Economy

326 businesses registered daily in Covid survival race

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Clients being served at companies’ registry. FILE PHOTO | NMG

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Summary

  • The number of businesses registered in the three months to September nearly doubled after the economic fallout from the Covid-19 pandemic saw many Kenyans switch to a survival mode.
  • Data from the companies’ registry shows that the number of business names registered between July and September jumped 95 percent to 29,941 compared to a similar period last year.
  • Compared to the quarter ended June, it means Kenyans registered an additional 9,649 companies between July and September---translating to an average 326 new registrations daily.

The number of businesses registered in the three months to September nearly doubled after the economic fallout from the Covid-19 pandemic saw many Kenyans switch to a survival mode.

Data from the companies’ registry shows that the number of business names registered between July and September jumped 95 percent to 29,941 compared to a similar period last year—coinciding with a tumultuous quarter characterised by pay cuts and mass layoff of workers by companies squeezed by the effects of the coronavirus pandemic.

Compared to the quarter ended June, it means Kenyans registered an additional 9,649 companies between July and September---translating to an average 326 new registrations daily.

“The number of registered businesses went up significantly starting the month of June this year. There may have arisen need for individuals who may have lost their means of earning a living to register a business to engage in some form of entrepreneurial activity for their sustenance,” Business Registration Services (BRS) director-general Kenneth Gathuma told the Business Daily.

The 95 percent rise in business registration in the quarter to September is substantial compared to the 4.3 percent recorded in the same period of 2019 and 3.7 percent in 2018.

Registration of private companies also increased by 28.2 percent to 15,681 in three months to September, compared to 12,236 in the similar period last year.

Tony Watima, an economist, said the increased registration especially of single-owned businesses and small partnerships is a reflection of survival attempts by people displaced from formal jobs.

“The data gives an impression about the structural changes the economy is undergoing. This has been the case where we have seen the informal sector absorbing many people. It shows that Covid-19 economic effects have hit the formal sector harder and pushed many more into the self-employment for survival,” he said.

Kenya’s economy contracted by 5.7 percent in the second quarter of this year, the deepest in nearly two decades --hurt by measures imposed to curb the spread of the coronavirus.

The measures included a country-wide dusk-to-dawn curfew, restrictions on travel in and out of the capital Nairobi and closure of learning institutions, hotels and restaurants.

As a result of the Covid-19-induced economic downturn, an estimated 1.72 million workers lost jobs in three months to June alone, according to the Kenya National Bureau of Statistics (KNBS).

More layoffs were reported in the successive months as the economic effects of the pandemic sunk in.

The number of people in employment fell to 15.87 million between April and end of June compared to 17.59 million the previous quarter, with young people the hardest hit by job cuts compared to those aged above 35 years in an economic setting that was plagued by a freeze in recruitment due to poor corporate earnings.

In response, many Kenyans turned to businesses such as farming and grocery, baking, mobile money agency, transport and art and craft to make ends meet.

There is, however, some hope after a recent survey showed that job cuts flattened out in September as more firms resumed operations.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) jumped to 56.3 in September, from 53.0 in August, its highest level since April 2018 — raising hope of recovery after a prolonged economic slump since March when Kenya reported its first case of coronavirus infection.

The 50.0 mark separates growth from contraction, according to the key index, which is based on feedback from corporate managers in key sectors such as manufacturing, services and agriculture.

The economy has registered a tick-up in demand since the lifting of inter-county travel restrictions and resumption of domestic flights in July and international commercial passenger flights from August 1.

“The PMI indicated a further improvement in business confidence and operating conditions this month, thanks in large part to the lifting of some domestic Covid-19 containment measures,” Stanbic Bank head of Africa research Jibran Qureishi wrote in the monthly the PMI report released on October 5.

“This should gradually continue to support activity into the end of the year. That said, we ought to be cautious around the possibility of a second wave globally that could dampen external demand again.”