Study: SMEs face harder times in next six months

A small business enterprise trader.  PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • Only 18 per cent expect a positive change in their business finances, while eight per cent see the situation remaining the same.
  • The few planning business development seek to defend their margins as opposed to growth.

More than half of small and medium-sized enterprises (SMEs) expect their business conditions to worsen in the next six months, a new survey has shown, pointing to the rising pessimism among companies as Covid-19 cases soar.

A survey by three research firms – SNDBX village, Wylde International and Amethyst Consulting – says 54 per cent of SMEs expect dark clouds to keep gathering on their businesses, with key concerns being reduced cash flow and disrupted sales.

The majority (68 per cent) of the surveyed SMEs said they performed poorly in April compared to March as Kenya imposed a curfew, closed schools, bars and restaurants in a bid to stop the spread of Covid-19.

“Most businesses are pessimistic about a change in their business finance environment in the next three to six months because of the struggle to pay employees, the probability of business losses and the struggle to meet loan commitments,” says the survey.

PAY EMPLOYEES

The survey shows 26 per cent anticipate that they will struggle to pay employees, 19 per cent expect losses while another 19 per cent say they will find it difficult to meet loan obligations.

Only 18 per cent expect a positive change in their business finances, while eight per cent see the situation remaining the same.

The survey was carried via mobile phone interviews between March and early April, involving 93 SMEs.

The bulk of respondents fall in the consultancy services sector, closely followed by financial services, hospitality and tourism and manufacturing.

About 55 per cent of SMEs say they had seen a drop in the number of customers, leading to a decline in revenues and weaker cash flow position.

Kenya’s Covid-19 caseload has crossed 11,000 mark. The Health ministry says the peak of infections is yet to come.

The measures the State has taken to contain the health crisis have led to a financial crisis as firms react to falling revenues through pay cuts and reduction of jobs.

FRESH FUNDS

The survey shows 78 per cent of SMEs do not plan to engage in any business development activities in the next three to six months.

The few planning business development seek to defend their margins as opposed to growth.

“The biggest motivation to engage in business development activities comes from wanting to maintain existing relationships with clients followed by taking advantage of sales growth opportunities and to a lesser extent, to avoid making losses,” says the survey.

The Central Bank of Kenya survey in May had revealed that 75 per cent of Kenya’s SMEs face collapse if they fail to get fresh funds from banks or equity partners.