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Columnists

The ugly picture that we cannot avoid

SMEs
SMEs account for over 80 percent of the nation’s formal and informal jobs. FILE PHOTO | NMG 

For some of us, warning since March of the cost in economic wreckage, starvation and lives from the extreme shutdown in Kenya and worldwide - for a relatively low-level killer virus that never merited destroying a generation - the beginning of the hard part now arrives.

A key moment was a friend sending a memo from Mater Misericordiae Hospital, just like so many others. This one announced staff would alternate from June to September between a month on duty at 50 percent of salary and a month on unpaid leave at 25 percent. It’s a package that will leave few of the hospital’s staff able to pay for both rent and food. But it beats a total layoff.

“But we will be fine after September, thanks to insurance,” he said. However, health insurance for most of us comes with our jobs, and jobs are now disappearing at a quantum rate. Our Central Bank governor has warned that three-quarters of the country’s small and medium-sized businesses stare at total collapse by the end of this month: and they do.

Yet SMEs account for over 80 percent of the nation’s formal and informal jobs. Wiping out three-quarters of those jobs is a blow beyond anything we are even imagining and we have no safety nets for those 11 million newly jobless.

Which is where the time has come to wake up. Because this pandemic is forcing us to a mirror. Ask our neighbours and they make no bones about Kenya’s ‘dog-eat-dog’ culture. However, if we don’t sort our heads out on this now, we are in for a mess of mammoth proportions.

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Take the dispute over the Brookhouse School fees, with students sent home for now months, but the school still billing for fees for the online tuition. As parents refused to pay, even the Education Secretary was forced to step in to point out that if parents bankrupt their private schools, where will their children go then?

And this is what people are not yet seeing. Yes, it’s rough to pay fees when the children aren’t in the school, and many parents will now be facing salary cuts too. But the facilities are all still there. So who takes the hit? The school and it closes, which hurts the parents and kids left with no school? Is that a win for parents who pay less this month?

In fact, we are now into such tough territory, we must look at consequences across all.

So yes, the government can refuse to support our small businesses further. It’s broke, after all. But before Coronavirus, there were around 2.8 million salary-earning Kenyans earning over Sh2 trillion and paying PAYE that contributed around a quarter of Kenyan government revenues.

Of course, the government measures cutting PAYE reduced that. But slash that revenue by three quarters, and our government has a near-20 percent hole in its recurring income: think that through in universal healthcare and schooling.

At the same time, the knock-on effect of so many job losses will create colossal extra problems.

The immediate picture is ugly. Any middle or upper-class Kenya who thinks their compound is going to be safe once 11 million more have not one shilling for food is living in a fantasy.

In reality, this looks set to echo the extreme depravation of Germany immediately after the Second World War. Having surrendered, with soldiers back home with no income and very few people in jobs, many starved, eating rats and searching train tracks for a single piece of coal.

Yet the horror of a breakdown on this scale is still a reality we aren’t facing. But we must.

For if we stretch now to keep schools open, businesses open and our economy open, we shall bounce back. But push all to closure - evicting, freezing, laying off, withholding payments – we shall pay for years to come, all hope of middle income status gone in our lifetimes.

We seem to have an enormous ability to ignore consequences. But if we do, they come anyway. Right now, we all need to take as much of the hit as we can: and keep all of us afloat.

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