SURVEY

Millions of jobs at stake as corona cripples small businesses

Tourism sector had the highest percentage of closures at 92%, survey shows

In Summary

•Most businesses have reported loss of customers, liquidity challenges, high cost of operation, inability to pay salaries and reduced labor productivity.

•43 per cent of the respondents expect full recovery in 2021 and 24 per cent in 2022.

Jua kali artisans at work at the Malindi Constituency Industrial Development Centre in Malindi town on August 31, 2020.
Jua kali artisans at work at the Malindi Constituency Industrial Development Centre in Malindi town on August 31, 2020.
Image: ALPHONCE GARI

At least 75 per cent of micro enterprises closed shop in the last few months as Covid-19 ravaged the economy, according to survey by the Kenya Private Sector Alliance (Kepsa)

The pandemic has also rendered millions jobless across multiple sectors of the economy, with companies and industries struggling to remain afloat through downsizing and salary cuts.

According to the survey titled 'Assessing the Covid-19 impact on businesses, jobs and opportunities for faster recovery', conducted between September and October, tourism remains the most hit sector with at least 3.1 million affected.

 
 

The sector had the highest percentage of closures during the period under review at 92 per cent. However 58 per cent have since reopened leaving 33 per cent closed. 47 per cent of micro enterprises have also reopened while 27 per cent remain closed.

Construction had 59 per cent closed, transport and storage (58%), education (57%), agriculture (50%) while wholesale and retail trade had 50 per cent of businesses closed.

The sectors have however recorded resumption of business, albeit on a slow pace.

“Finance and insurance did not report any closures while manufacturing recorded 13 per cent closures which have since reopened,” Kepsa notes in its findings.

Most businesses have reported loss of customers, liquidity challenges, high cost of operation, inability to pay salaries and reduced labor productivity.

In tourism, all surveyed firms reported inability to pay employees salaries with 92 per cent saying they have lost customers. Increased liquidity challenges in the sector is also at 92, while 75 per cent closed as a result of the government directives and challenges accessing markets.

Players in the agriculture, forestry and fisheries sector reported increased operation costs (83%) and loss of customers (67%).

 

Loss of customers for the manufacturing sector was at 88 per cent, market access challenges (63%) and difficulties collecting accounts receivable, that is bills and tax refunds, at 63 per cent.

“Tourism remained worst hit with all firms reporting high or very high negative effect compared to 96 per cent in May/June. Education recorded slight improvement with 88 per cent reporting high or very high negative effect down from 92 per cent,” Kepsa says.

Overall, 50 per cent of businesses reported high to very high negative impact in September/ October, compared to 74 per cent in May/June with majority (38%) reporting moderate negative impact.

Only six per cent of businesses reported that they had not been affected and or had a positive impact compared to four per cent in May/June.

Across all sectors, Micro enterprises were the most impacted with 64 per cent reporting high or very high negative impact on their businesses.

In June, Kepsa had reported that more than 5.9 million (5,991,768) direct and indirect jobs had either been lost or workers sent home on unpaid leave as companies and businesses mitigate effects of the virus.

This is seven fold the 846,300 new jobs created last year as per the Economic Survey 2020.

CBK governor Patrick Njoroge in May warned that at least 75 of small and medium businesses risked closure by end of June due to lack of funds in the wake of Covid-19.

This translates to close to eight businesses out of every 10, a situation the CBK governor described as dire and required quick interventions for a sector that accounts for 70 percent of new jobs in the country.

''Those businesses are on rocks and would be in a critical state by the end of June. They are in need of urgent rescue plan,’’ Njoroge had said.

The government moved to create a credit guarantee scheme to try and cushion businesses, with a number of tax relief measures to support households and entities during the pandemic.

The survey by Kepsa which attracted 428 respondents from all sectors of the economy shows 70 per cent of the businesses reduced expenditure on non-core business activities, 47 per cent temporarily suspended new investment/expansion plans while 34 per cent adopted use of e-commerce and other online technologies.

Meanwhile, 43 per cent of the respondents expect full recovery in 2021 and 24 per cent in 2022.

“Eight per cent expect full recovery by end of 2020 while 21 per cent are not sure when their businesses/organisations will recover fully,” Kepsa notes.

Government interventions including reduction of VAT and removal of inter-county movement restrictions were the most beneficial government interventions to businesses, the private sector lobby group says.

Others were reduction in PAYE that was most beneficial to 38 per cent and corporate tax for 35 per cent of the businesses.