The Covid-19 pandemic has presented unexpected challenges to businesses around the world. Business owners need to build a survival mindset. There has been a lot of research on the impact of the pandemic to businesses.
One key aspect affecting most businesses is reduced demand of goods and services, leading to shrinking financial resources. Organizations, therefore, need to learn and embrace financial management for resilience.
Businesses ought to conduct financial analysis during this period to identify areas that require adjustment. The key information that business should continuously generate and present for decision making include revenue, inventory turnover rate, accounts receivable turnover, current ratio and acid test ratios.
The information will aid with quick decision making when new revenue streams are identified. We have certain supermarkets in this country that are making home deliveries and now have refined the supply chain logistics; being resilient and taking the pandemic head-on to keep sales streaming in.
One of the most important concepts in financial management in this pandemic is the breakeven point. The breakeven analysis helps determine at what stage your company starts making profit. It helps you determine the number of units that you need to produce to become profitable. It is point zero at which you are neither making a profit nor a loss.
Every business owner should have this number in mind, it is the magical number; it can be the make or break of any business. During this pandemic, this number will be useful to survive. Based on this number the business can determine how to deal with any other aspect of operations – from potential sales volumes to expenses.
Liquidity is another key aspect of business survival. Liquidity measures the ability of the organization to cover immediate expenses. Expenses should be evaluated with the aim of maintaining efficiency and saving on costs.
The possibility of outsourcing certain business services while still achieving the same results but lowering costs for example outsourcing your marketing or accounting function. Hiring of equipment instead of purchasing is another important business decision; we have Uber that owns a global business without owning any vehicle.
Businesses can hire machine time to manufacture their products as opposed to purchasing equipment; hiring transport services without owning a fleet of vehicles. Businesses may eliminate or reduce rental space while still in business and achieve the same results. Businesses can hire production capacity to another entity while still maintaining similar production standards.
Managing business risk can also involve negotiating favourable payment terms with their suppliers, this way the business is able to pay when money is available. Businesses can also sell idle equipment and open up cash that would be required during this pandemic. In the circumstances where the business has received purchase orders, these orders can be financed by financial institutions. The main aim is to ensure that the business remains liquid while still transacting business.
Finally, organizations should invest time in scenario planning. Scenario planning is projecting the future and brainstorming on the possible future business environment. Businesses need to prepare for uncertainties that the environment presents and make plans on how to overcome those challenges while still remaining relevant.
This will enable the business to continue even when such circumstances as the pandemic occur. This process will help the business perceive risk and opportunities as they plan for the future.
Kenya was ranked position 85 in the Global Rank in imports, with total imports worth US$15 billion an estimated KES 1.5 trillion in 2018.
Our top 5 import commodities were: machinery, mechanical appliances; electrical machinery and equipment; vehicles other than railway or tramway; iron and steel; mineral fuels and oils. A lot has happened in the past 2 years, and I believe this list may soon change.
According to Tullow Oil, Kenya’s Turkana fields holds 560 million barrels of oil, with an expected daily production of up to 100,000 barrels starting 2022.This is promising news and perhaps soon we will no longer have to import as much oil as we do.
This will definitely have a positive impact on the economy as a result of increased revenues from exports, job creation in the manufacturing plants, as well cost reduction owing to reduced expenditure on imports.
The government has made some commendable steps towards promoting local manufacture of commodities. An example is the recent local manufacture of masks and ventilators, as well as the processing of sanitizers in an effort to combat the Corona virus.
As much as the pandemic has exposed some loopholes in our economy, it has also revealed new investment opportunities in areas such as e-commerce, online meeting apps, which are presently being used in high demand.
The government of Kenya aims to increase local manufacture from 9.2% to 20% of the gross domestic product by 2022. One of the ways it has supported this agenda is through the ‘Buy Kenya, Build Kenya’ initiative, that encourages consumption of local products.
KEPSA noted that growing local industries as well as supporting existing ones to enhance their capacity, will gain Kenya leverage in regional markets such as EAC and Afcfta.
The revival of sectors such as leather, textile, fish processing, mining, oil and gas and construction, among others, is vital in its potential to create at least 600,000 new jobs. This will certainly go a long way in achieving Vision 2030, increasing foreign direct investments and increasing GDP.
The government has allocated KES 1.1 billion for the development of textile and leather industrial parks such as the Naivasha Industrial Park. Companies with assembly plants in Kenya are also set to enjoy exclusive preference in the procurement of motor vehicles and motorcycles.
For instance, the restoration of RIVATEX, the textile company based in Eldoret, is expected to create over 3000 new jobs, something the youth in Trans Nzoia will greatly benefit from.
It therefore goes without saying that investment in local industries is imperative, if we want to achieve the Big 4 agenda and other developmental plans. As much as we can, let us maintain an appropriate balance of trade. Reduce imports. Increase exports.
