SURVEY

Reducing costs, maintaining jobs top priority for manufacturers

Despite fears of the impact of the pandemic on local industry, 81 per cent of manufacturers say they are not likely to close down as a result of the impact of COVID-19

In Summary
  • According to the survey, 78 per cent of manufacturers’ top priority is reducing costs, 61 per cent are keen on job retention with 53 per cent giving precedence to improving cash flows.
  • On employment, 40 per cent of surveyed manufacturers have reduced their casual employees whereas 17 per cent  have reduced the permanent workforce.
Trade PS Chris Kiptoo with KAM chairman Sachen Gudka, January 17,2019.Photo/Enos Teche
Trade PS Chris Kiptoo with KAM chairman Sachen Gudka, January 17,2019.Photo/Enos Teche

Manufacturers have cited reducing costs and maintaining jobs as top priorities during the COVID-19 pandemic.

According to the survey, 78 per cent of manufacturers’ top priority is reducing costs, 61 per cent are keen on job retention with 53 per cent giving precedence to improving cash flows.

“It is important to assess the impact of COVID-19 on businesses so as to work with various partners and stakeholders, including the government to develop appropriate policies that will cushion the economy from the adverse effects of COVID-19 as well as minimise job losses,” said KAM Chair, Sachen Gudka.

 

Gudka noted that while it is important to have measures in place to curb the spread of the virus, the regulations coupled with uncertainty are likely to lead to a prolonged recession that will affect business continuity. 

“Despite fears of the impact of the pandemic on local industry, 81 per cent of manufacturers say they are not likely to close down as a result of the impact of COVID-19,” says the report .

However, this number reduces to 76 per cent for manufacturing SMEs. 

On employment, 40 per cent of surveyed manufacturers have reduced their casual employees whereas 17 per cent have reduced the permanent workforce.

On the other hand, 91 per cent of non-essential manufacturers have seen a significant decrease in demand for their products compared to 74 per cent of essential goods manufacturers.

42 per cent of manufacturers are operating at less than half of their operating capacity, whereas 37 per cent of SMEs have scaled down production.

The survey also notes that 79 per cent of surveyed companies are experiencing cash flow constraints, with 86 per cent of SMEs facing the same challenge, leading to difficulties in meeting their financial obligations such as salaries and operational costs.

 

To resolve cash flow challenges, manufacturers have negotiated payment plans with their suppliers, customers, banks and sought additional financial support from other individuals and institutions.

The impact of COVID-19 has also been felt by SMEs, that are more exposed to its effects, with start-ups hardest hit. 

SMEs are currently facing more challenges in access to finance, greater cash flow constraints and a bigger drop in demand and turnover.

To help businesses navigate the pandemic, the survey proposes clearing outstanding VAT refunds and pending bills, re-evaluating tax reliefs and providing moratorium on changes in the tax regime.

It also suggests establishing an emergency rescue fund, re-evaluating regulatory overreach, and developing a comprehensive rebound strategy among others.