The overall strategy for response in the short, medium and long term is termed the HALT – REBUILD – SUSTAIN approach. These represent three different stages of our proposed economic approach to mitigating the effects of COVID-19 pandemic. While the effects of the pandemic are far-reaching, this brief focuses solely on the effects on the most vulnerable in the population under the HALT phase of the strategy (Table 1).
Table 1: The phases of the HALT-REBUILD-SUSTAIN approach
|PHASES &TIME FRAME||DESCRIPTION|
2 weeks to 3 months
|1. Full lockdown of all households in the country|
2. Regulated periods outside for essential needs and well-being
3. Enforced by security forces in the country
from month 4 at the end of the HALT phase, lasting from a period of 3 – 6 years
|1. End of lockdownBusinesses reopen and reestablish operations|
2. Economy re-establishes through various interventions
|SUSTAIN from the end of the REBUILD phase, lasting for a period of a minimum of 5 years|| 1. Economy back to the pre-COVID state, also ramping up for better results|
2. The economy has in place structures for enhanced growth
For the purposes of this brief, we focus on what interventions are most effective for the most vulnerable populations under the HALT phase.
Table 2: Government interventions to support vulnerable populations, MSMEs and Large Institutions
|Phases||MSMEs||Large Firms/ Institutions|
|1. Most Vulnerable|
HALT Social assistance including cash transfer / in-kind assistance programs
1. Tax reliefs
2. Assistance to pivot production towards supporting COVID-19 response
3. Subsidies for production
4. Direct contracts from government
| 1. High-interest government financial instruments|
2. Redirecting production towards COVID-19 response
3. MSME support initiatives
4. Price reductions
5. Production subsidies and tax reliefs for impacted large firmsM&E with research institutions on success and needs around the “new normal”
Continue interventions from
HALT phase skills training alongside cash transfersJob linkage programs
| 1. Continue interventions from HALT phase|
2. Subsidies for growth and innovation
3. Job creation programs
4.SmallBusiness Grants and Loans programs
5. Access to R&D grants
| 1. Continue interventions from |
2. Tax breaks Job creation incentives
3. Access to R&D grants
3. MSME support initiatives
4. Identifying new opportunities
Weaning off of social assistance for those stabilized
| 1. Wean off subsidies|
2. Growth and innovation programs
|1. FInalization of tax reliefs|
2. Regulation and controls
EFFECTS OF THE LOCKDOWN ON THE MOST VULNERABLE
The negative effect of the lockdown for the most vulnerable will be far-reaching. There are no apparent positive effects in the short term for this group of people.
- There will be a strain on health care provision: Healthcare support and infrastructure will be all but fully directed to containing and treating COVID-19. Access to health facilities will be severely restricted due to the contagious nature of the disease. Not only will the most vulnerable be seeking COVID-19 treatment, but they will also be seeking treatment from other ailments whose service has been suspended as low risk, thus increasing their vulnerability.
- COVID-19 will spread faster in high-density slum areas in urban communities: Limited testing facilities for large populations in high-density areas will mean increased spread from asymptomatic or unclear cases who have contracted the disease. Furthermore, due to the close proximity of interaction in high-density low-income areas, the disease can spread at an even higher rate.
- Prolonged school closures may result in education retardation: Vulnerable families do not have facilities to take on home-schooling effectively. Many households are run by caregivers that have not achieved primary or secondary education. Furthermore, these households do not have access to computers or the internet to access virtual learning tools. Many are relying on national radio broadcasts for classes – and these can only be run on a limited scale through the national broadcaster that cannot cover all subjects for all classes.
- Vulnerable families with little to no savings will be unable to sustain themselves without working: Blue-collar workers and those working in the informal sector, by and large, will not be able to work from home. Enforcing a lockdown will perpetuate a crisis of lack of daily subsistence to care for self and family.
- Domestic violence and crime will rise: Low income and high vulnerability lead to increases in domestic violence. The inability to obtain daily subsistence will force people to engage in criminal activities to feed themselves and their families.
ECONOMIC OVERVIEW AND ASSESSMENT OF MEASURES ALREADY PUT IN PLACE
There is no avoiding a recession, but GDP will likely sink to the lowest it has been in 50 years: Border closures will affect revenues from tourism, transport where Kenya has had strategic advantages as a regional transport hub serving Uganda, Rwanda, Democratic Republic of Congo, Burundi, and South Sudan which are in jeopardy due to cancellation of ship docking. Furthermore, the already constrained economy has little room for a stimulus package without significantly affecting all sectors of the economy. Kenya is also largely dependent on imports and has a high current account deficit. Conservative estimates predict a contraction of between -5 to 1.9% growth. Post-independence, the only other time GDP growth was this low was in 1970 at -4.7%.
