Businesses recovering but shortfalls in revenue remain a challenge - Business Tracker reveals

Findings from a second-round COVID-19 Business Tracker Survey conducted between August-September, reveal Ghanaian businesses are recovering, with many firms now fully re-opened, following the lifting of the country’s partial lockdown.

However, the results show that firms continue to report a decline in sales, difficulties in sourcing inputs, and challenges in finding financial resources to cover revenue shortfalls.

Businesses reported an average decline in sales of an estimated 85.5 million Ghana Cedis (51.5 percent), but this is an improvement compared to results from the first round Business Tracker, carried out in May/June, which reported an estimated decline in sales of 115.2 million Ghana Cedis (61percent).

“The COVID-19 Business Tracker is one of the three COVID-19 impact studies being carried out by GSS with nationally representative samples. The results from this second wave of the Business Tracker Survey aim to provide critical information in monitoring the effects of the pandemic on businesses”, noted Professor Samuel Kobina Annim, Government Statistician.

The findings show a decline in sales continuing to impact on employment and the operating model of firms.

Despite improvements over the first-round results, the latest results indicate the COVID-19 shocks forced many firms to continue to cut costs by reducing staff hours, wages, and in some cases laying off workers.

About 297, 088 estimated workers had their wages reduced in August-September, whilst 230,361 estimated workers had reductions in their working hours, with 11,986 estimated employees being laid-off.

Though the number of workers affected has reduced compared to findings in May/June, (where 770,124 had their wages reduced, 297,088 workers had reduced working hours and 41,952 workers were laid-off), the results show the pandemic continues to negatively impact labour.

Cash Flow problems persist, with 7 out of 10 firms (70% from 76% in the first tracker) reporting a deterioration in their cash flows, an indication of continuing weakness.

“The findings indicate that there have been some improvements, but Ghanaian businesses continue to be affected by the pandemic in various ways. Through our current initiatives to support businesses, we will continue to work with all partners to support the Government's efforts to help businesses to fully recover from the pandemic”, said Silke Hollander, Deputy Resident Representative of UNDP in Ghana.

In terms of digital uptake, about half of the firms increased the use of mobile money as against 38 percent in May/June. However, the share of business establishments that have adopted or increased the use of the internet for sales fell marginally from 9 percent in May-June to 8 percent in August-September.

This calls for policies and business development services to facilitate technological upgrading, including the use of digital technologies to support firms adjust to the “new” normal to increase productivity.

“Even though the survey shows some improvements, Ghana’s private sector remains deeply affected by COVID-19. The World Bank will continue to work with the Government of Ghana to mitigate negative impacts, but also to create pathways for long-term recovery and economic growth to make the economy more resilient to shocks such as COVID-19,” said Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra Leone.

The survey shows that firms which benefited from Government support almost tripled, compared to the first-round results, with currently 9 percent of firms (up from 3 percent in the first-round survey).

Many firms continue to indicate that they were not aware of support programs, suggesting the need for increased awareness and clarity on the guidelines and requirements of current programs.

Moreover, trading under the African Continental Free Trade Area (AfCFTA) is expected to start in January 2021, and this second round survey enquired about the businesses’ knowledge and perspectives of the AfCFTA. Only a quarter of firms (26.2 percent) report that they are aware of the AfCFTA.

“Let’s leverage the fact that Ghana is hosting the secretariat of the African Continental Free Trade Area to explore how best to enable businesses to benefit from the agreement”, added Ms Hollander.

The results of the survey suggest that policies are needed to support firms both in the short- and medium-terms. The continued decrease in demand, as well as difficulties in financing cash shortfalls, but many firms in a difficult position. Firms continue to report that measures that aim at improving liquidity (subsidized interest rates, cash transfers and deferral of payments) are the most desired policies.

In the medium and longer-term, steps should be taken with policies that support the private sector in the recovery stage from the pandemic, and with credit guarantee schemes for those accessing finance, assistance with input procurement, and trade facilitation.