As the coronavirus pandemic continues to spread worldwide, the situation has largely remained muted in Africa. This stems from the fact that far fewer cases have been identified on the continent, which remains relatively virus free at the time of writing.

But this is not to say that Africa is immune to what has become an increasingly global health crisis. One aspect of the virus' impact is undeniably economical, most notably because Africa's economic fortunes are closely intertwined with China and other global markets.

"The East African Community's (EAC) links with the rest of the world in terms of trade and foreign direct investment exposes it to the risks," said Victor Ogalo, head of Policy Research and Public Private Dialogue at the Kenya Private Sector Alliance (KEPSA).

The alliance is made up of over 500,000 business entities, which are either directly or indirectly affiliated with the umbrella body.

Kenya had seven confirmed COVID-19 cases as of March 18.

Two-way trade impact 

Like many other countries, Kenya is heavily dependent on China for the supply of manufactured goods and other products, and the Asian giant remains a key market for the country's agricultural produce. It is little wonder therefore that many businesses in Kenya have been disrupted, owing to the coronavirus outbreak.

Imports from China in 2018 stood at 21 percent of Kenya's total imports. On the other hand, trade between China and Africa stood at 12 percent of total trade over the same period, according to KEPSA.

In the first two months of 2020, for example, Kenya's imports from China dropped by 36.6 percent, which is attributed to the pandemic. It should be noted, however, that not only are imports from China being affected by the outbreak, but exports to China have also been negatively impacted.

"Demand of such produce as avocados, tea and coffee among other produce has gone down," noted Ogalo.

In view of what the pandemic might portend for Kenya's enterprises moving forward, KEPSA conducted a survey "to understand the projected impact of COVID-19 on the economy and across different sectors," said Ogalo.

The survey findings showed that up to 19 percent of companies have reported that their businesses have been affected by COVID-19. Industries range from agriculture, forestry and fishing, arts, entertainment and recreation, to construction, energy, education and tourism, among many others.

Sixty-one percent of businesses have felt the effect of the virus and 84 percent have experienced very low to moderate impact of the pandemic on their activities, according to the survey.

One important area that brings in much needed foreign currency for Kenya is the remittances from the country's diaspora. In a report issued on March 15 by Cytonn Investments, an investment and real estate company with offices in the Kenyan capital of Nairobi and in the United States, researchers predicted a reduction in diaspora remittances. This is due to the decline in economic activities globally, meaning a reduction in disposable income.

According to the report, diaspora remittances, which stood at $2.8 billion in 2019, have recently become the largest contributor to Kenya's forex reserves, which the Central Bank of Kenya (CBK) uses to stabilize the currency. In order to prop up the forex reserves in anticipation of currency volatility, the CBK indicated that it is looking to purchase Kshs 40.5 billion ($390.7 million) from banks in the next four months.

Challenges ahead 

Moving forward, a number of sectors are going to be particularly affected by COVID-19 in Kenya, and the EAC region as a whole. These sectors include tourism, whose contribution to export earnings amounted to 18 percent in Kenya and 18.8 percent in the EAC region. Up to 6 million tourists visit the region annually.

Tourism contribution to the GDP on average is 10 percent and 12 percent in Kenya and the EAC region respectively. Conversely, it is projected that the transport and logistics sectors will also be affected owing to reduced cargo volumes, according to Ogalo.

"In addition, public and private projects being implemented by foreign companies or that relying on expertise from affected countries may also suffer slow progress," he added.

Kenya Airways estimates that it is losing at least Kshs 800 million ($7.62 million) a month, noting that the situation could change more dramatically in coming days as more restrictions in global travel come, reported the country's Nation newspaper.

"The route [from Kenya to China] is important for Kenya Airways, flying about 7,000 passengers per month. China is arguably the largest trading partner of Africa and Kenya, in particular. Therefore, its significance cannot be downplayed. China is also a key cargo origin and a main feeder to regional freighters," Kenya Airways told the Nation on March 16.

China's close ties with Kenya and the region are further indicated by an EAC Trade and Investment Report of 2018, which shows the region received $5.7 billion in the way of foreign direct investment that year. Of this amount, $1.1 billion came from China.

The KEPSA survey, which involved 127 businesses drawn from 17 sectors of the economy, was triggered after an executive order issued by Kenya's President Uhuru Kenyatta. The order's aim was to create an opportunity whereby the Ministry of Industry, Trade and Cooperatives and other government departments would work on mitigation measures against the pandemic.

More than half of the businesses surveyed were large companies, which had more than 100 employees. Others that were surveyed included micro-enterprises with less than 10 employees, which made up 23 percent of the total businesses surveyed, while small and medium-sized businesses made up 12 percent of the survey.

KEPSA has set up a business action platform team and is developing a business COVID-19 action platform. KEPSA said the platform will have a 24-hour call center and portal to share business and workplace health-related information for all sectors and businesses from small and medium-sized enterprises to multinationals.

Looking ahead, Kenya's GDP growth in 2020 is likely to be impacted by 10 to 25 percent by the coronavirus, based on the impact on other economies. The Cytonn report said the 10 percent impact is an optimistic case in the event the outbreak is contained, and a 25 percent impact in the event it is not contained. Credit has to be given to the Kenyan Government on their swift handling of the medical side of the pandemic. However, work needs to be done on the business angle, said the report.

Speaking to the media in March, Stephen Karingi, Director of the UN Economic Commission for Africa's Regional Integration and Trade Division, said that despite the negative aspects of the coronavirus, there was an opportunity that Africa could take advantage of as trading within the African Continental Free Trade Area (AfCFTA) is set to commence this July.

"The intra-African market could help mitigate some of the negative effects of COVID-19 through limiting dependence on external partners, especially in pharmaceuticals and basic food," said Karingi, adding diversifying economies away from fuel-driven was vital beyond COVID-19 and stressed the need for the continent to urgently implement the AfCFTA.

Karingi also urged African countries who export drugs to prioritize selling in the African market.

(Reporting from Kenya) 

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