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Kenyan govt. steps in to help small businesses survive COVID-19
This week the National Assembly of Kenya met and passed amendments that could stand to benefit Kenyan SMEs, CNBC Africa spoke to SME Consultant, Victor Otieno on how much of help this will be to the sector and what else can be done during this difficult time.
Fri, 24 Apr 2020 10:16:10 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Significant tax reductions and financial support measures have been passed by the National Assembly of Kenya to provide relief to SMEs during the COVID-19 pandemic.
- SMEs in Kenya are facing liquidity challenges due to reduced revenue streams, emphasizing the need for tailored support, especially for the informal sector businesses.
- Collaboration among SMEs and partnerships with startups are recommended as strategies to enhance resilience, market presence, and business model innovation.
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.
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