Tailor-made solutions to ensure SMEs survival amidst COVID-19

By Phyllis Wakiaga

For many small businesses who are navigating these difficult times, they will testify to the fact they keep being bombarded with the word, ‘Adaptation’. Whilst it is indeed the most natural direction to take in an unpredictable environment such as this, 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 for raw materials and intermediate products, fall in demand of their goods and losses, among others.

Globally, SMEs have seen a reduction in labour, owed to the measures put in place to mitigate the spread of the virus by various countries. There have been interruptions in supply chains, leading to shortages of both raw materials and finished products. SMEs have also faced a drastic reduction in sources of revenue which causes liquidity challenges (COVID-19: SME policy responses). These conundrums also apply to the Kenyan context.

We, therefore, cannot downplay SMEs strategic position as we develop solutions to mitigate the impact of the pandemic on the economy and plan for a rebound. How do we address the realities that these businesses, who are the largest employers in our country, face?

One of the recommendations of the KAM, KPMG Survey on measures to cushion the economy 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 businesses retain employees, which shall 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 and development.

Globally, different countries have put in place 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 (turnover of less than 50 million Australian Dollars), which will provide up to AUD 25,000 back to small enterprises. This is in addition to 6-month loan repayment breaks and tax reliefs for small businesses in the country.

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 their employees. Germany further developed an Economy Stabilisation Fund which includes budget support for SMEs in addition to providing assistance for them to cover consultancy services to help them find solutions on coping with COVID-19.

Locally, Kenya Association of Manufacturers (KAM), through the Manufacturing SME Hub continues to empower SMEs on how to survive the crisis. We do this through training sessions which cover a range of topics including adjusting operations to cope with COVID-19 as well as accessing local, regional and even international markets amidst the constraints caused by COVID-19.

In the FY 2020/21 budget, the government set aside KSh 3bn for a Credit Guarantee Scheme facility to ease access to finance for SMEs who constitute 80% of the private sector. This is in addition to a KSh 712 million allocation for the manufacturing sector. However, this amount needs to be increased to cater to more SMEs in the country. The government’s move to offer concessional loans, which are cheaper compared to non-concessional ones is also welcome.

Cushioning SMEs will increase their resilience to shocks arising out of COVID-19, thus accelerating the country’s economic revival. As a long-term solution, we should make efforts as a county to boost inclusive economic development for job 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. She can be reached at ceo@kam.co.ke.