The Covid-19 pandemic has presented enormous challenges for Kenya and hit the economy hard. The bare statistics are grim.
According to the Kenya National Bureau of Statistics, the unemployment rate stood at 7.2 percent in quarter three of 2020 compared to 5.3 percent same period in 2019.
This reflects one of the most severe impacts of the pandemic, with many businesses having been forced to shut down temporarily and, in some cases, indefinitely, rendering thousands of Kenyans unemployed or facing severe pay cuts.
Worryingly, the economy went into recession for the first time in 12 years, with sectors such as tourism, hospitality, transport and logistics, education and manufacturing being most affected.
As we continue to navigate the pandemic, it is concerning that the usually resilient Kenyan economy has struggled to rebound. This has set off alarms loud enough for the International Monetary Fund (IMF) to be called upon, recently concluding an agreement with Kenya to assist economic recovery efforts as the pandemic continues to ravage the country.
Encouragingly, the IMF now predicts Kenya’s economy will grow by 6.3 percent up from negative growth last year, but uncertainty remains.
Given the pivotal role of manufacturing in Kenya’s economy, it is fair to say that the recovery of our economy is hinged on the revival of the sector.
The ongoing recovery environment is ideal to embrace the opportunities presented by new technologies. However, this can only happen on the back of an enabling and sustainable regulatory environment that promotes innovation.
Key to achieving this is domestic investments and foreign direct investments (FDI), which are hinged on a predictable and stable policy and regulatory environment.
FDI is especially crucial for Kenya, given its pivotal role in the wider East and Central African countries, which are key trade partners, and as such, critical for sustained economic recovery in the region. The most recent figures from the World Bank show that Kenya’s FDI declined by more than $300 million between 2018 and 2019. Kenya needs to ensure that this downward trend does not continue.
The fact that multinational giants such as Diageo, Coca-Cola, BAT, General Motors and Toyota choose to maintain substantial presence and investment in Kenya is a testament that we have been doing something right.
But this track record is under threat. Recent developments within the operating environment are placing increasing pressure on these companies ability to do business. Excisable goods such as alcohol, tobacco and nicotine products stand out as some of the worst-hit by regulatory overreach and a punitive excise regime. These organisations will therefore be taking note of Kenya’s forthcoming budget which targets to collect Sh1.7 trillion in tax.
One of the key ingredients to sustained economic recovery is consumer confidence.
To re-build this among Kenyan consumers, a predictable, fair and balanced tax regime is critical. It not only supports business planning but also enables commercial decisions that are consumer-friendly, spurring micro-commercial activity, which is the backbone of our economy.
Mucai Kunyiha, Chairman, Kenya Association of Manufacturers
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