As air raid sirens blare, Ukraine’s capital city goes back to business as usual

30 March, 02:02 PM
Despite the fact that about 10% of the staff of the Bunny Nail Cafe in Kyiv remained in the capital, the company returned to work a couple of weeks ago (Photo:Bunny Nail Cafe)

Despite the fact that about 10% of the staff of the Bunny Nail Cafe in Kyiv remained in the capital, the company returned to work a couple of weeks ago (Photo:Bunny Nail Cafe)

The city of Kyiv is trying to re-emerge as the heart of the country’s business system and is already partially returning to normal, supplying city residents with the goods and services they need

“We’ve started receiving direct messages to our Instagram page from our clients, they’re asking if we’re working,” says Antonina Krolevets, manager of nail-polishing service Bunny Nail Café in Kyiv.

Russia’s war against Ukraine robbed many of the service’s employees of earnings, complains Krolevets. Only 10% now remain at the nail-polishing chain as it returns to work.

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“I gave keys to one of the employees and asked: if a visitor comes up – would you be willing to work?” says Krolevets. “She said: ‘yes, I’ll work, I need to keep earning some money.’”

Since March 13, Bunny Nail Café chain has been back in operation, providing services to its clients. However, its working schedule has been adjusted to the realities of war: each of the physical outlets has only one or two nail masters, who work half-day shifts.

For more than a month Kyiv has been attacked by Russian aircraft as well as ballistic missiles. Despite this, the city, which used to be a home to 4 million residents who drove 1 million cars, is trying to revive the life of peacetime. All the same, air sirens are now the new normal for those Kyiv residents who stayed in their city.

Economy of Kyiv

“There are almost 400 business entities in Kyiv. Kyiv is working!” wrote Petro Olenych, head of the digital transformation office of the Kyiv municipality and deputy head of the city administration, on his Telegram channel.

Kyiv municipal department of information and communication technologies has created a special map that offers a view of the city’s businesses and companies. It provides a list of their physical locations, addresses, working hours, and contacts. The map is updated on a regular basis.

As of March 26, more than 650 grocery stores, 300 coffee shops, 360 stations for car repairs, 185 haircut salons, approximately 50 automobile shops, eight big street markets and 33 smaller ones were working, reports Kyiv City Administration.

Information like this is available to Kyiv residents online. For that purpose, they need to download the Kyiv Digital mobile app (Київ Цифровий). It provides the collected data in a structured form. Prior to beginning of the war on Feb. 24, this app used to be solely a payment mechanism to use municipal transport. Now it’s a whole ecosystem of digital solutions that people living in Kyiv now need to live a normal life.

For instance, Kyiv Digital app gives you a map with anti-bomb shelters, gasoline stations, grocery stores as well as official information from governmental agencies or Ukraine’s Armed Forces General Staff. Besides this, you may use it to donate own money to the Ukrainian army.

Biz Up

Mimosa Brooklyn Pizza, is a chain that is among the Kyiv businesses that decided to go back to work. Its key location is in Kyiv’s downtown, on Baseyna street.

The pizza places opening hours are restricted now – 1200 to 1600 since the war started. The menu is also different compared to what it looked like before Feb. 24. Only two pizza options are available, both for delivery.

Still, Mimosa Brooklyn Pizza is not the only place to eat in Kyiv – 20% of the city’s restaurants are working at least part-time, according to Poster, a company that provides tech solutions for the restaurant business.

Besides restaurants, big Ukrainian business is trying to do some work too.

They include Nova Poshta, a logistics and delivery company, Rozetka, an e-commerce giant, and Epicenter, a chain of building materials hypermarkets.

You can pay a visit to a dentist in Kyiv, get a haircut, see a cosmetologist, get repair service for your phone, and even buy flowers.

It’s not only the retail sector, with its supermarkets and shopping malls that is reopening, but also law firms, foreign language services, repair shops and dry-cleaning outlets.

“Barbershops, cafeterias, flower salons, even shawarma shops are working,” says Klym Bratkivsky, a lawyer, formerly with RBC-Ukraine news agency, who lives in Kyiv. “Also haircut salons, smaller shops, and pharmacies.” He also mentions petroleum stations and currency exchange outlets.

Macroindicators and Government Policies

As of now, the National Bank of Ukraine set following exchange rates: UAH 29.25 per $1, and UAH 32.42 per euro. That’s not much different to where the rates were before Feb. 24, when the Russian army started to invade more of Ukraine’s sovereign territory.

