How firms are surviving the pounding corona tide

Businesses desperate to survive the harsh economic times brought on by the coronavirus pandemic have come up with various measures that range from the ingenious to the downright mortifying.

And it is understandable. Globally, the virus is driving companies into early graves. Only the strongest and smartest firms will survive this economic maelstrom occasioned by Covid-19, which has infected nearly 2.5 million people worldwide, with 281 cases in Kenya as of yesterday.

Pay cuts and layoffs

Businesses with nearly zero chances of diversifying their revenue streams and with thin balance sheets have frantically gone for the scissors to restructure their operations.

Some of the businesses, including those in the hospitality, horticulture, aviation and media industries, have ruthlessly instituted deep pay cuts and massively chopped their workforces to stay afloat.

Although others, like hotels and travel agencies that have been directly affected by the coronavirus pandemic, are yet to file for bankruptcy, nearly all of them have bolted their doors to stop the accumulation of overhead expenses, such as labour costs and electricity. They have sent their employees on unpaid leave.

Shifting from the core business

Extraordinary times call for extraordinary measures, so some businesses have backtracked from their long-held values to venture into new frontiers to snap up opportunities that the pandemic has presented.   

With consumers increasingly getting uptight as their sources of income dry up, some businesses have crafted inventive ways of extracting an extra dime from broke Kenyans.

They have unveiled new products that resonate with the new reality of the stay-at-home order by the government. If your firm sells food, confectionery, detergent or face masks, the outlook is good.

Riding on technology for home delivery

With people being asked to stay at home, the new normal is home delivery. It is not just supermarkets and e-commerce companies that have gone into home deliveries; so have beverage companies such as East Africa Breweries Ltd.

Many tech companies around the world are also seeing surging demand for their services.

Safaricom, for instance, has experienced a surge in the data business as more people work from home. E-commerce companies such as Jumia have also seen an uptick in their operations, partnering with various restaurants to deliver food to those at home.

Almost every other firm has attempted to do business virtually. They have endeavoured to deliver products to a customer’s doorstep even as others, such as banks, have drummed up support for digital payments.

Most musicians in Kenya make money through live concerts. But there are no shows to attend, with all social gatherings being banned as the government enforces the social distance rule to curb the spread of Covid-19.

But Nyashinski, a popular musician whose real name is Nyamari Ongegu, recently treated his fans to a concert streamed live on YouTube for only Sh20. The concert offered a peek into his upcoming album, Lucky You. Several DJs and artistes have followed suit, hosting virtual parties.

But the going has been tough for others. National carrier Kenya Airways was among the first casualties of the pandemic as countries shut their borders. Even before the storm, the airline was hanging on by a loose thread. Without a bailout, coronavirus might as well sound its death knell.

Nonetheless, KQ has been fighting hard to stay in the skies despite facing fierce headwinds.

It has converted some of its passenger planes – four Dreamliners – into cargo planes. For any airline, having aircraft on the ground is more expensive than having aircraft in the skies.  

Last week, the national carrier said in a statement that it had dispatched a cargo flight operated by its Boeing 787 Dreamliner passenger aircraft from Nairobi to London loaded with 40 tonnes of fresh produce.

“This is part of the innovative initiatives we have embarked on by converting four wide-body passenger aircraft to fit our cargo operations to reduce the impact of Covid-19 on operations,” said KQ.

Its rival, Ethiopian Airlines, has not been left behind. The Addis Ababa-based carrier is yet to ground all its flights, but like other airlines, it has had to reduce utilisation. And just like KQ, it has configured a number of its passenger planes into cargo ones.

For KQ, this is the equivalent of a drowning man clutching at straws. The cash-strapped airline made a loss of Sh8.5 billion in six months.  

At first, only the senior management at the airline took a pay cut of 80 per cent, but this has since been extended, with all other employees seeing 75 per cent of their salaries held back.

