Capital Markets

Majority of SMEs finding it hard to pay employees on Covid woes

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Summary

  • Six in 10 small-sized businesses are struggling to pay salaries amid depressed sales because of economic fallout as a result of Covid-19 pandemic, findings of a survey by suggested on Tuesday.
  • The onset of the Covid-19 containment measures such as a nighttime curfew, first imposed on March 25, saw businesses scale down operating hours, exacerbating drop in sales which were flagging even before Covid struck.

Six in 10 small-sized businesses are struggling to pay salaries amid depressed sales because of economic fallout as a result of Covid-19 pandemic, findings of a survey by suggested on Tuesday.

The survey, commissioned by the Kenya National Chamber of Commerce and Industry (KNCCI), suggests 67.2 percent of surveyed traders faced challenges in paying workers at the end of 2020 compared with 35.3 percent before the pandemic hit.

The onset of the Covid-19 containment measures such as a nighttime curfew, first imposed on March 25, saw businesses scale down operating hours, exacerbating drop in sales which were flagging even before Covid struck.

The findings of the survey by KNCCI suggest that 37.9 percent of small businesses were having trouble retaining workers at end of last year compared with 20.9 percent at the beginning of the year.

The survey, done in partnership with the Center for International Private Enterprise (CIPE), is based on feedback from 153 businesses with monthly sales of between Sh500,000 and Sh5 million in 40 counties.

“Small businesses with a turnover of between Sh500,000 and Sh5 million per month provide majority of employment opportunities which keeps the cash flowing in all sectors. When these businesses are hurting, the impact is felt in all areas of the economy,” KNCCI president Richard Ngatia said yesterday.

The lobby said it will use the findings of the survey to engage national and local governments to improve the business operating environment and identify priority areas for support and intervention by advocacy groups and partners.

“Moving forward our efforts at the Chamber will be focused on providing information and ideas to small businesses on how to reimagine and reinvent their businesses for sustainability,”Mr Ngatia said.

“We have already made some headway by linking businesses to affordable credit at the beginning of the pandemic; however, a lot still needs to be done.”

Small-sized businesses have been hardest hit by the economic knocks and uncertainty of the pandemic which has weakened their cash flow positions and ability to get loans from commercial banks.

Central Bank of Kenya (CBK) governor Patrick Njoroge — quoting a survey he said was commissioned by Industrialisation and Trade ministry — said in May 2020 that three quarters of small businesses faced “serious” Covid-induced cash flow challenges.