Cushion the vulnerable from coronavirus effects, State told urged

Seth Onyango @SethManex

It is a delicate balance as Kenyans brace for job cuts, amid calls for temporary rent freezes to cushion tenants from evictions over sudden lose of income, as the novel coronavirus takes toll on the economy.

Nairobi’s busy streets are deserted as skeleton staff man the few operational offices with the pandemic keeping people away from churches, mosques, restaurants and movie theatres.

With every closure someone is going home without a pay cheque…and nobody knows for how long.

The knock-on effect is being felt fast with Kenyans setting aside cash for food in the event of a lockdown.

Business Hub has learnt that in Nairobi, those in lockdown are mobilising cash for food supplies, and some consider hospitalisation and rent a luxury as more businesses shut down.

A huge chunk of Nairobi residents are tenants with more than 67 per cent living in informal settlements.

“We hope the government is going to help us when we are unable to pay rent, too. They have done well with the loans, but that will not help us pay rent and buy food,” said Tom Omondi, a painter along Moi Avenue.

“All the construction projects have stopped. I may borrow money to buy some food, but what about the landlord?” quipped another painter.

“Governors do not want us to go back home, travelling is a hazard and business is down. I hope they will tell that to the landlord,” said Quinter Nyakoe, a hawker at the sprawling Gikomba market.

Changing attitudes

But the fast-spreading virus and the plight of Kenyans such as Omondi and Nyakoe may be changing attitudes about relief on the back of a move by Britain where Labour leader Jeremy Corbyn called on the Government to suspend home rental fees during the coronavirus crisis.

The virus struck at a time the economy was already burdened with unemployment, and reduced earnings from most sectors.

Consulting economist Raphael Matu and chief executive of Royal Business School says if the pressure mounts, and the spread is widespread, the country might grind to a halt and possibly seek external help.

The World Bank and the International Monetary Fund have moved rapidly to commit up to $12 billion (Sh1.2 trillion) and $50 billion (Sh5 trillion) respectively to address the economic and fiscal impact of Covid-19 globally. The two lenders have already given Kenya Sh6 billion. Central Bank of Kenya also gave borrowers relief for one year.

“Even after Kenyans borrowers were given reprieve on loans, it is important to note that about 40 per cent of Nairobi people work in informal sector and some have inconsistent jobs.

With a hand-to-mouth livelihood, the government must look at possibilities of taking care of these people,” he said.

Churchill Ogutu, an economist, says ordering a moratorium on commercial evictions will be a herculean task since landlords are majorly private-entity players.

Instead, he called for comprehensive stimulus plan to combat the debilitating effects of the coronavirus on the economy, both in the short, medium and long term.

“Broad-based economic stimulus could work well (as in other countries) but I doubt Kenya has enough policy levers towards it. Thus, there should be focus on hard-hit sectors,” he said.

Ogutu said the current environment means tax collection and foreign funding will dry up.

Michael Mburugu a partner at PKF calls the country’s predicament a catch-22. 

“The impact is really beyond Kenya since the Port of Mombasa, which has not been receiving goods, affects the whole of the region up to DRC Congo. Kenya is also source market for most of the region,” he said. 

“We must protect people from mass contamination since we do not have the capacity to deal with the worse case scenario. We can not compare ourselves with Italy, China and USA.

Imagine what will happen in a slum with a population of up to 2,000 in very close quarters,” he said.

“What we should be thinking about is the situation of the supply chain should we go on lockdown. Have we thought about the supply chain of basic things like water, food and painkillers?” he posed.

He said the government must start thinking about social safety nets like how people can get these basic goods and services during a lockdown.

Tax breaks

Other experts say Treasury should introduce tax breaks including payroll tax cuts to replenish disposable income among Kenyan households as the economy tilts towards a lockdown after Central Bank of Kenya (CBK) extended loan deadlines for borrowers.

Governor Patrick Njoroge, waived financial transactions between banks and individual mobile wallets, and extended loan repayment periods by up to one year.

“Banks will review request by borrowers to extend their loans for a period of up to one year. If you have a loan and it has been current until March 2, and you are getting difficulties especially because of the pandemic, directly or indirectly, you can go to your bank and they can discuss an extension plan with you,” he said during a meeting with the Head of State.