Dean’s Perspective: Socio-Economic Impact of COVID 19
Corona virus, christened Covid-19 by WHO is a virus that affects internal organs spreading rapidly from one infected person to another through close contact such as shaking hands, hugging, kissing, and in more other ways. The life span of the virus depends on where it lands e.g. on some surfaces it can last for up to 24 hours whereas on tissue up to 5 days. The general symptoms include: fever, difficulties in breathing, coughing and sneezing. According to WHO it appears the virus tends to spread mostly through respiratory droplets.
Covid-19 is now a global pandemic ravaging nations across the globe- over 199 countries so far. To date over 600,000 virus infections with over 30,000 deaths have been reported worldwide. With no known cure to the virus at the moment, the challenge is enormous and is likely to have unprecedented impact on the socio-economic sector of all nations. Starting as a small bush fire in Wuhan, China four months ago, it’s now moved by leaps and bounds to affect the entire globe courtesy of the modern ease of air travel and movement of people – from the Far East to deep West and from North to the South. Europe and particularly the Mediterranean-ream Countries appear to be the epi-center of the virus. The America’s are also grappling with the invasion. The super-power and the wealthiest nations on earth have not been spared either; their leaders are now worried and scared just like the developing nations in the south courtesy of Covid-19.
The pandemic is causing such disruptions that nations have been caught flat-footed. Most are now straggling in looking for solutions to limit virus’s devastating effects. Social life is changing in dizzying speeds from partial lockdowns to full lockdown; curtailed movements and maintenance of social distance has been encouraged; ban on international flights as well as unprecedented peace time national border closures.
Most countries have ‘hurriedly’ closed their borders to incoming traveler’s as well instituting strict 14-day quarantine period for the new arrival who include their own citizens; as one commented that “…the government is treating them like criminals…” The national economies have not been left behind. Lockdowns of most economies globally has affected movement of goods as well as people. Commerce and trade are almost at a standstill. Export and Imports, especially from China where over 70% of manufactured products come from have been hit hard. The total lockdown in those countries have almost brought imports to a standstill; hence affecting production also in the other countries including Kenya.
Opportunities and Challenges
This pandemic has provided both opportunities and challenges; though the latter appear to outweigh the former. Challenges on one hand include the unpreparedness of the nations to deal with a fast spreading pandemic that has no known cure at the moment. Opportunities on the other hand, are in terms of finding new innovative and effective strategies to deal with the virus. Researchers and pharmaceutical companies are racing against time to curtail the spread as they attempt to develop an effective and efficient anti-dotes to curb the virus. Manufacturers and other entrepreneurs have not been left behind either. Most have gone back to the drawing board in re-examining the feasibility of their Strategic Plans. New strategies have to be found to counter the effects of the pandemic. Production and distribution of essential material and products has to continue despite restrictions to avert the spread of the virus. Other philanthropic organizations and individual Foundations are not left behind in making donations in kind to ease the burden of the most vulnerable nations and human beings.
Covid-19 has become more painful to most organizations by the day. Businesses are being affected in unprecedented and unpredictable ways pointing to turbulent times in the near future and beyond. Companies are looking at various ways of mitigating the effects of the calamity and choices are limited – either shut down or come up with innovative and creative approaches to keep surviving.
The latter group are putting in place a number of strategies such as: investing in alternative marketing and food distributions (Tuskey’s Supermarkets), flexible work schedules for employees (Kenya Airways), scaling down operations and do what is necessary (Amber Construction Ltd.) and carry out maintenance as you keep networking with key partners ( Kempinski Hotels).
As regards Universities and other educational and training institutions new innovative opportunities are available towards effective delivery of learning. As these institutions are forced to close, students lose opportunities to learn on a face-to-face basis including interactions with others. However, novel frontiers are opening up. These institutions are exploring and utilizing the use of Information and Communications Technology (ICT) platforms in creative ways. These include e-learning mode, tele-conferencing, skype and other uses of the internet and social media to deliver learning.
Immediate Impacts of Covid-19
The immediate impact of Covid-19 touches all sectors in the development of a country. They range from social activities, production of goods and services, movement and distribution of products and the wellbeing of the nation.
Socialization: Due to the government directives, people are no longer free to move or associate with their family and friends. They are expected to keep a safe social distance of not less than 1 meter apart. Hence entrepreneurs cannot interact freely with clients leading to low sales. Social distancing as a new way of life. Social visits for ceremonies and other cultural events are likely to be reduced to nuclear family members only. Dwindling incomes and savings and hence social strive in the families are likely to occur.
Most activities brought to a standstill including: sporting, athletics, development projects, educational services, Normal scheduled activities – sporting, conferencing, travelling have been cancelled or postponed. However, restrictions are also likely to Parents likely to bond more with their families but fear of the rise of domestic violence.
