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Thousands of clothing manufacturing workers have been made redundant in the country, where unemployment is at nearly 30 percent, forcing the government to intervene/AFP

Coronavirus

How coronavirus has forced Kenyan Manufacturers to change gears

NAIROBI, Kenya, May 21 – It is no longer a matter of increasing profit or improving revenue for Kenyan manufacturers in business.

Coronavirus has dealt the sector a different ball game, forcing them to instead focus on reducing costs, retaining jobs, and improving cash flow, according to a new report.

The report by KPMG and the Kenya Association of Manufacturers states that manufacturers have had to push down their agenda of growing their businesses to live through the pandemic.

As such, 78 percent of manufacturers’ top priority is reducing costs, 61 percent are keen on job retention with 53 percent giving precedence to improving cash flows.

On employment, 40 percent of surveyed manufacturers have reduced their casual employees whereas 17 percent have reduced the permanent workforce.

On the other hand, 91 percent of non-essential manufacturers have seen a significant decrease in demand for their products compared to 74 percent of essential goods manufacturers.

Metal & Allied Sector Chair Bobby Johnson says that despite the rising costs, most manufacturers have adjusted their prices accordingly.

“We have a moral obligation to ensure that at this particular time we won’t take advantage of the situation but be very supportive of our country, Kenya.” – Bobby Johnson, Chair Metal & Allied Sector. –

According to the survey, the major focus of 78 percent of the respondents is to now look at all avenues of cutting costs.

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Manufacturers are also switching to survival mode and looking to maintain the status quo.

Good news

Despite fears of the impact of the pandemic on local industry, 81 percent of manufacturers say they are not likely to close as a result of the impact of COVID-19.

However, this number reduces to 76 percent for manufacturing SMEs. 

To help businesses navigate the pandemic, the survey proposes clearing outstanding VAT refunds and pending bills, re-evaluating tax reliefs, providing moratorium on changes in the tax regime, establishing an emergency rescue fund, re-evaluating regulatory overreach, and developing a comprehensive rebound strategy among others.

Speaking during the launch of the report, KAM Chair Sachen Gudka noted that while it is important to have measures in place to curb the spread of the virus, the regulations coupled with uncertainty are likely to lead to a prolonged recession that will affect business continuity. 

“It is important to assess the impact of COVID-19 on businesses so as to work with various partners and stakeholders, including the government to develop appropriate policies that will cushion the economy from the adverse effects of COVID-19 as well as minimize job losses. The report findings shall guide us as we engage the government in developing additional measures to further mitigate the adverse impact COVID-19 has had on businesses,” said Gudka.

The impact of COVID-19 has also been felt by SMEs, who are more exposed to its effects, with start-ups being the most vulnerable.

SMEs are currently facing more challenges in access to finance, greater cash flow constraints and a bigger drop in demand and turnover. Thirty percent have experienced a loss of between 65 percent – 100 percent with 49 percent reporting losses of between 30 percent – 64 percent.

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The survey targeted manufacturers under the KAM Membership base and mainly focused on employment, business resilience, the impact of the economic stimulus package announced by President Uhuru Kenyatta and proposals to further cushion the economy from the adverse effects of the pandemic.

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