Economy begins to snap back to life as flow of cash picks up

Fresh produce on sale at Daraja Mbili Market in Kisii County. [Smmay Omingo, Standard]

The economy is slowly emerging from a dark period of massive layoffs, business closures, a stock market meltdown and muted transactions.

An analysis of official data and sentiments from industry leaders show the economy is starting to turn the corner and Kenyans can begin to anticipate fresh growth and rejuvenation nearly six months after the country reported its first case of Covid-19 in March.

President Uhuru Kenyatta has gradually relaxed some containment measures, and as a result, economic activities have slowly picked up. A perception survey by the Central Bank of Kenya (CBK) released in August found captains of industry were optimistic about the recovery of the economy in a month’s time.

Positive data

Already, there has been positive data coming through. For instance, there has been an increase in transactions on payment cards, such as credit, debit and prepaid cards and point-of-sale machines.

In April, the value of these transactions declined to a four-year low of Sh35.2 billion. This has since resurged to Sh51 billion in July, according to data from CBK.

Mobile money transactions have also gone up on account of increased economic activity. In April, mobile payments hit a two-year low of Sh307.9 billion but recovered to Sh450 billion in July.

Some of the activities that had been restricted but have since resumed, include eating out in hotels and restaurants, the movement of people into and out of the counties of Nairobi, Mombasa, Kwale, Kilifi and Mandera, and domestic and international flights.

Hotel executives, whose businesses have been hard hit by the pandemic, told CBK that they had begun to register crucial forward bookings ahead of the resumption of international flights on August 1.

However, Mohammed Hersi, the chairman of the Kenya Tourism Federation?, said the hotel industry has mainly been driven by domestic tourists. He noted that in as much as the country was open to international arrivals, some countries like Canada, Australia and the European Union are still restricting people from moving out of their territories.

Hersi added that with the domestic market, most bookings are for weekends, with companies still cautious about holding conferences in hotels.

Increased economic activity is also evidenced in Google Mobility data, a report tracking the movement of people into various places. According to the report, the movement to places such as national parks, public beaches, shopping malls and public gardens has increased by five per cent to pre-Covid-19 times.

In April, traffic to amusement parks had dropped by a fifth, as people stayed away from public places in compliance with social distancing rules put in place by the government to curb the spread of the coronavirus disease.

 EXCEEDING 2019

Further, after a downturn in April, exports have begun to go up. By July, the value of exports – at Sh369.2 billion – had exceeded the value over a similar month last year by Sh15.7 billion.

Horticulture, one of the export commodities that suffered in the wake of containment measures, has also started flourishing.

Export of flowers, vegetables and fruits, a critical foreign exchange earner, had declined to around 20 per cent in March and April.

However, this has since improved to 75 per cent, according to Kenya Flower Council Chief Executive Clement Tulezi. He said as a result, most flower farms have been rehiring workers.

“Numbers in terms of exports are looking very good especially on the edible side, that is fruits and vegetables,” said Tulezi.

The only problem, he noted, was in the export of flowers due to logistics challenges.

“We are still very short of what is expected now. Majorly because of challenges of freight and not because there is no demand in the international market,” said Tulezi.

Electricity sales, another leading economic indicator, has also been going up as more offices, factories and markets reopen their doors.

Kenya Power, the country’s main power distributor, saw electricity sales in April drop by 15 per cent to 645 million kilowatt-hours (kWh). The following month, sales picked up, reaching 729.1 kWh. ?

And last month, the Purchaser Manager’s Index (PMI) survey, which measures the health of the private sector, showed businesses have gradually pulled out of the slump caused by the pandemic.

The survey by Stanbic Bank points to increased activity in August, though at a slower rate compared to July, marking a second consecutive month of growth.

“A second consecutive month of growth continues to indicate that the private sector is moderately emerging from the trough in April. Easier curfew restrictions and ameliorating external demand continue to support purchasing activity,” said Stanbic's head of Africa Research Jibran Qureishi.

Leading indicators

As a result of the improved leading indicators, banks are optimistic.

“For us, that is a good sign, therefore, we know that the customers we are nursing have got better prospects going forward,” said Habil Olaka, the CEO of the Kenya Bankers Association (KBA).

He noted that in terms of making decisions, banks are now more likely to make positive decisions as borrowers are about to get over the hump.

With the economy hit by Covid-19, banks had restructured loans worth Sh844.4 billion, nearly a third of the loans in their books, by the end of June.

This has seen a lot of them register lower profits as they set aside billions of shillings as insurance against possible defaults.

Official data shows more than 1.7 million Kenyans lost their jobs within three months after the country recorded its first case of Covid-19.