Kenyans brace for more economic hardship as SMEs struggle to pay salaries

Local small and medium enterprises (SMEs) are struggling to pay employee salaries following the Covid-19 pandemic, a study has revealed.

In the survey, 26 percent of surveyed SMEs said offsetting staff wages was their biggest challenge ahead of loan defaults and revenue losses.

This was largely attributed to shocks to cash-flows and disrupted sales amid shifting mitigation measures to contain the pandemic.

A majority (51 percent) of SMEs expect a negative change to business financing in the next six months.

80 percent of the businesses said external financing is the most important factor for them to keep their enterprises afloat.

Further, the SMEs expect to be more reliant on part-time staffing to manage the crises with 33 percent of respondents planning on retaining their part-time staff headcount.

Another 15 percent of businesses plan to increase this count.

Other responses to the disruption created by the pandemic include review of business strategies to include networking and new ventures, investments in business development and management, and the offer of waivers and discounts to clients.

In spite of the hardships in paying off salaries, the retention of employees by SMEs remains the second top priority at 51 percent after health and safety.

The SMEs note recent government initiatives to manage the global health crises have had positive and negative effects in equal measures with progression being marked from recent reductions to tax rates.

The Covid-19 pandemic has meanwhile invoked crises to SME owners including negativity, stress and uncertainty.

The research was carried out between March and April by Wylde International.