The Coronavirus outbreak thousands of miles away from Kenya threatens the country’s fragile economy with the Kenya Private Sector Alliance (KEPSA) warning of tough economic times ahead.
In a survey predicts the causal effects of the coronavirus, the body predicts that agriculture could be the most hit by the disease. Kenya’s horticultural products, tea, coffee and fruits could be the biggest casualties. Businesses in mineral ores are also among those most at risk as the coronavirus continues ravaging societies outside China.
KEPSA notes that the survey featured 95 locally owned businesses spanning 17 sectors of the economy. In addition, there were 32 manufacturers surveyed by the Kenya Association of Manufacturers (KAM) with the findings integrated into the report by KEPSA.
The KEPSA report highlights that close to 60% of manufacturers are now outsourcing inputs from other countries to cope with the coronavirus supply chains disruption. About 30% of other businesses are sourcing for export markets outside China with 10% scaling down their production capacity.
Globally, the UNCTAD notes that the outbreak and spread of the coronavirus (Covid-19) will negatively affect global foreign direct investment (FDI) flows. With scenarios of the spread of the epidemic ranging from short-term stabilization to continuation throughout the year, the downward pressure on FDI will be -5% to -15% (compared to previous forecasts projecting marginal growth in the FDI trend for 2020-2021).
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UNCTAD adds that the impact on FDI will be concentrated in countries that are most severely hit by the epidemic, although negative demand shocks and the economic impact of supply chain disruptions will affect investment prospects in other countries.
The report adds that more than two-thirds of the multinational enterprises (MNEs) in UNCTAD’s Top 100, a bellwether of overall investment trends, have issued statements on the impact of Covid-19 on their business. Many are slowing down capital expenditures in affected areas. In addition, lower profits – to date, 41 have issued profit alerts – will translate into lower reinvested earnings (a major component of FDI).
“On average, the top 5000 MNEs, which account for a significant share of global FDI, have seen downward revisions of 2020 earnings estimates of 9% due to Covid-19. Hardest hit are the automotive industry (-44%), airlines (-42%) and energy and basic materials industries (-13%).”
It adds that profits of MNEs based in emerging economies are more at risk than those of developed country MNEs: developing country MNE profit guidance has been revised downwards by 16%.
In Kenya, a possible price hike for commodities looms in the region since cargo ships supplying goods from China have not docked at the Mombasa port for more than two months following the outbreak.
Regionally, Ethiopia, Uganda, South Sudan, parts of Tanzania, Rwanda and the Democratic Republic of Congo could also be affected since they import their goods through Kenya.
China is a huge source market for a wide range of goods including raw materials, construction materials, furniture, kitchenware, clothing, electronics, vehicle spare parts and machinery meaning there will be a dearth in their supply.
With the spread of the disease in other countries outside China, the situation could get worse even seeing some businesses closing down.
KPA managing director Daniel Manduku, quoted by the East African last week said that Mombasa port receives three big imports from monthly but the four ships have not docked since the coronavirus outbreak and the consequent effects globally.