The outbreak of COVID-19 is the largest and the most consequential global health crisis in modern history. It’s magnitude, rapid spread and effects has affected economies across the globe, from developing to developed, leaving the citizenry and businesses realing in absolute agony. Kenya was not left behind either, as the pandemic impacted multiple sectors of the economy and the society at large. From the financial sector to tourism to education, the Kenyan economy showed a huge decline since the 2007/08 post election violence.
From the time the first case was reported in the country on 13 March, 2020, just like other governments, the Kenyan government announced several drastic measures aimed at containing the spread of the virus. The measures included, but not limed to; dusk to dawn curfew, cessation of movement, restrictions on public gatherings, social distancing, school closing, and working from home recommendations. This greatly affected small business across the country, with quite a number of them shutting down.
In this blog we have highlighted how COVID-19 impacted small businesses in Kenya.
COVID-19 adversely affected many businesses across the country in a number of ways, but by a large extent almost all businesses reported a drastic fall in the number of sales generated. Small businesses were faced with drop in demand due to reduced household purchasing power precipitated by loss of jobs, pay cuts, or cutting back on spending. Additionally, businesses were forced to close early or open later than normal so as to beat the dusk to dawn curfew, whilst the curfew didn’t have a huge impact on businesses that operate during the normal working hours, those that operate at night or on a 24-hour basis took a huge hit. The cessation of movement on some parts of the country also had an impact on the customer base of some small businesses.
2. Disruption in supply chain
The cessation of movement in and out of some parts of the country, leave for essential goods and services, led to a huge disruption on the supply chain of those small businesses that do not deal with essential goods and services. This subsequently led to some businesses unable to operate due to lack of supplies. Also, some businesses that import goods from other countries experienced delayed in deliveries and other added costs, a consequence of the pandemic.
3. Dead stock
As household incomes dropped, so did demand, this subsequently led to low sales and, in some cases, dead stock. The pandemic forced people to set their priorities to primary goods, shying away from secondary and tertiary commodities. Some businesses that had stocked many items unaware of the looming pandemic were left with unsellable items. This left some small businesses with huge inventory costs and too much stock at hand.
4. Labor disruptions
COVID-19 impacted how people work, making it impossible for others to perform their normal roles while at the same time abiding by social distancing and other stringent public health practices. Businesses were forced to adhere to government-imposed health measures to mitigate risk of exposure and infection of the virus. The dusk to dawn curfew, cessation of movement, and work from home directive prevented people from attending work which in turn led to reduction, if not total halt of business operations.
5. Access to loans
As a result of the effects of COVID-19, quite a considerate number of small businesses were forced into debt. While some businesses were able to access loans, this was not the case to all. Some lenders stopped lending due to the riskiness of the economy and uncertainty on the damage to be caused by the pandemic, while other lenders increased the cost of lending, thus putting a lot of burden on small businesses that were already grappling with the effects of COVID-19.
6. Closure of businesses
Faced with low demand and sales, quite a number of small businesses found themselves in a tight spot, where the amount of revenues generated were insufficient to break-even. Given that fixed costs and other operating costs remained constant even in the midst of a global pandemic, some businesses could not turn in profit to warranty a going concern scenario. This meant that they had only one option, to close down.
7. Government assistance
As COVID-19 raged on and the fear of more infections spread, the government announced measures aimed at cushioning Kenyans from the effects of the pandemic. These measures included; tax relief, reduction of personal income tax rate, reduction of income tax rate, and decrease of VAT rate. These policies only benefitted those in the formal sector, leaving those operating in the informal sector, where a majority of small businesses fall, without formal government support. Due to this disparity, small businesses took a double hit and were left to face the pandemic on their own.