Shortly after the 1st case of the covid-19 was reported in Kenya, the government introduced stern measures that would slow the spread of the virus in the country. Some of the measures include, partial lockdowns across counties, dusk to dawn curfew, restrictions on public gatherings, schools while others were advised to work from home.
Most small businesses in Kenya survive on providing services in such avenues such as public gatherings, weddings, providing accommodation services to long distance travelers, tickets to events, roadside snacks and meals, which with the temporary closures and dawn to dusk curfews meant they had to close business.
While at the time the government took several measures to limit the economic impact of COVID-19 on Kenyans by lowering the VAT rate, and reduced the turnover tax rate for SMEs, there was little impact felt by the businesses. Due to the financial fragility of many small businesses, the policy measures put in place would not salvage the situation.
The long-term closures and measures have adversely affected most of the businesses that could not afford to adjust to the new normal. By September 2020, over 1.7 million Kenyans had lost jobs followed by months long hiring freeze by most companies. The job cuts translated to low purchasing patterns from customers as most would only afford basics which lead to most business closures. In the us for instance, 43 per cent of small businesses had closed by April 2020 with all closures cited to the pandemic.
Cessation of movement in and out of the major towns in Kenya affected income from retail business. Most of the businesses especially in the capital get their commodity from rural areas and neighboring countries which was quite complex with the lockdowns. As a result, small businesses had to take readjustment measures like price increment that further affected their operations.
The Georgetown University Initiative on Innovation, Development and Evaluation conducted a survey on the economic impact of the covid-19 pandemic on small retail shops in Nairobi indicate that cessation of movement and dust to dawn curfews affected sources of income. They interviewed 2,739 small retailers in eastlands district in Nairobi. Out of the number, Sixty-five percent of respondents reported that cessation of movement had negatively affected their commercial operations.
Very few MSMEs set aside financial reserves to meet future expenses and emergencies. Due to the economic crash through the pandemic period, more small business took up loans to survive the effects of the pandemic. Although most loan institutions removed loan borrowing bottlenecks to make it easy for small businesses to take up the loans, most of these businesses were operating on zero loans pre-pandemic.
Due to the hard economic crunch, most MSMEs also experienced lower demand for their products and services as a consequence of the pandemic. Another impact to note is the growth of online businesses. The covid-19 business disruptions made it possible for businesses to shift their operations online to survive. Especially during the march lockdown, online sales shot up as customers would prefer online purchase and delivery to the physical shopping. As the economy slowly takes a step back to normalcy, there’s a clear indication that small business will fully integrate both online and physical shops.