Nairobi, May 7, 2020: Small and mid-sized companies have been hardest hit by the slowdown in the economy caused by the coronavirus pandemic, according to a survey carried out by the Kenya Private Sector Alliance (Kepsa).
Still, a majority (55 per cent) of mid-sized firms have decided to retain their employees while large companies have also decided against laying off workers, with 58 per cent reporting they opted to keep their employees and ride out the rough tide.
Kepsa, which represents 264 businesses in the formal and informal sectors, carried out a survey as it sought to understand the effects of proposed interventions to safeguard businesses and jobs across all sectors of the economy.
This is the second time the umbrella private sector body has carried out a survey to determine the needs and concerns of business to ensure a more targeted engagement with the Government as Kenya works to limit the spread of the novel coronavirus.
A total of 2,466 businesses participated in the survey, with 81 per cent reporting they have been impacted by Covid-19.
“Small and mid-sized companies reported the largest impact (high to very high) at 85 per cent and 83 per cent respectively in comparison to 78 per cent of micro-enterprises and 70 per cent of large companies,” Kepsa says in the report.
The tourism and education sectors have received the most impact, with 95 per cent and 93 per cent of them respectively reporting high to very high impacts due to the closures imposed to limit the spread of the virus.
“With the world stopping the movement of people, these have had the biggest impact,” said Kepsa chief executive officer Carole Karuga at the launch of the report on Thursday morning.
The sports, arts, creative and agricultural sectors have also reported significant impacts due to the limits on social gatherings, the cessation of movement and the imposition of the dawn to dusk curfew, now headed towards 42 days.
“Agriculture, Transport, Manufacturing and Tourism, which are among the largest contributors to Kenya’s Gross Domestic Product, report among the highest financial losses in real terms,” the report states.
With Europe and other markets beginning to open up, the horticulture sector will begin to become active as it seeks to meet the demand, but the cost of freight remains the challenge for this sector.
Because Agriculture is the dominant contributor to GDP, its plight will have a significant impact on the overall economy but could improve with the opening up of some markets.
On the other hand, the least affected sectors are finance, health and social work, and environment, water and waste firms reporting impacts of 47 per cent, 50 per cent and 56 per cent.
Slightly less than half (45 per cent) of businesses have had to close as part of their measures to mitigate the impact of the pandemic, with micro and small enterprises most affected.
Of these two categories, 62 per cent of micro enterprises reported having to close, while 49 per cent of small enterprises have had to take the same route. Along with the guidelines issued by the Government, businesses in the Education and Tourism sectors had the most closures.
From the survey, 58 per cent of large companies have not laid off their workers, particularly in the finance and insurance sector where 93 per cent of the respondents reported keeping their employees.
In the medium size category, 55 per cent of firms have taken the job retention route. Only 34 per cent reported laying off more than 50 people and the Agriculture sector was the most affected particularly horticulture due to export logistics challenges.
Among the Micro and Small enterprises, 52 per cent and 58 per cent of the respondents respectively reported laying off workers.
Overall, businesses are looking to benefit from the stimulus measures implemented by the Government in the form of reduced Value Added Tax (VAT), Pay As You Earn (PAYE) and Corporate and Turnover Tax.
While these are expected to benefit the largest number of businesses, the payment of pending bills and VAT refunds remains a key issue affecting liquidity and other financial obligations.
From the survey, most businesses would like financial support from the Government in form of grants or cheap accessible loans to help them pay salaries.
They also seek reduction of taxes or waivers, deferment of tax payments, business licenses and other statutory deductions, government to intervene to ensure banks restructure repayment of bank loans, rent and utility bills.
Across sectors, the common requests to Government were:
- Staff/salaries: Support to pay staff salaries until learning can resume and free movement for essential staff
- Tax/VAT: VAT refunds, tax waivers, especially income tax, and removal of sector-specific fees and levies
- Loan: Loan repayment holidays, low-interest loans, and quick loans
- Rent: Guidelines for rental relationships and relief/subsidy for rental payments
- Bills: Payment of pending bills and support with utility bills, etc
Attached below is the Kenya Private Sector Alliance (KEPSA) Business Survey on Effects of Covid- 19 Report.