COVID-19 wipes out GHC 40m revenue of 108 businesses – Industry leaders

Businesses have been adversely affected by the COVID-19 pandemic with an estimated loss of nearly GHC 40 million for 108 businesses who are members of the Ghana National Chamber of Commerce & Industry (GNCCI).

The 108 firms are just a fraction of the nearly 6000 memberships of the GNCCI dotted across the country sampled for the GNCCI Business Survey on COVID-19.

Chief Executive Officer of the GNCCI, Mark Badu-Aboagye, told theghanareport.com in an exclusive interview that the findings showed that the total estimated financial cost, defined as revenue loss and constraints to business operation “was GHC 39,823,407, which also differs and increases with firm size”.

The average cost for micro-enterprises was GHc 22,500; small enterprises registered GHS50,000; medium enterprise GHc 500,000 and large enterprise estimated GHc 600,000 for a firm.

Cumulatively, the estimated financial cost varies across the business sectors with agricultural businesses being GHC 787,000; industry GHC 9,863,300 and services GHC 29,173,107.

Within the industry sector, large enterprises are faced with the highest estimated financial cost of COVID-19.

Input supply has also been severely affected across firm sizes and business sectors.

On average, the extent of the effect on projected 2020 annual revenue was higher for small (80%) and medium (80%) enterprises than micro (75%) and large (50%) enterprises.

The government has sought to mitigate the impact with Finance Minister announcing an ongoing disbursement of GHC 600m for small and medium-scale firms being supervised by the National Board for Small-Scale Industries (NBSSI).

Additionally, Finance Minister Ken Ofori-Atta announced in the mid-year budget review that the government has earmarked about GHC 2 billion guarantee fund for over 100 large-scale firms to access more capital for operations.

SME support woefully inadequate

Citing the minister, Mr Badu-Aboagye pointed out that on average the amount disbursed for beneficiaries is GHC 899.80 for one beneficiary.

However, the survey shows that smaller SME’s (in this case micro-enterprises) are losing on average GHC GHC 22,500 to GHC29,000 “in terms of revenue so if you are giving them on the average GHC 889, then it means that it is woefully inadequate”.

By estimation, it implies that government support is less than 5% of the losses by the SMEs (micro-enterprises).

Mr Badu-Aboagye acknowledged that the stimulus package is not supposed to start a new business but to ensure survival hence “50% per cent of support out of the GHc 29,000 on the average for enterprises should be fair”.

He admitted challenges to revenue generation “so we are not expecting that the government will meet the entire amount of losses made by businesses, but at least the support to ensure that they survive and also keep businesses to retain the employees.

“I think it is relevant going forward to ensure that they bring our economy back on track”.

Other expectations of businesses from government

For businesses, the main expectations are a package of support (bailouts and tax reliefs). Other expectations include a moratorium on salary loans, low-interest loans and channelling of support through trade associations.

Employee management

The effect of the pandemic varies across business sectors in terms of lay-offs, expected lay-offs, short-time working hours, workers on paid leave, and workers made redundant.

Across firm sizes, small enterprises are faced with the highest lay-offs and redundant workers.

Medium enterprises also have the highest expected lay-offs and workers on paid-leave, while large enterprises have highest short-time working hours mostly evident in the services sector.

Staff morale has negatively been affected

GNCCI said given the importance of SMEs for Ghana’s growth and the fact that SMEs account for 93% of jobs created in the private sector, the current disruptions to their businesses could have dire consequences for the national economy.

Handling of business events

In coping with the disruptions, some businesses either use video calls and conferencing or have postponed or even cancelled events.

The sudden shift in some business activities online suggests the urgent need to address the underlying issues of the high cost of data and related charges.

The use of systems and technology to support business activities requires businesses to be informed and mitigate their risk exposures to cyber crime.

Business continuity and risk simulation

About two out of three businesses have a business continuity plan. However, four out of five businesses that have a business continuity plan had never practised risk simulation.

This raises the question as to whether the development of a business continuity plan is an end in itself or a means to an end. Businesses have given strong indication of re-evaluating their business strategies which will be critical in a post-COVID-19 era.

Other recommendations

The Ministry of Employment and Labour Relations must work with stakeholders to strengthen the Occupational, Safety, Health, and Environment (OSHE) mechanism and system to proactively ensure safe and healthy working environments.

The GNCCI maintained that provision of timely bailouts or tax reliefs is critical.

However, the government must consider the interconnected risks within the affected industries to achieve better operational resilience and improved collective efficiency.

Government’s stimulus package should be structured to address input supply, production capacities, end markets, and employee management given firm size and business sector.

In particular, as the single largest procurer and consumer of goods and services, the government should leverage this key functionality to stimulate local business production, growth and development.

The GNCCI further urged the government in consultation with the financial industry players to urgently make known the modalities required to enable large enterprises to access the GHS3 billion syndicated loan.

In lieu of layoffs and redundancies, businesses are strongly encouraged to work with unions and workers to explore alternative strategies to retain their workers, for example, businesses can furlough employees as a worker-retention strategy.

This will help minimise or eliminate the related costs of rehiring and training as well as the loss of well-trained employees.

There should be periodic risk simulation by businesses to test the robustness of their business continuity plan. In this regard, trade and business associations in collaboration with other stakeholders must support their members to develop robust business continuity plans.