Talk to business owners in Kenya regarding the measures in place to tame the spread of the Covid-19 pandemic, and the most prominent emotion you will read from their varied responses is anxiety. It is almost tangible.
While it has been generally accepted that the various restrictions on movement and commercial operations have taken a toll on the business environment in general, leading to job losses, contract suspension or cancellation and salary cuts, what is not clear for many is how long the damage will last. Also, as community transmission of the disease continues, what next in the coming months?
While expectations about the duration of the crisis vary widely, some enterprises believe the disruption of commerce will last long and are formulating coping strategies. From expert views, this may be the right thing to do.
Interior Principal Secretary Karanja Kibicho indicated recently that as much as the Government was considering a phased easing of the Covid-19 restrictions, Kenyans should not expect a sudden return to normalcy.
The World Bank Kenya Economic Update, released on April 29, 2020, states as much, projecting Kenya’s gross domestic product (GDP) will decelerate substantially in 2020 due to the negative impact of the coronavirus pandemic.
“Economic growth projection remains highly uncertain and the outcome will hinge on how the pandemic plays out internationally and within Kenya, along with policy actions taken to mitigate the situation,” the report states.
The World Bank subsequently predicts an economic growth of 1.5 percent for Kenya in 2020 at baseline, “with a potential downside scenario of a contraction to one percent if Covid-19 related disruptions in economic activity last longer”.
From conversations with business owners, many of them – particularly those whose enterprises had not been directly affected by the current restrictions – had initially not anticipated the Covid-19 crisis to drag on and have such a big impact on them.
Adjust business plans
Some have had to adjust their business plans, for those who can. Others who thought they had found themselves in the ‘right’ trade are now also becoming uneasy, worried that dwindling household incomes will ultimately harm their businesses.
“There are businesses that have placed employees on standby, some on half pay, others with no pay,” says Foster Ofosu, chief excitement officer of Idea2Markets-Africa.
He says many businesses might not survive Covid-19, but some will. “The idea is to start creating new approaches to serving existing markets, or in many cases, creating new markets. This may mean new products and technologies… and new delivery systems.”
Mary faith Vutale, the CEO of House of M’kay African Designs, a clothing line that also deals in natural shea butter products, says that sales have not only gone down, but also the stock of items on sale. With airports closed, she has been unable to replenish her stocks, which she gets from West Africa.
To cope, she has had to introduce products that are deemed essential during these times.
OdiBets-Kenya, on its part, has recorded an 80 per cent decline in turnover within the short period. “Due to the restrictions on public gatherings, the gaming industry has been affected because our clients bet on football matches, which [which were halted],” says Aggrey Sayi, the Country Marketing Director.
Rise in revenue
On the other hand, some businesses dealing in essential goods have recorded a rise in revenues. For example, manufacturers of pharmaceuticals earned high revenues in the month of March as the Government, households and businesses in the value chain bought products in reaction to the announcement of the presence of Covid-19 in Kenya.
Food and beverage manufacturers continue to experience strong revenues, but that, it is feared, may change if the crisis continues and consumption slows as incomes get stretched further.
Mary Wanjiru, a rice dealer based in Mwea, says it has been a busy season for her.
“Many clients are purchasing rice in bulk for fear of a total lockdown in the country due to the rising numbers of coronavirus cases and also because children are at home, thus food consumption is high,” she observed.
However, experts had indicated that the full impact of Covid-19 on the food sector may be felt at the start of the second quarter when the drop in the spending power of households and businesses becomes widespread. That time is here, and people may need to prepare for tough times too, before the government’s direct economic stimulus package, including some tax reductions, soft loans, digital support and employment, among others, start bearing results.