Kenya SME Covid 19 Stimulus Package Proposal

The coronavirus pandemic in Kenya can be termed as having caught most institutions including government flatfooted with quite a bit of uncertainty over the crisis and its apparent effect on economic performance for 2020 going to 2021.

Government efforts and action towards containing the spread must be supported by all persons and all hands need to be on deck in containing and hopefully eradicating the virus.

Whilst greater effort must be directed towards containing coronavirus infection from spiking by putting in place appropriate measures as is currently being done through school closure, encouraging citizens to stay at home, minimize public gatherings among other directives, the Kenyan government must set up a task-force or team tasked with developing an SME Covid 19 stimulus package proposals to cushion SMEs who are already taking a huge hit underpinned on the coronavirus pandemic.

The need for a stimulus package is crucial to backstop SMEs the engine of the Kenyan economy because the effect of the coronavirus to their business operations mainly liquidity will continue to be felt by SMEs up to a year after the virus is eradicated which isn’t going to happen at least in the short term.

SME challenges cognizant of the coronavirus pandemic can be categorized into two; demand side and supply side challenges.

Demand side challenges relate to falling revenue with customers purchasing only essential products/services mainly foodstuff.  Measure must be put in place to stimulate local demand by for example raising the PAYE tax band to Ksh 20,000 for financial year 2020-2021 in order to increase disposable income or money in mwanachi’s pocket to enable them purchase more.

Supply side challenges are more complex but if resolved have the greatest potential to free up cash-flow and increase SME liquidity.

Supply side support proposal to help in cushioning SMEs by supporting liquidity are as follows; Supply chain support especially for SMEs who rely on import as their primary input by offering time bound (6 Months after declaration of a coronavirus free Kenya) tax and levy relief as well as waiver on port clearance and if possible last mile delivery charges on platforms such as SGR.

Second is tax support measures such as waiver of relief from Turnover Tax and corporate tax to 1% and 20% respectively in addition to waiver of late tax payment penalties and interest at least for one full financial year.

Third is immediate payment of dues to SME by both national and county governments.

Fourth is relief on key input cost especially to SMEs in manufacturing; fuel and electricity.

Finally access and cost of funding support action to mobile credit as well as financial institutions to catalyse reduction in cost of loans, extending credit repayment period as well as fast-tracking SME credit de risking mechanism.