Covid-hit SMEs struggle to get back on their feet
Thursday February 17 2022
Traders sell wares at Gikomba market in Nairobi, Kenya, on July 11, 2021. PHOTO | FILE | NMG
Africa’s smallholder businesses are taking longer to recover from Covid-19 blues because of the spending habits of their clients.
The “Geopoll and Africa 118 Study of MSMEs in Africa” report notes that small businesses are struggling to get back on their feet because their clientele either changed habits, cancelled projects or ran out of money to continue paying for services.
Seven in 10 businesses that thrived in Kenya, Nigeria and South Africa shut down at the height of the pandemic and just 17 percent of the businesses that were forcibly closed down have resumed normal operations, the report says.
“The past two years have presented unprecedented challenges for SMEs – particularly in developing countries, including those in sub-Saharan Africa. Lockdowns, containment measures and demand shifts in response to Covid19 have pushed many SMEs to the brink,” said Fred Imbo, chief operations officer at Africa 118, a digital information services provider for small and medium businesses in Africa.
“With less income coming in, many construction clients likely halted long term projects over short-term uncertainties. The survey consistently pointed to a shift in spending towards food and other essentials,” said Mr Imbo.
Up to 81 percent of Kenyan businesses said they had to close their enterprises at some point but the country still managed to maintain the highest percentage of businesses in operations throughout the pandemic at 49 percent.
According to the survey, although certain types of businesses such as those offering digital services profited from the pandemic, only 10 percent of the SMEs in the study claimed Covid-19 had a positive impact on their business.
Up to 57 percent of the SMEs had to lay off workers, halt work or reduce salaries for employees in the past two years. The construction industry was hit particularly hard, with 80 percent of the respondents saying they had to take adverse hiring measures.
Low revenues meant most SMEs resorted to preserving resources, hence halting new hiring. Overall, 43 percent of the SMEs say they are not likely to hire or rehire staff in the next three months, with only a quarter saying they are likely to fill positions.