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Businesses positive on economy despite COVID-19 resurgence

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By Steve Umidha

Kenyan businesses are optimistic about the economy’s recovery prospects heading into December and New Year festivities but most of them plan to keep pulling back their spending for the near-term, according to the latest survey by SYSPRO study.

The Survey released yesterday shows was conducted among Chief Financial Officers (CFOs) in the manufacturing companies – showing that out of over 100 manufacturing outfits that responded to the online survey, over 50 per cent of such companies had recovered from the impacts of the pandemic while 30 percent expected to return to pre-pandemic trading conditions by the end of Q2 2021.

“The levels of optimism uncovered by SYSPRO’s online survey suggest that CFOs – who are increasingly responsible for risk management in their organizations – now see COVID-19 as manageable in a business context, rather than terminal,” said Mark Wilson, CEO of Europe, Middle East & Africa at SYSPRO.

The survey which drew responses from Africa including, Asia-Pacific, Canada and USA was conducted in October 2020 and shows a return of business confidence, the acceleration of Industry 4.0 as a means to overcome future disruptions and the rise of a more robust role for the CFO in engineering the bounce-back.

The study further shows that the ability for businesses to weather the COVID-19 storm was particularly prevalent amongst manufacturers involved in the production and distribution of essential goods such as Food & Beverage during lockdowns as well as those who have the ability to augment their existing digital activities and adapt to ecommerce models.

The study also showed that the size of an organization also played a vital role in determining its ability to survive the pandemic. Companies with over 51 employees were significantly more likely to report having fared as well as, or better than, expected.

The report comes amid recent concerns by the World Bank which warned that most employed Kenyans could soon lose their daily source of income as a majority of companies face a high risk of temporary or permanent closure and reduced revenues.

Kenyan labor force, particularly young people are disproportionately employed in restaurants, entertainment joints, tourism sectors which were largely shut down in March and remained closed through the three-month dry spell and beyond when the country went into a lockdown – with retail, another popular source of jobs for young people, also hit hard.

The WB report last week warned the country should prepare for a tougher period ahead as more companies look to close shop owing to the ongoing pandemic.

“Many wage workers who are still employed face reduced working hours, with average hours decreasing from 50 to 38 hours per week. Almost 1 in 3 household run businesses are not currently operating, and between February and June average revenue from household run businesses decreased by almost 50 percent,” reads the report Navigating the Pandemic released last week.

As a result of the pandemic, poverty levels by Kenyan households jumped by 4 percentage points, an equivalent of 2 million additional households that were impacted by Covid-19 leading to sharp decreases in incomes and employment.

The unemployment rate increased sharply, approximately doubling to 10.4 percent in the second quarter as measured by the Kenya National Bureau of Statistics (KNBS) Quarterly Labor Force Survey.

Kenya’s economy has been hit hard by COVID-19, severely affecting incomes and jobs. The economy has been exposed through the dampening effects on domestic activity of the containment measures and behavioral responses.

A total of 604 firms in Kenya sent workers home due to the coronavirus fallout, according to Federation of Kenya Employers (FKE) which said that at least 33 jobs were lost in every modern sector company between March and August 2020 – that number is expected to swell if estimates by WB are anything to go by.

The Kenya National Bureau of Statistics estimated that around 1.7 million people had been made redundant due to the outbreak during this time, a figure that FKE had termed as ‘conservative.’

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