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By Steve Umidha
A mounting backlog of unresolved problems brought by Covid-19 pandemic is causing businesses to take evasive action, a new study has shown.
Most alarmingly, the Africa MSME Pulse Survey by research firm Geo-poll, is warning that employment opportunities in the private sector are likely to remain scarce for the next three months despite many businesses picking up where they left off before the pandemic hit.
That cloud of uncertainty is expected to affect operations in key sectors across major markets in the continent with nearly half of all small businesses in countries such as Kenya, South Africa and Nigeria all staring at working on lean labor force if the fragile situation persists.
“Despite many businesses resuming work to some extent, employment opportunities remain scarce as MSMEs try to recover lost time and revenue,” reads in part the How Small Businesses in Africa are Bouncing Back from a Pandemic report released this week.
Overall, the report noted that 43 percent of the MSMEs said they were not likely to hire or rehire staff in the next three months, with only a quarter saying they are very likely to fill positions from data collected in December last year from interviews with 312 MSMEs in the three countries.
A majority of the MSMEs who took part in the study – about 57 percent, had to lay off, halt work, or reduce salaries for employees in the past two years, in what the report said was consistent across the three countries.
Since the pandemic hit more than two years ago, small businesses were presented with unprecedented challenges including lockdowns, containment measures, with demand shifts in response to COVID-19 pushing many MSMEs to the brink.
At the same time, access to affordable funding has become more limited to MSMEs, the majority of whom were forced to trim their work force to remain afloat, while others were pushed out of business completely.
It is estimated that about 75 percent of MSMEs in Kenya alone, confirmed that the devastating pandemic negatively impacted their business, with most having to layoff, halt work, reduce employee salaries or temporarily shut down while other businesses chose to shut down, only 17 percent have since reopened at full capacity.
The country’s Micro, Small and Medium Enterprises (MSMEs) contribute approximately 40 percent of the GDP with the majority falling in the informal sector. While there are about 7.41 million MSMEs in Kenya, only 1.56 million are licensed whereas 5.85 million are unlicensed – an indication of how large the sector is.
On the other hand, the Micro and small enterprises (MSEs) make a substantial contribution to livelihoods and inclusive growth in Kenya – accounting for 24 percent of the country’s gross domestic product (GDP), with over 90 percent of private sector enterprises and 93 percent of the total labor force in the economy.
According to the World Bank, access to finance has been cited as a key constraint to MSME growth in most emerging markets and developing countries.
MSMEs are less likely to be able to obtain bank loans than large firms, forcing them to rely on internal funds or cash from friends and family to launch and run their enterprises.