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Government and Policy

What the Government Can do to Cushion the Impact of Coronavirus on Businesses

BY Soko Directory Team · March 16, 2020 10:03 am

On Friday, 13th March 2020, the Cabinet Secretary for Health, Mutahi Kagwe announced the first positive case of the coronavirus on Kenyan soil, sending shivers among citizens across the country.

Despite the fact that Kenya announced the first case of coronavirus three days ago, the country had already begun experiencing the adverse economic effects of the pandemic.

A report done by the Kenya Private Sector Alliance (KEPSA) showed that 61 percent of businesses were directly impacted by the Coronavirus, directly.

According to Cytonn Investments, the government needs to institute measures to combat the effects of the pandemic as well as support businesses that will most likely be impacted negatively.

In the UK, for example, the government suspended business rates for small firms, offered discounts for larger firms and extended sick pay.

In Singapore, the government has created a Jobs Support Scheme worth USD 935.5 million to help firms retain employees during this period of uncertainty.

“We believe the Kenyan Government can borrow a leaf from what some other governments have so far done,” says Cytonn Investments.

According to analysts from Cytonn, the government can implement the following remedies so as to cushion businesses from the impact of the coronavirus:

  • Grant tax breaks to companies seeking to increase their capacity to produce import substitute goods, which could even mean zero-rating VAT for the next 3-months,
  • Release VAT refunds to assist businesses with managing their cash flow,
  • Encourage banks to give concessionary loans at low rates to facilitate businesses, and as well provide moratoriums on loans that are due,
  • Announce and provide for a Business Stabilization Fund to cushion the impact of the coronavirus, especially for Small & Medium Enterprises (SME’s),
  • Consider reducing corporate tax for industries that have been highly affected by the virus such as the aviation industry, or waiving corporate tax for a 3-month period as well as a reduction in payroll tax for the next 3 months for the low income bracket workers, and,
  • Strengthen the local supply chain for traders to be able to access import substitute goods.

The coronavirus could reduce Kenya’s GDP growth to a range of 4.3 percent to 5.2 percent for the year 2020 depending on the severity of the outbreak and economic implications for Kenya.

Read Also: Equities: Coronavirus in Kenya Triggers Panic Sell-off by Investors

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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