Banks are also working. The biggest Ukrainian banks have opened branches for customers to visit, while digital banking hasn’t seen any major interruptions in its work. Payments are going smoothly. Since the Russian invasion PayPay, the payment network, has even joined the list of companies that do that business in Ukraine – a long-awaited move.

However, the escalation in the war has obviously affected the Ukrainian economy negatively. Prime Minister Denys Shmygal expects national GDP to shrink by at least 35% this year. More than 50% of the labor force have lost their jobs, with white collar positions hit the most. Some 40% of Ukrainians say they have enough savings only for a month of normal life, reports Rating, a sociology group, citing a recent poll.

SMEs have been hit hard too – 32% of those employed at small- and medium-sized enterprises have only enough funds to survive for a few more months. Another 22% say they will be able to stay afloat for not more than one month. Some 9% could stay afloat for six more months, while only 5% say they would able to survive for more than a year. Some 24% of SMEs do not have any substantial financial reserves, reports European Business Association, a pro-Western corporate lobby group, in its March survey.

“Now is the right time to go back to work and revive the economy,” says Yulia Svyrydenko, Ukraine’s first deputy prime minister and minister of economy. “For Ukraine, each company matters, especially if it keeps working, while those who are closed should open up again.”

All Ukrainians who don’t have any military obligations and don’t serve with the Armed Forces should work and make contributions to Ukraine’s economic resilience, says PM Shmygal. “The country must work. Business must work,” he says.

The Cabinet of Ministers Shmygal leads has announced several measures to stimulate entrepreneurial activity. For instance, this includes some fiscal moves.

Since April 1, businesses won’t have any liabilities on value added tax and corporate income taxes, which used to be set at 20% and 19% respectively. Now corporations will have to pay only a flat 2% tax on revenues – but only if the revenues don’t exceed UAH 10 billion ($345 million).

Besides, the government has canceled the tax audits for the period of Russia’s war on Ukraine. The 5-7-9 lending program for cheap credits will have an interest rate break, while the amount of funds provided by this program could be as much as UAH 60 million ($2 million) per borrower.

Mission Impossible

Interest-free lending is a good measure for supporting Ukrainian entrepreneurs, and Krolevets from the Bunny Nail Café nail-polishing service in Kyiv is thinking about taking such a loan.

Most Ukrainian entrepreneurs have heard of low interest rates in the euro area countries and in the United States, and have been dreaming of having such an interest rate environment in Ukraine.

Krolevets is not sure that even a zero interest rate loan could revive her business, but she is absolutely sure the Ukrainian government is doing right thing with such a move.

“We’ll pay our taxes, we’ll cover our utility bills, the city budget will receive some money,” she says. “Maybe we will be even able to pay our rent. All the stages (of the company’s businesses process) will receive some money. Employees will get their salaries, though not those that they used to have before. But they will be able to cover own financial liabilities.”

Yulia Tsaran, another Ukrainian entrepreneur, feels much the same. She used to run a small confectionary production business, but now works by herself, with no employees. She cooks desserts and sells them to her clients.

“After two weeks of war it became clear that doing nothing was just impossible, personally, for me,” Tsaran says. “First, you have financial liabilities (utility bills, taxes) that need to be paid. Second, making desserts is my passion.”

All of the things needed to produce desserts under war conditions and the realities of the war economy are hard to find. Cream, Mascarpone cheese and berries are not considered to be essential foods, tells Tsaran. The same with packing. Businesses that used to produce packing materials are closed or are selling only the leftovers from their own warehouses. Delivery is not working properly too: Some days nothing can be delivered because of the air raid sirens and curfew.

However, Tsaran feels she is doing all right. Her clients keep writing comments on her social media page.

“I feel there is demand, some people order things as presents for their loved ones,” Tsaran says. “And one women wrote to me that (my desserts) help her feel the calmness of peacetime.”

Those businesses who have been affected by the war the most severely are continuing to evacuate to the country’s western parts. As of March 21, Ministry of Economy through a special program helped to relocate 40 companies. Eighteen of them have already started working in new locations. Soon, the Economy Ministry will relocate 300 more companies.

Vadym Vazhynsky, the owner of three SoundMag shops for audio listeners, moved to Ivano-Frankivsk, western Ukraine. He didn’t expect for anyone to help him. His business just stopped, having previously had sales locations in Dnipro, Odesa and Kyiv.

“Some places are dangerous to stay, some places people just left,” says Vazhynsky.

“Kyiv has its own logistical problems.”

He has experienced a substantial drop in demand for the products he used to sell. And with no sales – there won’t be any cash flow, says Vazhynsky.

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