Security: with the new order of lockdowns, the security of people and their property is becoming murkier. Thefts, robberies, break-ins and burglary to name a few are among some of the negative effects on society resulting from the current situation. Hence there is need to strictly enforce the government directive by availing sufficient security to enforce as well as protect the citizens during this period.
Transportation: Hiking of fares has been witnessed by PSV vehicles in the pretext that the number of passengers have reduced from 14 to 8 for the normal 14-seater matatus to keep acceptable social distance. Transportation of goods and farm produce is also affected in light of the partial lockdown by the government. Other forms of transport including the railways and to the airline industry have suffered equally. The airline passenger transport particularly for International travel has come to a standstill, hence affecting one of the major sector in the country – Tourism.
The Micro, Small and Medium Enterprise (MSME) sector also known as the Informal Sector which employs over 80% of the Kenyan working population has also been hit hard. Incomes have been affected and hence very few customers due to the fear of contracting the virus. This sector encompasses Boda Boda operators, street hawkers, ‘mama mboga’s’, artisans and Jua kali operators. Micro-enterprises – cost and no customers.
Manufacturing and Production: Produce/foodstuff Market- due to movement supply is quite high but no buyers due to lockdown. The supply side is also dwindling due to curtailed movement of produce from the farms. Manufacturing has ground to a standstill if not limping.
As businesses slow down or close their production activities altogether sending workers home, travelers cancelling their hotel bookings, and shares and stocks fall in the capital markets, Covid-19 has led to not only a national but also a global economic crisis. Besides the health crisis, the socio-economic impacts have a devastating effect on the wellbeing of families and communities. Lost incomes for vulnerable families due to the outbreak can lead to the sharp rise in poverty, missed or poor meals for children and the old folk and reduced access or availability of healthcare far beyond Covid-19.
There is a direct economic impact from lives lost in an outbreak, beyond the human tragedy as a result of an epidemic. Besides losing family members who may be sole breadwinners, income and their in-kind contributions to household income such as childcare are also lost – resulting in a major financial burden. Covid-19 is threatens to do exactly this and even go beyond. The Economic impact has both the Short-Run and the Long-Run effects.
In the short-run
The effects in the short-run are a drop in wages and incomes as well as a hike in poverty that will affect the families and the nation. Such short-term economic impacts can turn into reductions in long-term growth. As the health sector consumes more resources and as people reduce social activities, countries invest less in physical infrastructure. The short term impact results from direct costs due to sickness and mortality of the most vulnerable groups. Increase in diseases and ailments set in leading to imports of essential drugs including those for treating patients with signs of Covid-19.
For instance in Kenya as a short and immediate term measure, the President announced a raft of strategies including reduction of taxes (PAYE Corporation tax, Turnover tax and VAT), and injecting more resources (Kshs.10 billion) towards the elderly, orphans and the vulnerable.
In the long-run
The Long-Run effects involve loss of human capital and infrastructure deterioration as resources are diverted to cater for the health sector. This results from what may be called “aversion behavior.” These are actions taken by different people, organizations and particularly governments to assist its citizens avoid catching or spreading the virus.
Governments instituted bans on most non-essential types of activities ranging from partial to total lockdowns by imposing curfews to not only limit contact between citizens but also stop the spread of the virus. As an example, the government Kenya ordered a dusk-to-down lockdown besides other measures beginning Friday March 27th, 2020 and also banned public gatherings including social and sporting activities. Other countries such China ordered factories shut as it imposed total lockdown to the cities and provinces of origin. Spain on its part ordered a total lockdown. Companies, businesses and educational institutions have also taken proactive measures to avoid infection. These are all aimed at mitigating the spread of Covid-19.
As part of the long-run impact, new opportunities and innovative solutions to deal with Covid-19 after effects will be in place. A new order of social and economic activities are likely to be created and developed.
Based on the current situation both nationally and globally, it is clear that Covid-19 is fast impacting negatively the entire globe in such unconceivable manner and with deadly fury. On the other hand, the coping strategies whether through government bans or business decisions are resulting in massive job losses and hence lost wages for workers. The workers particularly in the informal sector, who form the majority at 80%, are hard hit. Individuals also through government directives have minimized trips to markets, restricted travel, and minimized the going out for business and other social activities.
These actions have tremendous negative effects to all sectors of the economy in un-predictable ways; the sectors being the health sector, manufacturing, retail and other services, trade and transportation and education among others. Recession is likely to set in as Annual Budgets and Strategic Development Plans are left in disarray. Consequently these results into reduced incomes through both the supply side (reduced production drives up prices for consumers) and the demand side (reduced demand from consumer’s hurts business owners and their employees). Economies, especially those of the LDC and some MDC are likely to crumble – since they may not have national reserves and the available resources are channeled to fighting the epidemic leaving development programs in limbo!
Prof. Peter B. Kibas, PhD, KIM, MISB(UK)
Professor of Entrepreneurship & Management
Dean, School of Business and Economics