Consumption, investment, and manufacturing will take a hit. Consumption makes up 80% of Kenya’s GDP, but it has slumped as businesses close and households put large purchases on hold to build savings for the long haul. Businesses are also putting investment plans on hold. Arts, entertainment, recreation, and restaurants are all but closed down and will contribute almost zero to GDP until the quarantines are lifted. Manufacturing has also been disrupted because global supply chains have been obstructed by factory closures and because companies are shutting down factories in anticipation of reduced demand. MSMEs will start laying off staff.
Agricultural exports went down but are climbing back up as cargo continues to function. Thankfully agricultural mainstays such as tea, coffee, and agriculture remain as exports have picked back up, but managing social distancing on large farms and small alike will present new challenges.
High reliance on imports from China will also affect trade. China, where this pandemic started, had to shut down manufacturing and also close its borders in order to manage transmission and to flatten the curve. As a result import from China slowed down significantly, as have imported from other jurisdictions.
While the relief measures announced by the government are welcome, many do not address the plight of the most vulnerable. Many of these interventions apply to business and more importantly, those operating in the formal sector. The World Bank Kenya economic update on Work done in 2016 tells us that over 80% of businesses operate in the informal sector. This means that many interventions may not have a direct effect on the most vulnerable. Table 3 below provides an assessment of the same.
Table 3: An assessment of relief measures on the welfare of the most vulnerable
|Relief Measure||Effects on most vulnerable|
|1. 100% tax relief to persons earning under KSh 24,000||Over 80% of the work is in the informal sector. They will not benefit from these provisions. Fr individuals that were earning Ksh 12,298 and below, there will be no change|
|2. Reduction of PAYE from 30% to 25%||Over 80% of the work is in the informal sector. They will not benefit from these provisions|
|3. Reduction of Corporation Tax from 3% to 1% form MSMEs||2% reduction on already meager turnover will not free up enough capital for MSMEs. They also reported that 70% of MSMEs have a turnover of Ksh 10 million or less.|
|4. Ksh 10 bn to be directed to elderly, orphans and vulnerable children||Modality of transfer can use existing structures, but challenges in identification will be a constraint.|
|5. Suspension of CRB listing for MSMEs||KNBS states that over 400,000 MSMEs do not last two years. This number will be increased over the crisis period. This also does not have a direct effect on the most vulnerable.|
|6. VAT reduced from 16% to 14%||Based on CPI increase of 5.82% In Dec 2019, this will reduce cushion inflation effects by 0.11% which is welcome but not sufficient for the most vulnerable.|
Moreover, goods bought in markets where vulnerable populations shop do not typically charge VAT.
|7. Payment of pending bills to the tune of KSh 13 bn and directive of the private sector to do the same||This will be felt by formal sector MSMEs and not the informal sector|
|8. KRA refunds to be processed up to KSh 10 bn in 3 weeks||KRA typically applies for refunds as credits against tax owed so this will not result in direct cash in hand that can be used by business and will not have the immediate effect on the most vulnerable.|
|9. Ksh 1bn from UHC for the employment of health workers||CHWs and CHVs needed at Level 1 have been grossly under-resourced. They will be essential in preventive knowledge and dissemination as well as verifiable channels of information for the Ministry of Health|
|10. Pay cuts from national government leadership||Effective as a signaling tool for other public and private institutions but will not release significant resources|
|11. Lowering of CBR by 100 basis point to release credit to MSMEs||Will shore up MSMEs and will provide some cushion enough from layoffs for most vulnerable|
|12. Lower cash reserve ratio from 5.25% to 4.25%||This will increase liquidity in the market in the immediate term and will provide some cushion enough from layoffs for most vulnerable|
|13. Provisions for Banks to restructure loans||This will provide relief especially to MSMEs who have high-interest risky loans and will provide some cushion enough from layoffs for most vulnerable|
SOCIAL ASSISTANCE OPTIONS
Cash transfer programs are not new to Kenya. The Kenya National Safety Net Programme (NSNP), established in September 2013, is a government social protection program. NSNP was established to provide a common operating framework for the government’s four cash transfer programs.
