As Kenya moves to contain the spread of the COVID-19 virus, the most vital yet vulnerable segment of the economy, the informal sector, are the most threatened.
According to the World Bank, approximately 95% of the country’s businesses and entrepreneurs* operate within the informal sector, and only 24% of them own a business bank account.
Persuant to this, we interviewed Mr. Wayne Hennessy-Barrett, CEO and Founder of 4G Capital, on how the informal sector is dealing with the Cover-19 outbreak and the measures we can take to support the sector further.
4G Capital serves over 150,000 clients in Kenya and Uganda through its network of over 100 branches. Since 2013, 4G Capital has supported East African micro-enterprises by providing financial literacy and enterprise training combined with right-sized working capital credit to help small businesses grow sustainably.
KW: Health – What’s being done to ensure safety of the informal workers? How do we enforce measures like social distancing? What more can we do?
Wayne: The majority of 4G Capital’s 150,000 clients operate their micro-businesses in crowded open-air markets, providing affordable food, medicine and daily provisions to bustling villages and towns. Here, isolation and social distancing protocols are virtually impossible. The lack of access to running water and sanitation also create enormous difficulties.
4G Capital has joined a consortium of industry leaders to provide hand-washing facilities and sanitisers in the markets where they are most needed.
The Kenyan government has responded decisively and with maturity to a complex problem, and involving tough decisions. Should informal markets, the most vulnerable segment of our population has its access to livelihoods and foodstuffs curtailed. Now is the time for business to stand alongside the government and public sector, as well as NGOs, with innovation and creativity. For example, closed schools, sports fields and otherwise large empty fields could be used as temporary market places, to allow for greater social distancing for and distribution of soaps, sanitiser and other cleaning products.
KW: Payments – How do we ensure/encourage less usage of cash?
Wayne: Removing mobile money charges is an excellent step in the right direction. The only cost we believe has remained is the agent withdrawal fee, we understand that this is an initiative to inhibit the use of physical cash further.
We are encouraging our clients to only deal with mobile money transactions; however, we are unsure whether other micro-businesses are receiving this important message. Cash is still being handled, we need a stronger message from our community leaders and government to educate our population.
KW: Curfew – How is it affecting the informal sector?
Wayne: Businesses are closing earlier; there is anxiety as people hurry to get their last shilling of the day with enough time to get home safely. Our clients report with fewer hours in the day to trade, their ability to earn is restricted. At the same time, people understand it is important to restrict the potential spread of the disease, and in some cases, they even feel safer at night.
KW: What are some of the initiatives by the private sector?
Wayne: This crisis, for all its pain and disruption, is an opportunity for people to rise to the occasion. 4G Capital is trying to play its part, supporting our small business clients and using our business training as a way to support public health education. We are one of many companies that is trying to genuinely arrest the spread of the virus and help communities overcome the challenges. It is quite inspiring to see other companies, such as Koko Networks, SafeBoda, Twiga Foods, Sokowatch and other Kenyan tech companies working together with multinationals like Citi Bank and governments to meet this challenge. Tough times can bring out the best in people.
KW: We have seen government cut VAT and tax rates, what other measures would greatly help the informal sector?
Wayne: Cuts in tax rates and VAT are a bold and welcome move for the country. However, the informal traders who make up 95% of all businesses in Kenya, by nature of their lives, will not benefit from this. We must remember Kenya has only recently moved to an African ‘middle income nation’ status, and there is much work to do to help the informal economy transition to a formal existence, integrated with the national tax and social security framework.
Financially, the informal sector would benefit from a reduction in the cost of utilities and mobile phone charges, and to be treated with sympathy and support by the local authorities, who we must remember have challenges of their own. We are all wananchi today, and we need to look after each other to get through this.
KW: Where do we go from here?
Wayne: We must push on and effectively execute solutions without delay. Financial inclusion and access to health services are more critical than ever. There is a wonderful upside to COVID-19. People are now being forced to realise how completely connected we are, and how the well-being of our neighbours, whether they be an individual or another country, however rich or poor, is as important as our own. We are each others keeper. Beyond the immediate crisis, we must plan to rebuild the global economy in a way that gives fair value for everyone. We can re-start globalisation in a way that recognises everyone’s contribution, and doesn’t allow the exploitation of those with fewer advantages.
* Work Bank Data as at 2016.