Hotels have also felt the weight of this pandemic after the government prohibited social gatherings. A few of them have been presented with glimpses of opportunity which they have latched onto with both hands.

Two of them, Boma Hotels and Pride Inn Hotels, have been quarantine facilities for those forced to isolate themselves by the government to prevent the spread of the disease.

Those quarantined in these luxurious hotels are expected to foot the bill. Most of them say they have been paying around Sh9,000 a night. At first, they were to spend 14 days, which is the period within which those with the coronavirus disease begin to show symptoms.

The government then extended the quarantine period by another two weeks before it reduced this to eight days following an outcry from those in isolation.

A source with intimate knowledge of the process told Financial Standard that the government was to pay the bill for the additional eight days. For these eight days, Pride Inn was expected to pocket at least Sh10 million from the State.

This is much less than what these hotels make during the low season, but it is better than nothing at a time when Covid-19 is ravaging the entire hospitality industry.

And it is not just hotels that are being turned into quarantined facilities. Schools and colleges, which have since been closed following President Uhuru Kenyatta’s directive, have also been cashing in. 

By converting their empty classrooms and halls into holding facilities for people suspected to have been in contact with those who have tested positive for Covid-19, institutions of learning have been making at least Sh2,000 per night per person.

Again, this is better than nothing for institutions that are not sure how long they will go without fees from their students. Some schools and colleges, however, are using technology to ensure the continuity of their business by offering online courses.

Things have been tough for hundreds of private school teachers. In Nakuru County, for instance, most of them have had their contracts suspended as the shutdown of schools heads into a second month, with no clear end in sight.

Some private schools have had to be innovative, perhaps to justify the fees they have already received or which they will demand. Some of these innovations have been as rudimentary as just posting a photo of handwritten assignments to parents’ WhatsApp groups.

Others, such as those from the University of Nairobi, have been slightly more nuanced and might be a precursor of how learning will be conducted in the aftermath of Covid-19. The university has provided a way in which students doing their theses can interact with their supervisors online.

Some of the technologies primary and secondary schools have been using to continue learning in this period include virtual classrooms, emails, blogs and online discussion boards.

Alternative lines of business

Export processing zone (EPZ) companies manufacture various products for markets abroad.

In Kenya, most of these companies, which enjoy tax holidays, manufacture garments for export to the US.

The trade is largely carried out under the lucrative African Growth and Opportunity Act (Agoa), a preference programme that provides duty-free treatment for certain products from eligible sub-Saharan Africa countries.

But the US is under lockdown and hurtling towards a recession. Millions have lost jobs as businesses file for bankruptcy. Some EPZ garment factories have found a way around this.

Kitui County Textile Centre (Kicotec) and Eldoret-based Rivatex are now manufacturing face masks, which are in high demand after the government made it mandatory for everyone to put one on while in public places or public transport.  

Kicotec, which is based in Syongila, has been turned into a 24-hour production house where 30,000 pieces of masks are being produced daily.

Rivatex is also running mass production of face masks. These companies have had to stop production of everything else to concentrate on the protective covering.   

Tuskys Supermarket and other retailers have also found a silver lining in the corona era.

While traffic to their outlets has been dwindling, demand for essentials, such as foodstuff, soap and sanitisers, has risen.

They have also increased their home delivery services. And with many formal eateries being forced to close down, Tuskys has come up with its version of kibanda (informal eatery) food, where it serves affordable takeaway dishes, such as githeri kavu (plain maize and beans), chapo mandondo (chapati and beans), ugali, matumbo, sukuma (ugali, tripe and kale), ugali nyama (ugali and beef), chapo nyama and mukimo nyama. These dishes start from Sh95.

This pandemic also seems to be upending long-held values by some business establishments.

Naivas Supermarket, for instance, has diversified into selling alcoholic beverages in some of its outlets, breaking away from a tradition that was started by its founder. With bars closed, and wines and spirits shops shut by 7pm, the retailer has seized on new opportunities to make money.  

dakure@standardmedia.co.ke