Eighty-one percent of Kenyan small and mid-sized companies have been hardest hit by the slowdown in the economy caused by the coronavirus pandemic.
According to a second survey carried out by the Kenya Private Sector Alliance (Kepsa), to determine the needs and concerns of business, 2,466 firms that participated, 81 percent reported having been heavily impacted.
“Small and mid-sized companies reported the largest impact (high to very high) at 85 percent and 83 percent respectively in comparison to 78 percent of micro-enterprises and 70 percent of large companies,” Kepsa says in the report.
The tourism and education sectors have received the most impact, with 95 percent and 93 percent of them respectively reporting high to very high impacts due to the closures imposed to limit the spread of the virus.
“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.
The least affected sectors are finance, health and social work, and environment, water, and waste firms reporting impacts of 47 percent, 50 percent, and 56 percent.
On the other hand, 55 percent of mid-sized firms have decided to retain their employees while large companies have also decided against laying off workers, with 58 percent reporting they opted to keep their employees and ride out the rough tide.
Fiscal steps to protect small businesses
With Kepsa’s findings, it seems Kenya’s fiscal efforts to protect small businesses seem marginal. The Central Bank of Kenya in March reduced the Cash Reserve Ratio (CRR) to 4.25 percent from 5.25 percent, releasing Ksh.35.2 billion as additional liquidity availed to banks to directly support borrowers that are distressed as a result of COVID-19.
However, in April, CBK disclosed that only seven banks had restructured loans amounting to Kshs 176.0 billion in April, equivalent to 6.4 percent of the industry’s total gross loan book of Kshs 2.8 trillion as at January 2020.
Tourism accounted for the largest portion of funds provided by banks at 45.58 percent followed by agriculture 16.7 percent, real estate 11.94 percent, and trade 10.37 percent.
Stanbic Bank’s Monthly Purchasing Managers’ Index (PMI), for the month of April, showed that businesses in recorded their fourth decline since the start of the year with the index coming in at 34.8, a 30-month low and down from the 37.5 seen in March 2020.