between 7pm and 5am, and movement in and out of Nairobi metropolitan area and three other regions is restricted until April 27.

Meanwhile, a ban on all inbound and outbound international flights to Kenya that was imposed on March 25 was extended for an additional 30 days from April 6, with the exception of cargo flights and evacuation charters for foreign nationals.  

Beyond addressing the health challenges, the authorities have also taken action to mitigate the wider risks to East Africa's largest economy.  

On March 23 the Central Bank of Kenya (CBK) cut its 2020 growth forecast from 6.2% to 3.4% in light of the pandemic, citing a drop in demand from international trading partners, as well as disruption to tourism, supply chains and domestic production.

The CBK also cut its benchmark lending rate by 100 basis points, to 7.25%.

Following this, on March 25, President Uhuru Kenyatta announced a raft of measures designed to ease the impact on businesses and households. 

Alongside an 80% salary cut for the president and his deputy, the measures included a reduction of value-added tax from 16% to 14%; a reduction in both income tax and corporation tax from 30% to 25%; and 100% tax relief for individuals with a monthly income of less than KSh24,000 ($225).

More than 80% of businesses in Kenya are micro-, small and medium-sized enterprises (MSMEs), and these generate around 75% of all jobs and 30% of annual GDP. Consequently, a number of the measures announced aim to support small businesses, including a reduction in the recently re-introduced turnover tax rate from 3% to 1%. 

Manufacturing adapts

Prior to the crisis, the government was working to expand Kenya’s manufacturing capabilities, particularly in the field of medical supplies.

These efforts have been stepped up in recent weeks, with many local manufacturers converting their operations.

“Where possible, companies are exploring ways to adapt existing manufacturing capacity towards medical supplies – anything from masks to simple ventilators – and other essentials, which were not viable for local production prior to Covid-19,” Carole Karuga, CEO of Kenya Private Sector Alliance, told OBG.

An example of this is the newly formed partnership between Haco Industries, a fast-moving consumer goods producer, and East African Breweries. Together, the companies have begun producing hand sanitisers for free distribution.

Elsewhere, the Kenya Medical Research Institute (KEMRI) has started manufacturing Covid-19 rapid testing kits to aid state assessment facilities. Before the pandemic, KEMRI had produced hand sanitisers, diagnostic testing kits, and other products for the region as required, but the outbreak has necessitated a switch.  

Digital solutions are also helping the manufacturing sector respond to the crisis.

In mid-March the Kenya Association of Manufacturers launched a digital directory for locally manufactured goods to help customers shop online. MSMEs can use the portal to directly contact local suppliers to source raw materials and intermediate goods, with payment possible via cashless platforms.

Going forward, this new capacity provides solid foundations for growth, although business leaders caution that production volumes must be sustainable in the aftermath of Covid-19.

“In the long term, we are evaluating measures to prevent a ‘rebound effect’. This new local manufacturing capacity must be maintained once the global supply chain returns to stability," Karuga told OBG.

Digital leader

Kenya was already a regional leader in digital innovation prior to Covid-19, particularly in the field of mobile money, which is proving to be useful in limiting the spread of the virus globally.

The value of mobile money transactions in Kenya has expanded rapidly over the past decade, from KSh166.6bn ($1.6bn) in 2008 to KSh4.4trn ($41.3bn) last year. This has been led by the growth of Safaricom-owned M-Pesa, which is the most popular mobile money service in East Africa and allows users to send money, pay bills and apply for loans via SMS . 

Following a meeting with the CBK, Safaricom announced on March 17 that all person-to-person transactions under KSh1000 ($9.38) would be free for 90 days, in effort to maintain mobile money flows during this period of economic disruption. In addition, it increased the daily transaction limit for MSMEs from KSh70,000 ($657) to KSh150,000 ($1400).

In similar moves, courier firms have been partnering with supermarkets and restaurants to offer free or low-cost home delivery options to support social distancing. 

Parallel to this, the e-commerce sector has also experienced an increase in activity, as many Kenyans have shifted to online shopping to avoid visiting stores. For example, local platform GoBeba reported that its gross merchandise value tripled in the three weeks following the first reported Covid-19 case in Kenya, driven by sales of household essentials.

Regulatory catch-up

Elsewhere, following the government's encouragement for companies to adopt work-from-home procedures where possible, a recent survey by human resources consulting firm, Corporate Staffing Services, found that three-quarters were considering implementing permanent work-from-home procedures after the pandemic. 

The significant changes in the operating environment caused by Covid19 are forcing businesses across all sectors into a digital reorientation. As new technologies and working practices are adopted, legislation will likely have to follow suit.

“The 2007 Employment Act lacks provisions for emergency or epidemic situations, so it is currently impractical and expensive to vary contracts and to terminate or suspend employment," Christine Oseko, managing partner at Oseko & Ouma LLP, told OBG.

“Therefore, the cabinet secretary and legislators have the important task of issuing guidelines and amendments to help businesses adapt, now and in the future.”

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