Table 4: Ongoing cash transfer programs
|Program||Cash Transfer for Persons With Severe Disabilities (PWSD-CT)||Cash Transfer for Orphans and Vulnerable Children (CT-OVC)||Hunger Safety Net Programme (HSNP)||Older Persons Cash Transfer (OPCT)||Urban Food Subsidy Programme (UFSP)|
|Target Groups||Persons with severe disabilities, who require a full-time caregiver||Orphans and vulnerable children||Vulnerable households||Elderly (65 and above)||Poor urban households|
|Coverage||A national program covering 45,505 households (15/16) funded by GoK||National Programme covering 246,000 households funded by GoK UNICEF, DFID and World Bank||A regional program covering 100,000 (15/16) households among poorest and vulnerable groups in four Arid Counties of Turkana, Mandera, Wajir, and Marsabit funded by GoK, DfID, Australia.||A national program covering 203,011 households (15/16) funded by GoK||County focused program covering 10,200 poor families in Mombasa (15/16) funded by JICA.|
|Eligibility||– Permanent care including feeding, toiletry, protection from danger from themselves and from other persons and the environment and thus, require intensive support on a daily basis.- Must be poor- Beneficiary/ household must not be enrolled in any other Cash Transfer program- A member of the household must not be receiving any pension and/or regular income||– The household must be extremely poor – The household must have OVCs- Household must not be enrolled in other CT Programmes||– Cannot afford to meet basic expenses (regular nutritious food, adequate housing, and sanitation, etc) let alone invest in human capital development- Lack assets to earn sufficient income even in good years- Are vulnerable to sinking into further depth of poverty in times of extreme shocks e.g. drought, livestock disease; floods, etc- Likely to engage in harmful coping strategies e.g. selling off assets, pulling children from school to earn for family, heavy borrowing- With elderly, without adult labour, long term illness, severely Disabled- Lack capacity to participate in productive programs e.g. income-generating activities||– Older persons must be 65 years and aboveMust be poor and vulnerable|
Beneficiary/Household must not be enrolled in any other Cash Transfer program- A member of the household must not be receiving any pension and/or regular income- A member of the household must not be in any gainful employment
|– Beneficiary/ Households considered extremely poor (e.g. those who use less than 1dollar per day- Those with no capacity to perform casual employment e.g. frail elderly, disabled and child-headed households).- Households whose members have no potential to work for reasons of disability, being a child or very old.- Beneficiary/ Household must not be enrolled in any other Cash Transfer program- A member of the household must not be receiving any pension and/or regular income- A member of the household must not be enrolled in any other cash transfer program|
|Amount Paid||KES 2,000 per household per month delivered every two months through appointed payment agents – currently the KCB and Equity Bank||KES 2,000 per household per month paid through the Kenya Commercial Bank and Equity Bank and its Agents||KES 5,400 every two months (from July 2016) to targeted households, delivered through Equity Bank and its Agents||KES 2,000 per household per month delivered every two months through appointed payment agent – currently the Equity Bank and KCB||KES 2,000 per household per month delivered every two months through the Postal Corporation of Kenya|
Source: Kenya Social Protection Website – accessed April 1st 2020
Internationally, as of March 27, 2020, 84 countries (up from 45 in the previous week) have introduced or adapted social protection and job programs in response to COVID-19. This amounts to a total of 283 programs currently in place. Social assistance is the most widely used 150 out of the 283 programs. Social insurance and supply-side labor market intervention follow at 91 and 42 respectively. Interesting to note, however, no low-income countries have developed social assistance programs as yet.
Within social assistance, cash transfer programs are clearly the most widely used intervention by governments. Fifty-eight countries have those cash transfer programs in place with 35 being brand new initiatives specifically in place as COVID-19 response.
Countries with existing cash transfer programs tend to leverage them, even applying multiple schemes at the same time or formulating parallel programs using the same frameworks. This could be instructive for Kenya in being able to quickly put a framework to support both urban and rural vulnerable populations. The Philippines, for example, introduced 5 new cash programs alongside its national Pantawid program.
Countries are being innovative and developing innovation around social assistance alongside cash transfers. Utility subsidies that waive fees for basic services are being run in El Salvador. Bolivia is running loan deferments and COVID-sensitive public works are being tested in the Philippines. Each approach addresses specific weaknesses in their countries.
