Coronavirus ravages 59% of sales of SMEs in Kuwait

A decrease of a whopping 303% was witnessed in the net operating profit of companies, which resulted in a decrease in the liquidity ratio by 26%

  
A man wears a protective face mask, following the outbreak of the new coronavirus, in Kuwait, February 25, 2020.

A man wears a protective face mask, following the outbreak of the new coronavirus, in Kuwait, February 25, 2020.

REUTERS/Stephanie McGehee

KUWAIT CITY - According to a study prepared by four consultancy firms on the impact of the COVID-19 pandemic on 159 companies as well as small and medium enterprises, there has been a drop in in the value of their sales during the crisis by a monthly average of 59 percent, and a decrease in the profit margin by 66 percent, reports Al-Qabas daily.

The study revealed that a decrease of a whopping 303 percent was witnessed in the net operating profit, which resulted in a decrease in the liquidity ratio by 26 percent.

The same study shows a decrease in the average number of workers by 13.1 percent with a drop in the average value of salaries and wages during the crisis by 46 percent.

The most important observations were the delay of 58 percent of tenants in paying their monthly rents during the crisis, with 37 percent of them receiving a deduction in their monthly rent by real estate owners and 18 percent obtained a waiver in some of their monthly rents during the crisis. The rate of eviction of tenants from their rental units was 5.7 percent.

The study went on to explain that the sectors of sports, health clubs, restaurants and beverages are the most affected by the crisis, as a large part of them was net cash with a monthly average covering a period of no more than one month of operation during the crisis period. The largest percentage of technology, industry and e-commerce sectors had net cash with a monthly average covering more than three months of operation. The percentages of cash liquidity have been greatly affected by the delay in paying a large part of the expenses, as the greatest impact was on the working capital ratio for those companies as well as small and medium enterprises.

The study stated, “The biggest challenges based on the different sectors during the crisis were the rotation of inventory, poor data quality, cash cycle of projects, and payment of periodic obligations such as salaries, wages and rents. Mitigating their effects requires a package of legislative and financial recommendations, in addition to governmental decisions.”

The agreement to prepare this study was reached at the end of April after observing the clear impact of the COVID-19 pandemic on small and medium enterprises as a result of the government’s precautionary decisions to deal with the repercussions of the health crisis. The most important of them was the closure of businesses and the announcement of partial and total lockdowns as well as some health requirements that had an impact on some business models in a way that differed from one activity to another in the SME sector of Kuwait.

The companies participating in the preparation of this report share close links with their clients from small and medium enterprises in various sectors and activities. This contributed to obtaining accurate data that helped the analysts interested in identifying the effects of this crisis from an economic perspective.

The financial consultancy firms participating in preparing this study affirmed that they would do whatever they could to support and assist all government agencies and other parties, in order to find the best ways and solutions to reduce the repercussions of this crisis on the small and medium enterprises sector.

They believe that this sector is one of the important sectors, if not the most important, in the restructuring of the Kuwaiti economy, and that its support is not only related to supporting the youth, but also the state’s economy, community livelihood and future jobs.

159 participating parties

Since the time of its inception as an idea to the completion of the study, a total of 180 days was spent. It included a phase of gathering and analyzing the data of 159 companies and projects as a sample in order to arrive at the results of the study. The sample was divided into eight different sectors and activities in the following manner – the percentage of restaurants and beverages sector from the total sample was 28 percent, retail sales sector 22 percent, service sector 16 percent, sports and health clubs 14 percent, technology 8 percent, e-commerce 8 percent, medical clinics 3 percent, and finally the industrial sector 1 percent.

 

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