OPINION: Reflecting on COVID-19 learnings and angling for recovery
By Joshua Oigara
It has been an exceptionally tough year behind us.
The COVID-19 pandemic has triggered the strongest economic contraction in modern history, leaving in its wake the biggest and unprecedented healthcare crisis with deep-running ramifications for businesses, households, employees, suppliers, customers and virtually everyone.
In East Africa, the second and third quarters of the year were some of the harshest in decades.
Since March 2020, when the region announced the first Covid-19 cases, the crisis has jeopardised years of development and decades-long gains against poverty and inclusive growth while threatening the lives and livelihoods of millions.
The downside risks remain in the event of second or even third wave of infections that has forced new lockdown measures in some countries especially in Europe.
But we remain optimistic that the development of the vaccine has covered significant ground that could make 2021 comparatively easier.
For individual economies, it provides an opportunity for greater recovery. Based on our year-end assessment, we are confident that modest growth will rebound in the region in 2021.
We foresee an upside in the economy from the second quarter of the year. All present signs indicate that the worst of the economic downturn appears to be in the rearview mirror.
Although recovery is expected to be gradual, it is safe to say that an economic forecast of around 5% GDP growth is possible in 2021.
My confidence in a positive outlook is founded in the collective knowledge we continue to acquire on living with the virus and the vaccine science now being deployed that is expected to defeat it.
Due to these two critical factors, the global and even regional supply chains are increasingly being restored, shuttered businesses are reopening and there’s light at the end of the tunnel with the various adaptive measures deployed by governments to aid revival.
But most importantly there are signs of recovery in the real economy with catalytic sectors like trade, transport, and manufacturing witnessing a significant level of vibrancy following the easing of the lockdown measures that had earlier been imposed.
Following a steep decline witnessed in the second and third quarters of 2020, which saw GDP growth revised from an average of 5% to just slightly above 1.5% the regional economy has proven remarkably resilient.
The Kenyan economy has particularly seen signs of better times, setting the stage for strong post-recovery growth in 2021.
The vaccine programmes underway in various nations around the world and those in the offing in the coming months are promising a turn-around from the second half of the year.
Some studies have shown that vaccines will slow down the pandemic. Should the developed nations win on the vaccines, we will certainly witness a change of trajectory in sectors such as tourism which took a direct hit.
The concerns of 2020 are also giving us a new strength to fight to build our businesses and for the economy to grow in 2021 and beyond.
In the banking sector, we have remained operational supporting the wider economy at a time of need. The industry is well primed to steady the ship during these turbulent times.
Through partnerships with various levels of governments and innovative liquidity plays, the broader financial sector is positioned to support small and medium enterprises (SMEs), struggling sectors like the tourism and education sectors as well as emerging markets and the informal sectors to ensure that all sections of the economy emerge successfully on the other side of this crisis.
Banks will have to continue and redouble their effort in facilitating an economic turnaround, working with authorities to enable businesses starved of cash flow to return to trading and bolster confidence in consumer sentiment and business investment.
One of the positives of this crisis is that it brought to the fore the possibilities of the digital economy.
In response to the COVID-19 outbreak, close to half of firms are starting to use or are increasing the use of digital platforms according to a year-end World Bank report on Kenya.
More firms are investing in digital platforms (49 percent) than they are investing in software or digital equipment (13 percent), changing their product mix (18 percent) or increasing working from home (12 percent), says the World Bank report.
As a result of these shifts, e-commerce has grown exponentially since the outbreak as demonstrated by increased spending on digital platforms, while financial institutions have enhanced their digital offerings to meet the changing customer behaviour.
What this means for the business community is that organisations that embrace digital solutions have greater resiliency in the face of adversity—and a leg up on the competition that will enable them to recover faster and pivot from playing defence to chasing growth.
In my view, the pandemic will have several lasting implications for the future of financial services across customer behaviours, products and services, operating models, and ways of working. But I’m optimistic about the future. We have crossed the Rubicon.
Mr Oigara is the KCB Group CEO and MD.