NAIROBI, Kenya 17 Jul – Tough times are ahead for Small Medium Enterprises (SMEs) who say they will struggle to pay salaries in the next six months amid the COVID-19 pandemic.
According to a new report by Wylde International, nearly a third of SMEs (26pc) say they will have a hard time paying salaries due to dwindling profits.
According to the report, 19 percent of SMEs expect revenue losses in the next six months while 19 percent see themselves defaulting on loans during the period.
“The Kenya SME sector experienced a challenging first quarter due to factors including locusts invasion, and floods. Hope prevails however with the expectations of loan funding, credit guarantee schemes, and an overall sense of optimism for the year ahead. Covid-19 has caused supply chain shutdowns partial and total lockdowns and from economy outlook,” the report states.
The report adds that cash flow is the largest problem facing the SMEs followed by disruption of sales.
The majority of SMEs also expect negative changes in business finance citing external funding that includes loans and grants as most important to keep businesses afloat during the Covid-19 period.
VAT reduction has also been highlighted as the most useful Government intervention by a majority of SMEs (51pc) followed by PAYE reduction while curfew was rated the least useful intervention.
“Government needs to increase local procurement to boost local manufacturing and SMEs in this space. Donors should also set aside funding for business survival,” said Joram Mwinamo Managing Director Wylde International.
SMEs have been urged to leverage on digital tools to stay visible and top of mind with existing clients and take advantage of discounts, tax rebates and other stimulus packages offered by government.
“In a bid to stay afloat SMEs should also implement aggressive cost management that focuses on essential spending as well as find ways to remain open for business while observing health protocols,” noted Christopher Odongo Director of Entrepreneurship Wylde International.
The mobile based survey was carried out among 93 SMEs between the month of March and Early April 2020.
Businesses seemed to be on a recovery mood in April with most SMEs performing better than March 2020.
Non-funding needs for SMEs in the near future include a review of business strategies and new ventures.