TAKING THE BLOW

Aviation, tourism most hit sectors—Moody’s

Pharmaceutical and real estate are among least exposed

In Summary

•Most affected sectors in Kenya includes hotel and tourism, flower farming, export processing zones and the Small and Medium Enterprises.

•61 per cent of the businesses reported negative business effects due to the Covid-19 outbreak,” a survey by Kepsa indicates.

Tourists along Mombasa beach
Tourists along Mombasa beach

The automotive industry, tourism, aviation, and non-food retail sectors face the highest exposure to financial distress as the global economy grapples with the effects of the coronavirus.

A survey by business and financial services company Moody’s also lists consumer durables, apparel, and gaming as among the most affected.

Manufacturing, chemicals, media, oil and gas, mining and agriculture remain moderately exposed, the survey shows.

 

 Sectors with low exposure are construction, defense, equipment and transport, rental, packaging, pharmaceutical, real estate, food retail, telecoms, and waste management.

“Covid-19 induced economic disruption will disproportionately impact some industry sectors more than others,” Moody’s says in the report.

Hundreds of businesses and companies in Kenya are currently struggling to stay afloat in the wake of reduced economic activities.

The most hit sectors include hotel and tourism, fresh produce and flower farming, export processing zones and the Small and Medium Enterprises.

The sectors have reported massive job losses as firms turn to austerity measures to deal with revenue shortfalls. Companies have also resorted to pay cuts to retain employees amid shrinking revenues.

More than 50 major hotels at the coast (Mombasa, Diani,Kilifi) and Naivasha have either closed or reduced operations.

At the coast, about 9,000 hotel employees have been directly affected, the Kenya Association of Hotelkeepers and Caterers said yesterday, with hundreds of suppliers, contractors and other service providers being thrown out of business.

 

“We are looking at empty hotels,” KAHC executive officer Sam Ikwaye told the Star.

More than 1,000 employees in the flower sector have been sent home as exports remain suppressed.

In aviation, Kenya Airways has grounded most of its planes after stopping international operations, a move that leaves more than 2,000 jobs at stake. It has forced employees to take pay cuts.

The national carrier is losing an average Sh300 million per day, the amount it generates daily on international flights.

The International Air Transport Association (IATA) has warned that airlines could lose up to Sh11.3 trillion if the coronavirus spread continues unabated.

Media houses are grappling with low revenues on reduced advertising. Some have already issued redundancy notices with others asking their employees to take pay-cuts if the businesses are to remain afloat.

In the retail sector, some supermarkets cut down on the number of staff citing a tough business environment.

The Kenya Association of Manufacturers has estimated that 16.7 per cent of its over 900 members are considering downsizing to deal with lower revenues as a result of supply chain disruption.

Chairman Sachen Gudka has however asked manufacturers to try and safeguard jobs.

“We must do our utmost to ensure that there are at best, no, and at worst, minimal job losses,” he said.

International trade which supports more than 7.4 million SMEs in the country has also been disrupted as a business with China, Kenya’s biggest import source, remains low. Bilateral trade between the two countries is valued at approximately Sh382 billion.

A survey by the Kenya Private Sector Alliance (Kepsa), on 17 key sectors of the economy, indicates about 21 per cent of businesses reported losses of between Sh1 million and Sh5 million.

Sub-sectors that are most affected are textile and apparel (25%); plastics and rubber (14.29%); building, mining and construction (14. 29%); food and beverages (14. 29%).

More than half (53%) of the surveyed businesses were large companies with more than 100 employees.

“On average 61 per cent of the businesses reported negative business effects due to the Covid-19 outbreak,” Kepsa says in the report.

The Kenya Federation of Employers (FKE) has since expressed concerns over continued job losses.

''This is a big threat to the country’s job market that is already at its low,” executive director Jacqueline Mugo told the Star.