Other countries are modifying existing programs using six basic strategies. (i) Increasing coverage (Brazil), (ii) higher benefit levels (China), (iii) advance payments (Indonesia), (iv) simplifying administrative requirements (Romania), (v) plugging COVID-response schemes into existing delivery platforms (Pakistan), and (vi) providing innovative design solutions, such as school feeding programs delivering food directly to children’s homes or nearby distribution points (Jamaica / India).
- RECOMMENDATIONS TO SUPPORT MOST VULNERABLE
Kenya should use existing cash transfer programs in parallel to fast track countrywide assistance to the most vulnerable. These programs already have names and contact details of the vulnerable. This can be further revised to include individuals who have now fallen into vulnerable status as a result of COVID-19. County governments will also be instrumental in supporting these initiatives.
Eligibility criteria should be relaxed, and registration harmonized across platforms. This includes allowing for wider definitions of the target groups, larger coverage, higher allocations and clear registration processes for new additions groups (for reevaluation post -COVID-19). Overlap in eligibility across cash transfer programs should also be regulated. It should also be noted that the service providers for cash transfers are, by and large, the same – making scaling up much easier. The process of registering beneficiaries for these programs will need to be done on a rolling basis.
It is imperative that social assistance programs are tracked for progress against outcome objectives. From the start as interventions are being designed, an M&E framework should be instituted in order to gather data, evaluate the success of the program and iterate for enhancements along the way. This information will demonstrate the success rate of interventions, and also go a long way in future social assistance development and design.
Activating the use of Huduma Namba as it would be a crucial tool at a time like this. To support a coordinated response, a cross-cutting broad-based identifier would make formulation and roll out of COVID response much easier. Continued registration can proceed alongside the response mechanisms.
Reduce tax incidence on an essential basket of goods and services most consumed by vulnerable populations, including food, shelter, medication, transport and communications. This will help cushion the effects of the socio-economic downturn.
Broaden the channel access of KBC to provide more classes to more individuals via radio and television. KBC should deepen partnerships with the Ministry of Education, as well as other radio and tv stations to broadcast classes for all levels and subjects of education.
The security forces should put together a crime response unit in conjunction with the DCI and hospitals to respond swiftly and effectively to incidents of domestic violence that are bound to escalate. A hotline and an information campaign around reporting should be instituted and rolled out with the support of the private sector. Community support groups should also be involved to create structures through which quick response channels can be activated specifically with domestic violence.
Controlled centers of access in high-density areas where essential amenities can be distributed can also support testing. Providing vouchers and other goods and services is important, but controls around access still must be adhered to. Therefore in order to limit a lot of movement around densely populated areas like slums, temporary but central stations can be set up that allow only a subset of people in at a time (zoning densely populated areas can support this approach) so that people can access food, water, soap and other essential goods and services. This will also allow health officers to undertake basic testing (taking of temperature and other interventions) and disseminate and gather information to support the communities.
In addition, other in-kind relief programs can be used alongside cash transfers. We propose an additional set of options for support over the HALT phase. These are taken from the literature around what other countries are doing to mitigate the socioeconomic effects of COVID-19. These can apply to all vulnerable groups:
- Electronic food and hygiene vouchers. Using mobile money, transfer a set amount of money that can only purchase food. Additional food benefits for children who benefited from school feeding programs. (Argentina, Costa Rica, India, Indonesia, Kazakhstan, Paraguay, Philippines, Venezuela amongst several others)
- Food and hygiene delivery services for elderly and other immobile individuals using agents such as community health workers, military or the Red Cross or partnerships with delivery firms. (Armenia, Bulgaria, Colombia, Dominican Republic, Russia)
- Waive electricity and water costs (Colombia, El Salvador, Jamaica, Bahrain, Belgium)
- Benefits under safety net programs to be increased (Bangladesh, China, Egypt, Thailand)
- Food subsidies to producers to be passed down to households (Bangladesh, Kosovo)
- Pay wages or wage subsidies and/or salaries of select industries (Jamaica, Philippines, Turkey, Uzbekistan)
- Suspension of eviction from dwellings, or effected reduction in rent/ subsidies for owners. (Greece, Philippines)
- Early payment of pensions. (Costa Rica, Kosovo)
- A mandatory partial waiver of school fees where there is home-schooling
- interest-free loans for the payment of salaries
Written by Wangari Muikia, Lead Economist, Expertise Global Consulting Ltd(EGCL)