More than a third of small businesses on Facebook in Kenya have been forced to shut down as a result of the COVID-19 pandemic, according to the Global State of Small Business Report released by Facebook in collaboration with the World Bank and Organisation for Economic Co-operation and Development (OECD).
The report indicates that only 62% of small and medium-sized businesses (SMBs) on Facebook sampled in Kenya remain operational or are engaging in any revenue-generating activities. The report derived from the Future of Business Survey was conducted between January and May this year and sampled 30,000 small business leaders in over 50 countries including Kenya.
Of the sampled businesses, 65% have had to reduce their workforce in Kenya as a result of the pandemic as they continue to register lower sales. In fact, 75% of local businesses have registered lower sales this year compared to last year with about 47% of the sampled businesses expecting to experience cash flow challenges in the next few months.
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Digital sales have meanwhile become increasingly important for the SMBs as the stay-at-home measures to prevent the spread of COVID-19 continue to be enforced. 46% of Kenyan SMBs surveyed report making 25% or more of their sales digitally in the month of May.
It is however not all doom and gloom as a majority of the sampled local SMBs, i.e. 65% reporting being optimistic for the future.
Globally, the survey indicates that more than a quarter of SMB’s closed between January and May this year with the figure rising to more than 50% in some countries. A third of SMB’s currently operating reported that they had reduced their workforces, a worrying sign of what could be a lengthy job crisis.
Nearly two-thirds of small businesses in operation confirmed that sales are down in comparison to the same period last year. Small businesses in the tourism and hospitality sectors are some of the hardest hit. Globally, 54% of tourism agencies and 47% of hospitality and event SMBs reported that they were closed at the time of the survey. Micro businesses, which are SMBs owned and operated by one individual, have closed to a greater extent than those that have multiple employees.
Across SSA, most countries have also reported being affected by job losses due to the pandemic. 45% of operational SMB’s on Facebook in South Africa, 45% in Nigeria and 47% in Ghana reported that they reduced their employees as a result of the pandemic while small businesses in these countries also reported seeing a significant dip in revenue generation with Ghana, Nigeria, and South Africa reporting, 56%, 59%, 67% lower sales respectively.
The survey shows that Ghana has reported the highest number of small businesses on Facebook engaging in revenue operating activities in SSA at 68% compared to Kenya and Nigeria at 62% and South Africa at 57%. In comparison to elsewhere in the world, Taiwan and the Czech Republic reported 96% and 94%(respectively) of their small businesses on Facebook engaging in revenue-generating activities.
The report also captured the support offered by governments globally to SMBs during this period where some governments have helped offset the impacts of COVID-19 by providing financial assistance. At the time of the survey, almost a quarter (23%) of SMBs reported that they were receiving financial support in response to the pandemic, the majority of this in the form of government grants and loans (about 60% in total).
The report highlights, however, that this is far from universal across the sample with 27% of small businesses reporting that there was no assistance available at the time of the survey. The report confirms that businesses across the globe are spending time during the lockdown to prepare to re-open and are adapting their business models by developing an online presence.
The report also indicates that the path to recovery for small businesses is not certain and they need more support including salary subsidies, tax deferrals, and access to loans and credit to offset ongoing cash flow and demand-side concerns.
The Facebook Global State of Small Business report which was released recently will be followed by 4 monthly trend updates that will focus on different topics like;Â Access to Finance, Gender Gap, Digital Engagement, and Micro-businesses. The study will be concluded by a final report that will explore the trends that have emerged over the past six months.