Tailor-made solutions to ensure SMEs survival

By Phyllis Wakiaga
Wednesday, July 29th, 2020
Workers at Shona Enterprise in EPZ, Athi River, Machakos county making face masks to that will be distributed by the government to curb the spread of Covid-19 in the country. Photo/PD/CHRISTINE MUSA
In summary

For many small businesses who are navigating these difficult times, they will testify to the fact they keep being bombarded with the word, ‘Adaptation’.

While it’s indeed the most natural direction to take in an unpredictable environment, only in very few cases does adapting mean less expenditure.

The reality of change is anchored on making adjustments and investments, which means cost, time and in many cases, delayed outputs.

A KAM, KPMG survey on the impact of Covid-19 on manufacturing in Kenya, states that the challenges facing SMEs, exacerbated by the pandemic, range from cash flow constraints, reduction in operating capacity, difficulties in sourcing raw materials and intermediate products, to fall in demand of their goods and losses, among others.

Globally, SMEs have seen a reduction in labour because of measures put in place to mitigate spread of the virus by various countries.

There have been interruptions in supply chains, leading to shortage of raw materials and finished products.

SMEs have also faced a drastic reduction in sources of revenue which causes liquidity challenges. These challenges apply to the Kenyan context.

We, therefore, cannot downplay SMEs strategic position as we develop solutions to mitigate the impact of Covid-19 on the economy and plan for a rebound. How do we address the realities that these businesses face?

One of the recommendations of the survey was the establishment of an emergency rescue fund, supported by development partners, to identify and support the most vulnerable businesses and entrepreneurs affected by Covid-19, including SMEs.

This will help them retain employees and ease their liquidity challenges, thus ensuring business continuity.

The report further recommends developing a comprehensive rebound strategy to ensure Kenya quickly bounces back on the path towards sustainable economic growth. 

Globally, different countries have deployed various measures, most of which are geared towards maintaining liquidity for SMEs. 

Australia, through its Boosting Cash Flow for Employers Programme, has provided cash flow support to SMEs.

This is in addition to six-month loan repayment breaks and tax reliefs for small businesses.

On the other hand, Germany referred SMEs to already existing facilities to help them cover short-term liquidity requirements.

The country also expanded short-term work arrangements to avoid huge job losses and prevent companies from laying off employees.

Germany further developed an economy stabilisation fund which includes budget support for SMEs in addition to providing assistance for consultancy services to help them find solutions to cope with the pandemic.

Locally, Kenya Association of Manufacturers, through the Manufacturing SME Hub, continues to empower the firms to survive the crisis.

This includes training sessions which cover a range of topics including adjusting operations to cope with the crisis as well as accessing local, regional and world markets. 

In the 2020/21 Budget, the government set aside Sh3 billion for a credit guarantee scheme to ease access to finance for SMEs which constitute 80 per cent of the private sector.

This is in addition to a Sh712 million allocation to the manufacturing sector. However, this amount needs to be increased to cater to more SMEs.

The government’s move to offer concessional loans, which are cheaper, is also welcome. 

Cushioning SMEs will increase their resilience to Covid-19 shocks, thus accelerating the country’s economic revival.

As a long-term solution, however, we should boost our inclusive economic development for jobs and wealth creation by creating an enabling environment for businesses to thrive in. —The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Kenya Chapter Board chair [email protected]