Flash Report /
Sub Sahara Africa

Kenya's president orders new Covid lockdown, negative for banks and EABL

  • Covid-19 deaths now at 7 per day as hospital facilities face strain

  • Bars set to be closed and sale of alcohol in restaurants banned. EABL set to experience slow sales

  • New lockdown comes just before tourist high season, setting the stage for closure of hotels

Kenya's president orders new Covid lockdown, negative for banks and EABL
Faith Mwangi
Faith Mwangi

Equity Research Analyst, Financials (East Africa)

Tellimer Research
29 March 2021
Published byTellimer Research

In a televised presidential address, Kenya's President Uhuru Kenyatta enacted stringent new measures to combat the rise of Covid-19 cases and hospitalisations which have put a visible strain on the country’s health facilities.

The number of current active Covid-19 cases in the country is 36,343. According to the president, the death rate has spiked from the January and February rate of 3 people per day to 7 people a day, the highest since the pandemic first hit the country in March 2020.

At the end of January 2021, Kenya’s Covid-19 positive test rate stood at 2.6%. By Monday 22 March, the positive test rate had jumped to 19%, and health experts estimate that the positive test rate is now as high as 22%. The major concern in this third wave is that there has been a notable spike in hospitalisations in the country, unlike in the first wave when there were minimal cases requiring hospital treatment. The government has confirmed several major hospitals in the country lack intensive care unit (ICU) beds for patients and most have waiting lists for the beds. This has partially resulted in higher death rates as patients are unable to access healthcare in good time.

Given this backdrop, the president enacted new measures, with the key points being as follows:

  1. Movement by road, rail, or air into and out of the disease-infected area is restricted. This zoned area comprises the five counties of Nairobi, Kajiado, Machakos, Kiambu and Nakuru. This will be negative for the tourism sector as the upcoming Easter high season already had significant local tourist bookings. As there was no indication of when this restriction on movement will end, some hotels have opted to close entirely and wait for further information. The recovery in the tourism sector has been set back, with expected loan recoveries from the sector now unlikely to happen in 2021 and NPLs in the sector expected to creep up.

  2. All public gatherings and in-person meetings are suspended within the five counties until further notice.

  3. The nationwide curfew continues, with the hours extended to 8:00pm until 4:00am in the zoned area comprising the five counties mentioned above. The rest of Kenya will observe curfew between 10:00pm and 4:00am daily. The reduction in business hours is negative for the economy.

  4. Immediate suspension of all in-person learning at Kenya's educational institutions including schools, universities and vocational colleges. We see this as negative and expect some NPLs to arise in the education sector. In 2020, several private institutions officially closed as the prolonged period without income from fees strained their finances. Additionally, educational institutions support other businesses that operate in their vicinity and these will suffer income losses as well.

  5. The operation of bars is suspended in the five affected counties. Similarly, the sale of alcohol in restaurants and eateries in these counties is also prohibited. This is negative for East African Breweries (EABL) as the counties affected are key sales regions for the brewer.