The impact of covid-19 on small businesses in Kenya

 The impact of covid-19 on small businesses in Kenya

Image: MoneyandMarkets

Forty-three-year-old Glady Wateri, a fishmonger outside Kikuyu market makes about Ksh.3,000 a day, this is about 50 per cent less what she would make before the novel Coronavirus hit the country and sent tens of businesses back to the drawing board.

Her case is not unique. Thousands of other Small and Medium-Sized enterprises have hugely been affected by the COVID-19 pandemic. The implementation of the dusk-to-dawn State curfew, introduction of wide-scale remote working policies and limitations on social gatherings, among other measures made it difficult for them to function seamlessly.

“We hope the lifting of the state curfew by president Uhuru Kenyatta as announced during the Country’s Mashujaa day on October 20th, 2021 will cause a positive impact for our businesses moving forward.” Said Wateri whose large customer base is Kenya’s working-class whom a majority would make a purchase in the evening while going home between 7 Pm and 10 PM – the same time the curfew was imposed.

The implementation of the dusk-to-dawn State curfew, introduction of wide-scale remote working policies and limitations on social gatherings, among other measures made it difficult for them to function seamlessly.

According to Martin Wanyoike, a local travel bags trader, not even the economic policy measures put in place could save them from the negative impacts of the virus.

“We have hard our labour force affected, household income reduced and unimaginable changes to the prices of essential commodities. I have never seen business this low as not so many people are travelling for fear of contacting Covid-19”. Said Wanyoike.

In terms of the labour force, Covid-19 made work difficult for SMEs who largely depended on social gatherings to make ends meet. The virus demanded that they abide by social distancing measures. While this effect spreads on household income for each of the employees, the effects made it even harder for the businesses to survive.

Besides the curfew, cessation of movement dealt a huge blow to SMEs. The directive which required no movement of people in and out of Nairobi saw commercial operations affected. This meant delivery of goods in whichever sector could be made outside the city neither could customers in the other counties access the goods. Income was lost.

We have hard our labor force affected, household income reduced and unimaginable changes to the prices of essential commodities. I have never seen business this low as not so many people are travelling for fear of contacting Covid-19

Martin Wanyoike

To survive, some SMEs had to take loans, research by Georgetown University on the economic impact on small retail shops in the country shows that 38 per cent of retailers reported having taken out formal loans from financial institutions due to COVID-19, while 29 per cent accessed informal loans from relatives and friends as a way of dealing with the effects of the pandemic. 

Eighteen per cent of respondents took out both informal and formal loans. However, those with outstanding loans had problems fulfilling their repayment obligations hence receiving restructuring arrangements from their bank. A different group needed access to additional funding to maintain their current loan.

In a survey by International Finance Corporation, 38 per cent of MSMEs expected to maintain their business volumes despite the impacts of the virus. Almost a third of the business owners anticipated a decrease in their volumes, particularly those in the construction sector.

About 10 per cent of the businesses expected to be forced to at least temporarily close down their business operations. These businesses were mainly active in the education sector as well as the culture, sports and entertainment sectors. The remaining 20 per cent of businesses planned to increase their volumes over the upcoming quarter.

…those with outstanding loans had problems fulfilling their repayment obligations hence receiving restructuring arrangements from their bank. A different group needed access to additional funding to maintain their current loan.

Sectors with a more optimistic business outlook were largely planning to maintain or even hire more employees while sectors with more negative business expectations saw themselves more likely to lay off employees.

Besides, digital solutions constitute a unique opportunity for businesses to limit physical transactions with customers during the pandemic.

The survey recorded that a considerable increase in sales generated online from 17 per cent prior to the crisis to about 27 per cent of total sales since the outbreak of the pandemic.  

Overall, 84 per cent of interviewed businesses reported using digital solutions and tools – small- and medium-sized businesses were even more likely to have benefitted from such.

Almost 60 per cent of the MSME owners stated they used digital payment services to deal with the COVID-19 pandemic. Other important digital tools and solutions included online marketing, e.g. via social media channels, as well as offering products and services online.

To further remain resilient and survive, Kenya Association of Manufacturers and KPMG noted that 78% of manufacturers, including SMEs in the sector, had to swiftly shift their focus from increasing profitability, revenue and domestic market share pre-Covid to currently reducing costs, retaining jobs, and improving cash flow.

 Across all business sizes, businesses on average used about two of the different digital tools and solutions such as digital payment services, online marketing, e-commerce platforms and communication apps et cetera.

To further remain resilient and survive, Kenya Association of Manufacturers and KPMG noted that 78% of manufacturers, including SMEs in the sector, had to swiftly shift their focus from increasing profitability, revenue and domestic market share pre-Covid to currently reducing costs, retaining jobs, and improving cash flow.

“Currently, our focus is on building the resilience and sustainability of our manufacturing sector to prevent us from suffering from shocks brought about by crises, such as Covid-19.” Said KAM CEO Phyllis Wakiaga.

Thank you for stopping by, for any business or tech news tips, please share to info@thebusinessbreak.com or bizzbreak@gmail.com

Abel Muhatia

Editorial Content Developer

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