What you need to know:
- About 54 percent had faced increased financial challenges while 42 percent were not able to pay employees’ salaries and reported reduced labour productivity in October.
The political climate has already heated with Building Bridges Initiative, while the general elections await in 2022. All these could potentially derail revival efforts.
For businesses, this has been a tough year replete with challenges sparked by Covid-19 pandemic, with majority reporting cash flow troubles, high cost of operation, while some firms have closed entirely.
In a survey conducted by the Kenya Private Sector Alliance (Kepsa), 66 percent of businesses reported a significant drop in sales as at the beginning of the last quarter of 2020.
About 54 percent had faced increased financial challenges while 42 percent were not able to pay employees’ salaries and reported reduced labour productivity in October.
Other impacts that had been reported include challenges accessing markets, loss of suppliers or raw materials and permanent termination of one or more product lines. Only three percent stated they had not been affected.
Kepsa report added that 13 percent of small and large enterprises remained closed over the period to October, indicating the economic toll on businesses.
The closures were seen in sectors including wholesale and retail, tourism, education, construction, ICT, transport and storage, and professional services.
Most businesses under finance and insurance were let off the hook as they did not report any closures while some firms under manufacturing that were shut have since reopened.
The hit on the businesses has compelled them to undertake measures including reducing expenditure on non-core business activities to ensure business continuity.
Businesses have also temporarily suspended expansion plans and resorted to workforce reduction and salaries to keep going.
Despite these immense challenges, private businesses remain optimistic, saying 2021 will offer an opportunity to rise again. They are banking on innovation to emerge out of trouble and rebuild their capacities.
“Business is hoping for recovery after a very tough year due to Covid-19,” Kepsa Chief Executive Carol Karuga said.
Mrs Karuga noted however that it will take State’s prioritised action to save the enterprises that are key in providing jobs.
“Like other countries in the world, government will need to prioritise supporting businesses especially with fiscal policies since that cover all businesses unlike monetary policies,” she added.
Early in December, the State unveiled Sh10 billion credit guarantee scheme to support small businesses weather the Covid-19 shocks.
The cushion will be available until the financial year ending June 2022 and will be channelled through seven commercial banks — Co-operative, KCB, Absa, Stanbic, DTB, Credit Bank, and NCBA.
In the event of default, the National Treasury will cover up to 25 percent of the loan with the lenders carrying the remainder under the third-party credit risk mitigation scheme initially allocated Sh3 billion.
Fears, however, loom over the rising cases of the virus, which has led to re-imposition of restrictive measures and lockdown in some counties.
Moreover, the political climate has already heated with Building Bridges Initiative, while the general elections await in 2022. All these could potentially derail revival efforts.
“We hope politics will be run in a way it does not affect the economy which is already struggling from Covid-19,” Ms Karuga noted.
The pandemic began to show its full impact in April leading to temporary closure of businesses including tour companies, learning institutions, bars and restaurants. As a result, most announced layoffs and forced employees to take unpaid leave to cut costs.
Majority of businesses representing, 79 percent, of those that are still closed have since retrenched, while 28 percent of those that remained opened also let go some of the employees.
Data by Kenya National Bureau of Statistics states that over 1.7 million people lost their jobs in the three months to June.
Young people have been the hardest hit representing 50 percent of the retrenchments compared to those in the mid- and senior-levels.