This archive report was first published on 21 May 2020.
May 21, 2020 - The Covid-19 pandemic has pushed thousands of manufacturing jobs to the brink as factories switch to survival mode to cope with disruptions in sales and operations.
According to a report by the Kenya Association of Manufacturers (KAM) and audit firm KPMG, released on Wednesday, the industries have resorted to reducing costs and cutting down production to deal with depressed demands and low sales.
Already, 40 percent of those surveyed have sacked their casual labourers and sent more on unpaid leave, while 27 percent have reduced permanent staff. A staggering 69 percent are struggling to pay their staff, with small and medium enterprises being the hardest hit.
"The top three priorities for the majority of businesses before Covid-19 were to increase profitability, increase revenue and domestic market share," stated the KAM report. "However, when faced with the dilemma of reducing costs or retaining jobs, the former usually takes precedent and downsizing considerations seem more of a reality."
The pandemic-driven trade disruptions have seen sales drop drastically, with 93 percent reporting a fall in turnover ranging between 30 to 100 percent. Reduced demand has been worst in the textile and apparel as well as timber, wood and furniture sectors, followed by the leather and footwear sectors.
Restricted movements and operation hours have also seen the manufactures cut production, with 42 percent now operating at less than half their capacity. The average utilised capacity for micro, small and medium enterprises ranges between 42-37 percent.
The curfew and lockdowns in major counties have also affected logistics, with 76 percent saying they have difficulties in locally sourcing or importing raw materials and 67 percent found access to market challenging.
The businesses also face a cash flow crisis, with close to 80 percent constrained by delayed payments from the government and other customers. This will see more than half struggle to meet operations costs and tax obligations.
The manufacturers have been waiting for the Treasury to release close to Sh23 billion in value-added tax refunds and pending bills, which was expected to hit accounts last week but has since delayed.
