IMPACTS OF COVID-19 TO SMEs IN KENYA

As a result of the global pandemic, COVID-19, economies around the world are struggling due to the effect of the crisis on trade investment, growth and employment as many firms and businesses remain closed to help fight the pandemic.

While some medium and large firms have their employees work from home and hope to get back to business after the crisis, most small and medium enterprises/businesses (SMEs) face the possibility of collapse and are not sure if they will survive the drastic effect of the crisis to the economy.

In Kenya, SMEs are estimated to constitute 98% of businesses in Kenya contributing 3% of Kenya's GDP. Playing a key role in economic development, SMEs contribute 30% of job creation, and cover a wide range of establishments in almost all sectors of the economy.

According to the GOK, (2005), SMEs engage between 1-99 employees and operate formally or informally, seasonally or all year long and are mostly located in several areas such as streets, markets, households, and others are mobile and tend to move from one location to another.

With the already existing challenges faced by SMEs in the country, such as inadequate capital, inadequate skills and knowledge, limited market access, corruption and unfavorable regulatory environments, raising concerns of sustainability, the COVID-19 crisis has come with its own challenges making the sustainability of these enterprises more uncertain during the crisis, and to some impossible post the pandemic.

Most SMEs are living in the unknown and in uncertainty of the future post the pandemic.

Micro and small businesses have experienced a dramatic decline in businesses activities compared to some medium and large sized businesses, as most of the country’s micro and small businesses reduced their daily operations.

With few or no customers to buy their goods or use their Services, there has been loss of jobs increasing the unemployment rates, collapse of liquidity, lack of revenue flow, challenges in managing their work environment, disrupted supply chains and difficulties in accessing emergency support as most SMEs rarely draw on government support.

These challenges, as a result of the COVID-19 Pandemic have led to a decline in business activities of most SMEs in Kenya.

Reduction of Revenue/Cash flow.

With most people staying home and observing Social Distancing during the lockdown, most SMEs have few customers to buy their goods or use their Services. This leads to reduced revenue and cash flow hence the business is not able to sustain itself without cash flow.

A survey by BFA Global found that 52% of businesses in Kenya recorded some or significant decrease in business revenue.

Loss of jobs increasing the unemployment rates.

With the reduced number of customers to buy goods and services provided by most SMEs, there has been a reduction in the revenue flow to most businesses.

Most employers are not able to sustain their businesses, pay their employees' salaries, pay rent and utilities and some businesses have closed down increasing the rates of unemployment in the country, as more and more people keep losing their jobs.

Challenges in managing their work environment.

Most SMEs do not have a physical location that can provide room to all their employees, and still observe social distancing while at work, and with the measures put in place by the government to prevent the spread of the virus, this is a key challenge.

Most of the SMEs have reduced their operations due to their inability to implement preventative health measures for their employees and customers, such as sanitizers, temperature check points and hand washing stations.

These preventive measures have resulted in an increase in operating expenses for businesses that continued to stay open.

Disrupted supply chains.

Most SMEs depend on suppliers to get goods from abroad or locally. With the closure of borders and restrictions in movements from one place to another, especially in areas where the infections are high has been a challenge to maintaining the supply chain.

Considering the many regulations that have been put in place to allow movement if need be, this has led to delay of arrival of goods and in some cases lack of delivery of the goods by the suppliers.

Difficulties in accessing emergency support.

Most SMEs rarely draw on government support and mostly depend on the revenue they get from the sales they make and loans from banks and SACCOS. Most SMEs already have existing loans that need to be repaid and there is a diminished confidence from the financial markets, and a reduction of credit.

The Kenyan government introduced several stimulus measures for MSMEs including reducing value-added tax and corporate tax, however, this does not seem to be enough as they still have salaries, rent and bills to pay which they are not getting reprieve from.

Despite all these challenges as a result of the COVID-19 pandemic, it is still possible for SMEs to survive the crisis.

Even if most businesses owners/ entrepreneurs in SMEs see sustainability impossible during and post the pandemic, economists claim that, with the right strategies put in place, most of these enterprises if not all will get through the crisis.

The pandemic has been around for months now and it is not too late  for SMEs to put several strategies into place, sustain their businesses and survive the pandemic.

Finding workarounds online through Digital platforms.

Digital platforms have proven to be a lifesaver for most businesses that recognized the need of taking their offline businesses online with a great example being SMEs in China using Alibaba and other online marketing platforms.

In Kenya, these platforms are also helping SMEs find solutions, though they have not fully expanded access as the Chinese platforms have in  response to COVID-19.

These days most SMEs in Kenya use platforms like Instagram and Facebook to market and sell their goods, and other already available platforms such as  Sendy, Glovo, Jumia among others, to deliver their goods to customers as most already accept digital payments such as M-Pesa.

SMEs that were not previously online will have to find ways to reorient and adapt under these circumstances. Their future is unclear if they do not find ways to make use of Digital platforms to sustain their businesses.

Communicate with their clients/customers.

Social Distancing has pushed many individuals to think outside the box and get out of their normalcy cocoon of operating their businesses such as taking offline businesses online.

However, SMEs that have previously not been online and are utilising digital platforms during this crisis need to communicate with their clients/customers to make them aware of their presence online, and that they can still receive goods and services despite the crisis.

With this strategy, most if not all SMEs will be able to sustain their businesses and their clients, making it easier for the business to survive the pandemic.

Communicate with their Employees.

SMEs with a plan of sustaining their businesses after the pandemic need to understand that it is essential to clearly guide their employees to guarantee their safety, and to help them adapt to the new working methodologies that will definitely still be practiced when markets reopen.

These new methodologies aim to follow the guidelines set by the company and by governments during the COVID-19 outbreak and those that will be put in place when the government waives the  lockdown restrictions.

The emotional well-being of employees is key in sustaining any business. Businesses owners should keep in-touch with their employees and know how they are adapting to the new working methodologies and how they are generally adapting to the stress that comes along with a crisis such as the COVID-19.

Reflect and Redesign.

Although the pandemic has hit SMEs extremely, for them to survive the pandemic, they need to reflect and redesign their business strategies, developing forward-looking strategies to the new normal.

SMEs need to analyze their resilience to crises and their crisis management strategies. Additionally, to survive the pandemic economic-wise, SMEs should take the opportunity to identify lessons from the crisis and come up with actionable insights that can help become more resilient.

Small businesses are in a vulnerable position. Even after markets reopen, the way forward for SMEs may still not be clear, especially for those that depend on demand and supply from abroad, where some markets may remain closed.

SMEs contribute highly to a country's GDP and its economic growth, and for them to survive this pandemic, a change and adjustments of policies regarding the operations of SMEs and financial support from the government and able financial institutions is needed. However, the SMEs business owners and entrepreneurs have an important role to play as mentioned to ensure sustainability during and post the pandemic.