Struggling sectors that were hit by the pandemic still waiting for a way out
It is a double blow for the sectors that have missed out on the Government’s stimulus package in the wake of the coronavirus pandemic.
Numerous companies in industries such as aviation, horticulture and hospitality have shut down operations, while others are clutching on straws hoping the State will come to their aid.
The sectors, which were already struggling following a difficult operating environment last year, are increasingly waking up to the reality that a government bailout is unlikely as it struggles to fight the pandemic with meagre resources.
Industry players feel the measures announced by President Uhuru Kenyatta last Wednesday have left them out, putting thousands of jobs at risk.
But while some might benefit from the tax refunds and the pending bills that will be paid within the next three weeks as per the presidential directive and others fit in the small, Micro, Small and Medium Enterprises (MSMEs) whose turnover tax will reduce from three per cent to one per cent, many are not in operation.
The Kenya Association of Travel Agents noted that its members would be sending home their employees on unpaid leave for a period of two months.
KATA Chairman Mohammed Wanyoike noted that the situation could deteriorate unless the State devices mechanisms to enable the entire travel industry to stay afloat. The industry is dependent on aviation and the stoppage of international flights to and from Kenya has substantially dented its prospects.
“We are witnessing the shutdown of the travel industry. The economic effects are getting worse by the day and could become more permanent if the government does not act now,” said Mr Wanyoike.
“The industry has evaluated its internal position consultatively and has taken up immediate measures to safeguard the health of the travel agents industry by the CEOs taking a 90 per cent pay cut in March 2020 and all industry employees going on unpaid leave from April 2020 for a period of two months. Travel Agents business is aligned onto Airlines, and hence in the absence of operating airlines the travel agents’ businesses are 100 per cent vulnerable.”
While the move by the Central Bank of Kenya (CBK) asking commercial banks to give moratorium on loan repayments on a case by case basis might help many industry players, it was seen as a sort of a blanket freeze on loan repayments for some time that the industry has been pushing for.
As industry players pursue this front, the number of hospitality facilities that have suspended operations keeps rising by the day. A leading hotel in Diani last week sent a notice to clients notifying them that it would be temporarily close its doors in April and would consider reopening after August if the situation will have improved.
Kempinski, Dusit D2, Ole Sereni, Weston and Tribe Hotels have also suspended operations. Other major hotels that have shut down temporarily include the Serena Hotels, which has suspended operations in 10 of its hotels in Kenya and Tanzania.
The firm’s other properties, including Serena Nairobi, will, however, remain open, but it noted that it would continue to monitor the situation.
The hotel chain operates more than 30 hotels in East Africa as well as Mozambique, DR Congo, Pakistan, Afghanistan and Tajikistan.
“Never in the 40-year history of Serena Hotels has any event of this breadth and scale impacted the global hospitality industry than Covid-19,” said the hotel’s management in the notice advising clients of the decision to shut down some of its operations, which is telling of the impact that the pandemic will have on tourism.
All the facilities that have suspended operations are, however, cautiously optimistic, noting that the closure will be for a few months.
They are also refraining from laying off staff, saying they are giving them unpaid time off, while also giving them perks that might help see them through the period of closure.
“Occupancy is generally at zero. At the moment we are thinking about the health and safety of our employees as well as priority is to save jobs… these are discussions that we are having jointly with the Ministry of Labour and the labour unions,” said Kenya Association of Hotel Keepers and Caterers Chief Executive Mike Macharia.
The Kenya Flower Council last week said flower farms across the country had sent home half of their employees, and more jobs are on the line as Kenyan flowers are locked from key markets.
This is due to both the unavailability of cargo flights as well as reduced demand in Europe.
Airlines too are reporting zero business after the ban on international flights, with the companies that operate local flights also struggling to fill up their planes.
Those that had sold tickets in advance are now offering refunds, but also asking clients to push forward their travel.
The International Monetary Fund (IMF) noted that African governments should extend a hand to these sectors. While acknowledging that governments too will be pressed for money considering that the pandemic will result in a reduction in tax revenues, IMF noted that such moves as tax reliefs or delays in paying taxes could help address cash flow issues.
“Where feasible, governments should consider targeted and temporary support for hard-hit sectors such as tourism. For instance, temporary tax relief through targeted reductions or delays in paying taxes could help address cash flow shortfalls for affected businesses,” Abebe Aemro Selassie, director of the IMF Africa Department, and Karen Ongley, mission chief for Sierra Leone, wrote in a joint post last week.