Kenya is currently experiencing the fourth wave of Covid-19 infections with positivity rate for tested samples now ranging between 15-18% daily. The spike in infections is being caused by the spread of the Delta variant, which is believed to be more transmissible. Total confirmed cases in Kenya stand at 205,356 and cumulative tests so far conducted are 2,149,376 against a population of more than 50mn. Cumulative fatalities remain low at 3,995 deaths.
In response, Kenya's president Uhuru Kenyatta has revised the country's vaccination plan and set some new targets:
Vaccinate 26 million adults by 2022 with 10 million expected to be vaccinated by December 2021 (the previous target was 10 million adults by June 2022).
Vaccines from Johnson & Johnson will now be imported to supplement the AstraZeneca vaccine. These are expected to arrive this month. Unlike the more widely used two-shot AstraZeneca vaccine, the Johnson & Johnson is a single-dose vaccine, which is expected to help accelerate the vaccination rate.
Herd immunity target date is now within the next 12 months with the president open to importing vaccines from other companies such as Pfizer for emergency use. Vaccine uptake and distribution has been improving significantly and the continued vaccine availability will determine whether the target will be achieved.
The president is now pursuing a mid-term strategy where the government will complete the logistics of filling and packaging the imported vaccines in the country to speed up production. This is also aimed at turning Kenya into the East Africa supply hub for vaccines.
These targets have also been set so that the country does not go in and out of lockdown with every new surge in Covid infections, as has been the case over the last year (Kenyatta made this point at the presidential address on 29 June).
We believe the chances of another imminent lockdown have significantly reduced with the new vaccination plan as well as the latest containment measures that have been put in place for the next two months – large public gatherings and political rallies have officially been halted and curfew hours have been maintained at 4am to 10pm to restrain movement.
These measures would allay fears over the rising infection rates and lockdowns in our view, which is promising for the country's economic growth in Q3 21. For instance, in June, private sector credit growth accelerated to 7.7% and we expect the upward trend to continue in Q3 21 if the government does not implement further lockdowns.
Run-up to 2022 election still a concern for Covid spread
Political rallies were one of the key contributors of the second and third waves of Covid-19 infections in Kenya. With the general election slated for August 2022, the country is just about to get into full pre-election season with campaigns set to start in the coming months. It remains unclear whether the president is keen to continue to prohibit political rallies beyond the two months. Even with restrictions in place, the public have often disregarded rules when political rallies were held with no social distancing observed or masks being made mandatory at these events.
These political rallies could prove to be super-spreader events and lead to a return to strict lockdown measures that could be detrimental to the economy as it has for the past year. For instance, the various cycles of lockdowns over the last year have proven to be negative for private sector credit growth and asset quality for banks due to the impact on sectors such as consumers, education, tourism and real estate.
That said, while the fourth Covid wave puts Kenya's growth story at risk (6.0% real GDP 2021-2026 CAGR, according to IMF forecasts, which is significantly higher than Sub-Saharan Africa peers Nigeria, at 2.3%, and South Africa, at 1.5%), it is unlikely to derail the top-down investment case.