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The Impact of Covid19 on Businesses and Economy

Peter Musila 4 months ago
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COVID-19 is generating a lot of concern and confusion for businesses. All companies across the globe are experiencing negative impacts. The novel coronavirus has been the topic of discussion since the turn of the decade.

Less is known about it since 31st December 2019 when Wuhan reported the first case and is slowly spreading across the globe, causing so much panic. Globally, international trade, financial markets, microeconomic indicators, and health sectors are adversely affected.

A study by the World Health Organization indicates that the new coronavirus could kill 150,000 people in Africa unless urgent action is taken, and nearly a quarter of a billion people will be infected. This means direct effects to the businesses around the globe and the economy at large. For this reason, we have chosen to discuss the impact of the virus has on businesses and the economy.

Globally, economic activities have been brought to a standstill due to fears from the rapid geographical spread of the coronavirus and the high infection rate. A study by the Organization for Economic Cooperation and Development (OECD) indicates that the world is set to experience the slowest economic growth pace since 2009 during the 2008/2009 financial crisis as a result of the disruption.

The financial and commodity markets will experience a sharp decline as most investors are currently resulting in placing their money in safe-haven assets the likes of Gold, whose performance is up by 9.7%. The collapse of the oil prices has profoundly affected the stock market; hence most investors in the equities market becoming net sellers.

The stock markets recorded a sharp decline after the first case was reported in the country. For instance, Safaricom and KCB recorded 5.4% and 7.0%, respectively, in one day.

The supply chains have been highly disrupted since the covid19 was recorded. Kenya imports approximately 21.0% from China, something which has changed since the manufacturing sector is lacking labor caused by fears and lockdown disruptions. As many countries and world capitals have been put under strict lockdown, major industrial production chains have been brought to a halt.

Commodities making their way into the Kenyan market either from China or South Korea might see the prices skyrocket as time goes by. Demand is higher than supply. The Kenya Association of Manufacturers has warned that the outbreak could cause a shortage of intermediate goods used to manufacture products that are exported, a negative impact to the Kenyan economy.

According to a report done by the Kenya Private Sector Alliance (KEPSA), 61.0% of businesses surveyed stated that the pandemic had had a direct negative impact on their businesses. No one can project when the coronavirus will be controlled adequately; the businesses will keep on having employees work from home if possible while others remain shut.

Lockdown will keep on disrupting deliveries causing massive delays. The demand for export will reduce, prices for commodities will shoot, capital flows will significantly reduce, travel will be minimal, and attaining credit from financial institutions will be a hard task repaying the loans. Few foreign and local investors will be comfortable to toss a coin.

Due to the hard times brought about by the Covid19, Diaspora remittances will reduce significantly. The decline in economic activities will negatively affect disposable incomes. Kenya recorded USD 2.8 billion from overseas in 2019, and is one of Kenya’s largest forex reserves key to Central Bank in stabilizing the currency. With the changes, the Central Banks seeks to purchase KSh 40.5 billion from banks in a bid to bolster its dollar reserves.

As Jeremy Farrar, Director of the Wellcome Trust, says: “We are all in this together, as this pandemic will affect our families, in every country. We will leave no-one behind.” However, there is a light at the tunnel as key players and respondents are optimistic that once the dust settles on COVID-19, businesses and consumers will be quick to return to normal.

How can we combat the fear of the unknown that COVID-19 amplifies? lets discuss via our social media handles.

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