It is time we supported our local industries and encouraged them to flourish. As for the local industry and business owners, be agile. Continuously innovate and work towards delivering goods that are of international standards. That is the only way we can compete with the global ‘bigwigs’ and out Kenya on the map.
Miraa traders in Kenya are up in arms after Somalia turned back an aircraft that was delivering 13.6 tonnes of khat to Hargeisa, the capital of the breakaway Somaliland region.
Nyambene Miraa Traders Association (Nyamita) chairman Kimathi Munjuri said the cargo plane was turned back on Saturday despite having received clearance to leave Nairobi and deliver the highly prized commodity to Hargeisa.
Hargeisa, a major consumer of Ethiopian khat, is experiencing a shortage of the stimulant due to ethnic unrest that has hit Ethiopia’s expansive Oromia region for the last five days.
Flight 5YMSA, which had overflight and landing clearance from Somaliland Civil Aviation and Airports Authority, turned back and landed at Wajir International Airport.
According to Somalia based news sites, the cargo plane was denied entry due to the country’s air Somalia banned miraa imports three months ago to prevent the spread of the coronavirus.
Despite Somaliland declaring unilateral independence in 1991, the issue of air traffic control is yet to be agreed on between Mogadishu and Hargeisa.
The semi-autonomous state is in talks with Somalia, spearheaded by Djibouti, to resolve longstanding differences.
Airspace control is one of the issues Somaliland wants to be solved in the talks that resumed late last month in Djibouti.
The move by Somalia was reportedly received with protests in Hargeisa by expectant miraa chewers who are hit by the shortage.
Mr Munjuri said traders’ losses would run into Sh8 million if the khat is not delivered on time.
“The miraa is valued at about Sh3 million, Sh2.5 million goes to transport. There are other logistics costs, which cannot be refunded. We had approvals from Somaliland Civil Aviation Authority to deliver the miraa. Everything was in order until the aircraft entered the Somalia airspace. The pilot was told that he was carrying illegal cargo,” he said.
Mr Munjuri decried the slow pace of the Foreign Affairs ministry to address the trade stalemate with Somaliland.
“We have even been trying to have the Somalia border reopened to facilitate trade but nothing seems to be moving.
“The Ministry of Trade and Agriculture have been engaging Foreign affairs on various issues. All miraa trade issues seem to be stuck at Foreign Affairs,” he said.
Somaliland withdrew all Covid-19 restrictions including public gatherings and international flights on June 23.
The incident came a day after Kenyan investors and State officials held talks with Somaliland President Muse Bihi in Hargeisa.
The COVID-19 pandemic has emerged as the defining global health crisis of our time. As it spreads exponentially, the disease has had an unprecedented impact on almost all economic sectors. The strain on governments is extreme and the impact on the people continues to grow. To arrest the spread of the coronavirus, Kenya introduced stern containment measures.
The pandemic also has the potential to create devastating social, economic and political crisis with far-reaching consequences. But as cases increase, there is solace in the fact that the government has stepped up response efforts. However, it is in disaster response and relief efforts that the values of open government can come under intense pressure, though it can also meaningfully contribute to better outcomes.
But as the government, partnering with other local and global players, steps up efforts to combat the pandemic, it is worrying that these are being negated by saboteurs and profiteers. The public enemies slowing down the fight against COVID-19 are not only those breaking the curfew but economic saboteurs who do not implement government directives.
Besides arresting curfew breachers and mask defaulters, let the authorities also go for economic saboteurs who refuse to effect the executive directive on tax relief. Almost four weeks after President Uhuru Kenyatta announced two per cent VAT reduction on essential commodities, the prices at many retail outlets are unchanged.
The prices of milk, bread and sugar, for instance, are either the old ones or have been increased. Why is milk still retailing at Sh50-plus yet the authorities do not go after the retailers with as much zeal as they do drunkards who are locked up in bars?
What interventions are Kepsa, FKE and Cofek, among other stakeholders, doing to point out these gaps? While I appreciate that Kepsa has been visible in this area, prescribing measures to mitigate the impact of the pandemic, it is my humble opinion that some of these once-vibrant bodies have failed in their cardinal duty.
It is encouraging to hear that the Kepsa COVID-19 Business Response Committee seeks to gather disaggregated information from all sectors on the impact of COVID-19 on them and the effects of the interventions by the public and private sectors to safeguard businesses and jobs during and after the pandemic.
These are progressive policies. When you cushion employers from the hardships of COVID-19, families and communities will, in turn, not feel the heat. Apparently, though sad indeed, the coronavirus crisis has revealed the ‘true’ public servants.
