In Kenya, Small and medium-sized enterprises (SMEs) command an employment base of 14.9 million people making diverse contributions to the economy, social well-being and continued innovation. Additionally, SMEs account for approximately 98% of Kenya’s businesses. They are ultimately at Kenya’s pinnacle in achieving Kenya’s big four agenda and vision 2030 – the nations development blueprint that encompass environmental sustainability and inclusive growth. However, the ranging global pandemic has seen them get a resounding purge risking their role as focal drivers of Kenya’s economy. As experts scramble for SME’s recuperation strategies across the world, it is critical to first muse the impact of the pandemic on small enterprises in developing countries.
Government measures to contain the coronavirus pandemic- lockdowns, quarantines and curfews- have greatly impacted on both the supply and demand sides of Small and Medium Enterprises (SME’s). On the supply side, there is a drastic reduction in the supply of labor, leading to capacity underutilization. In the aftermath, there are shortages of intermediate goods and services. On the demand side, there is a sudden decline in spending and consumption as consumers experience loss of income, dread contagion and perceive higher levels of uncertainty.
Consequently, the SME’s revenues are severely dented, blurring their survival rates due to acute shortages in liquidity in times of crisis. Despite the scarcity in empirical evidence on COVID-19 impact on SMEs, preliminary studies indicate that SMEs are more susceptible to the health guidelines of social distancing in comparison to larger companies. Specifically, the disruption of business networks and supply chains that are critical to their performance. In addition, they have lower resilience and flexibility due to their size factor. It is then conceivable, SMEs will have major difficulties in re-building their pre-pandemic networks that are either large operators mostly reliant on suppliers in hard hit regions like China.
SMEs in developing countries have low levels of digitalization and have challenges in integrating new technologies. Possibly, new government regulations will require changes in work processes such as teleworking. As a response, SMEs will have to adopt containment technologies as measures to combat the spread of the pandemic. This will translate into more costs for prevention, capital and underutilized labor that will weigh more on SMEs than large firms. Limited resources at the disposal of the SME’s coupled with reduced confidence and constrained credit services, SMEs can only bear the pandemic shocks to a lesser amount of time than the larger firms. To note is that SMEs may be impacted further for failing to obtain information on pandemic repression measures, possible business strategies to mitigate the shocks and government support initiatives.