Coronavirus (Covid-19) has had an unprecedented impact on the global economy, including massive job losses, shuttered economy and livelihoods.
Kenya has not been spared, forcing the crafting of major interventions expected to help households and businesses remain afloat.
In the Budget unveiled by the National Treasury Cabinet Secretary Ukur Yatani on Thursday, there were several policy measures targeted at helping small and medium-sized enterprises (SMEs), among others, to get back to their footing.
The Kenya National Chamber of Commerce and Industry (KNCCI) President Richard Ngatia spoke to Weekend Business on the post-budget issues relating to the budget. Below are the excerpts:
It has been only three months into Covid-19 and the impact on the economy and businesses has been grave. Where could we be in another three or six months?
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The last three months have been some of the darkest, not only in the business sector but in all other sectors of the economy and social life. Being a global phenomenon, the effect has been profound worldwide.
However, it is imperative to note that following the decision by the government to gradually ease restrictions, the economy will be resuscitated to ensure cash flow, resumption of businesses and creation of jobs.
As KNCCI, we candidly called for the reopening of the economy but it is imperative to ensure all health protocols and guidelines are observed to curb possible spike of the coronavirus disease. Failure to do this can erode all the gains we have made as a country.
Moving forward, we are hopeful normalcy would return but we must positively embrace the new normal of social distancing, high personal discipline and hygiene and use of technology to do business.
What were your key takeaways from Thursday’s Budget statement on tax proposals and resource allocations?
It is commendable that Treasury has moved to create the credit guarantee scheme, which will eventually be financed to the tune of Sh100 billion to ensure SMEs not only access credit but also at affordable rates due to the minimal risks lending to SMEs poses to lenders. Treasury also announced it has set aside Sh3 billion seed capital to operationalise the Credit Guarantee Scheme to reduce risk in lending small businesses.
To add on to this, the chamber and Equity Bank signed a pact for the establishment of Sh200 billion Post Covid-19 recovery kitty to resuscitate the economy.
Given that SMEs comprise about 75 per cent of all businesses in Kenya, we are grateful that President Uhuru Kenyatta has prioritised cushioning them from the ravages of the pandemic since the ripple effect of their collapse in terms of loss of jobs and tax revenue will be tragic for the entire economy.
It is also noteworthy that the CS directed all ministries, departments and agencies to clear all pending bills, failure to which funding will be withheld.
Pending bills have seen businesses close shop and worse still occasioned auctioning of investors.
CS Yatani has announced that all firms will start paying the minimum tax - which is one per cent of revenue, regardless of making a profit, how does that fit in an environment where almost every company is hardly surviving Covid-19?
Currently, with the prevailing harsh economic conditions occasioned by the health crisis which has also triggered an economic crunch, as a chamber, we would urge for a relook into this matter so as to stimulate local investment and not vice versa. While it is critical that everyone plays their part in building the nation by contributing to the national kitty, this directive could wait for another time.
In the President’s stimulus package, how best would you ensure there is a trickle-down effect to SMEs impacted by Covid-19, or pushed out of business?
In the past, the majority of the SMEs have suffered most because of failure to maintain proper financial records. To ensure they benefit from the stimulus package, there is a need to create a framework that caters for their unique portfolios. This also should extend to the credit guarantee scheme. This way, we will ensure the benefits trickle down to the smallest SMEs, including sole proprietorships.
As a chamber, we are supplementing government efforts by training all chambers members on financial probity of business, bookkeeping, investments and also connecting them to ready markets for their products and services.
Treasury CS rooted for buying Kenyan goods to boost local manufacturing with a reduction of taxes on imports for inputs used in diaper manufacturing, and Sh600 million to buy locally assembled vehicles. Is it sufficient?
Given the disruptions caused to global supply chains, Kenya has no option but embrace local many manufacturing.
The Buy Kenya Build Kenya push should go beyond diapers and encourage local assembling of vehicles and others to create and sustain local enterprises and generate more jobs.
It is through encouraging local manufacturing that we will tackle the soaring levels of unemployment while ensuring that the foreign currency outflows are minimised to only the commodities we got no capacity to produce.
The Head of State is leading by example by adopting locally manufactured fashion wear through his Rivatex-made shirts and this should be replicated across government. We should all support him on this.
No country develops without industries.