This is beyond the President’s commendable call for government entities to clear pending bills. It seems few are paying for goods or services procured in the past two months. I know of customers who, taking advantage of the virus, have written to service and goods providers, claiming that they cannot pay for them or are closing shop and hence scaling down on consumption.
Consumer regulatory agencies have failed Kenyans during the pandemic. Since the announcement of the first confirmed case of COVID-19 in Kenya, uncertainty descended upon consumers, sparking panic buying of commodities ranging from essential foodstuffs to protective gear, such as face masks, gloves, hand sanitisers and toiletries.
Traders should realise that the pandemic has worsened the economic situation of many households, with many breadwinners having to contend with pay cuts, unpaid leave or even loss of gainful employment. Kenyans should condemn such heartless businesses dancing on the graves of helpless consumers.
Central Bank of Kenya (CBK) Governor Patrick Njoroge has accused suspended Treasury Cabinet Secretary Henry Rotich of distorting revenue figures.
Dr Njoroge yesterday said the misrepresentation of numbers by the embattled official had driven the government on a borrowing spree.
In a rare bare-knuckle attack on Rotich’s tenure, Njoroge described Treasury’s budget-making process as “abracadabra”, where revenue numbers were randomly included in the budget books “from thin air.”
The governor described the revenue shortfalls by Treasury that resulted in a borrowing spree as “parte after parte” in street parlance.
“There was a lot of abracadabra,” said Njoroge of the budget-making process that was overseen by Rotich and his Principal Secretary Kamau Thugge.
Njoroge spoke at a press briefing in his office a day after the Monetary Policy Committee slashed the benchmark lending rate from nine per cent to 8.5 per cent.
Rotich and Thugge face multiple criminal charges, including abuse of office, conspiracy to commit economic crimes, single-sourcing for projects, and approving payments contrary to the law.
In five years, Rotich had borrowed upwards of Sh3 trillion, an amount higher than what his 14 predecessors, combined, borrowed. And as of last year, repaying this ever-increasing debt was gobbling up about 57 per cent of tax revenue.
Suspended Treasury CS Henry Rotich Photo/COurtesy
The country has low sources of revenue and high spending on non-development projects, a recipe for financial disaster. Njoroge said for the first time in his four-year stint as governor and chairperson of the MPC – the CBK’s organ responsible for monetary policy – they were in agreement with austerity measures being undertaken by Treasury.
He lauded the current crop of leaders at Treasury for “being realistic” in their revenue projections.
“It is not the first time we have had a conversation with the National Treasury. I have been here four and a half years now. But I think for the first time… we believe in the fiscal consolidation taking place,” said Njoroge.
“It is one thing to have words that you are going to consolidate, it is another to actually mean what you say and actually go ahead and do it.”
Njoroge was referring to the many austerity efforts by Rotich, which always failed to materialise, with the country falling deeper into debt. The country’s stock of debt currently stands at Sh5.9 trillion. Njoroge said there was no clarity in terms of revenue estimates that Treasury presented to the MPC in the past.
“Revenues in the past were over-stated, completely over-stated,” he said. Treasury has since revised downwards revenue estimates to Sh2 trillion from Sh2.1 trillion.
“If that is the way you do budgeting, then you deserve what you get, which is nothing. And indeed, you deserve the crisis that follows after that,” said Njoroge.
Trans National Bank Buyout: Nigerian Tier-1 lender, Access Bank says it is ready to acquire the Transnational Bank of Kenya. CEO of Access Bank Herbert Wigwe, says he anticipates that the deal will be concluded before the end of November. The ownership of Transnational Bank is associated with the family of the former president Daniel Arap Moi.
The Competition Authority of Kenya gave Nigeria’s biggest lender the go-ahead to acquire 93.57% of Trans National Bank Ltd, as consolidation in the East African nation’s banking industry gathers pace.
Access Bank Group Head Office, Nigeria
Access Bank Plc’s purchase follows the merger of NIC Group Plc and Commercial Bank of Africa Ltd., and KCB Group Ltd.’s acquisition of National Bank of Kenya Ltd. earlier this year. Access Bank joins other Nigerian lenders Guaranty Trust Bank Ltd. and United Bank of Africa Plc in operating in the Kenyan market.
The deal bodes well for the Central Bank of Kenya’s push for consolidation in an industry of more than 40 lenders and a population of almost 50 million people. Kenya has more banks per person than South Africa and Nigeria, Africa’s two largest economies.
In the past two years, SBM Holdings Ltd. of Mauritius bought up some of the assets of Chase Bank Kenya Ltd. and the entire capital of Fidelity Commercial Bank Ltd.
Transnational, which swung to a full-year pretax loss of 98.5 million shillings ($951,690) in 2018, lends mainly to the agricultural sector, according to its annual report. Non-performing loans ballooned 58% to 1.85 billion shillings, while loans rose 0.5% to 6.63 billion shillings, it said.