Kenyan govt. steps in to help small businesses survive COVID-19

In a bid to cushion Kenyan Small and Medium Enterprises (SMEs) from the harsh economic effects of the COVID-19 pandemic, the National Assembly of Kenya has passed amendments aimed at providing relief to the struggling sector. The amendments include significant tax reductions and financial support measures. CNBC Africa recently interviewed SME consultant Victor Othieno to shed light on the impact of these measures and explore additional ways in which SMEs can be supported during these challenging times. One of the key proposals put forth is the 100% relief on salaries for individuals earning below 24,000 Kenyan Shillings. This is coupled with a reduction in pay scale from 30% to 25%, a decrease in Value Added Tax (VAT) from 16% to 14%, a reduction in corporate tax for resident companies from 30% to 25%, and a decrease in Turnover Tax (TOT) from 3% to 1%. These incentives are designed to free up disposable income for individuals, boosting demand for goods and services. However, the effectiveness of these incentives may be delayed due to existing tax filing timelines. SMEs in Kenya have been grappling with liquidity challenges as a result of reduced revenue streams during the pandemic. With customers under quarantine and disrupted supply chains, many SMEs are facing financial strain, leading some to close down. Victor Othieno highlighted the need for additional support tailored to the 79% of informal SMEs in Kenya. He recommended a comprehensive mapping exercise to identify and assist these informal sector businesses, advocating for a cash transfer program with a mix of grants and soft loans to provide socio-economic protection. Othieno also emphasized the importance of collaboration among SMEs to create ecosystems that can leverage economies of scale and capture more market share. By working together in market clusters, SMEs can enhance their resilience and adaptability to the current economic challenges. Furthermore, partnerships with innovative startups could offer SMEs opportunities to revamp their business models and explore new markets. As SMEs play a crucial role in the Kenyan economy by providing jobs and driving economic growth, it is imperative for the government and other stakeholders to continue exploring sustainable solutions to support their survival and growth. The resilience and adaptability of SMEs, coupled with strategic collaborations and targeted support initiatives, will be key in navigating the uncertainties brought about by the pandemic.