COVID-19 and impact on businesses – What Can African businesses do?

Background

The novel Coronavirus needs no introduction, according to the Center for Disease Control and Prevention, U.S.A, a novel coronavirus is a new coronavirus that has not been previously identified. The virus causing coronavirus disease 2019 (COVID-19), is not the same as the coronaviruses that commonly circulate among humans and cause mild illness, like the common cold.

A diagnosis with the previously known coronavirus 229E, NL63, OC43, or HKU1 is not the same as a COVID-19 diagnosis. On February 11, the World Health Organization announced an official name for the disease that is causing the 2019 novel coronavirus outbreak, first identified in Wuhan China.

The new name of this disease, a respiratory illness that can spread from person to person is Coronavirus Disease 2019, abbreviated as COVID-19. In COVID-19, ‘CO’ stands for ‘corona,’ ‘VI’ for ‘virus,’ and ‘D’ for disease. Formerly, this disease was referred to as “2019 novel coronavirus” or “2019-nCoV”.

This pandemic has led to demand shocks (sudden event that increases or decreases demand for goods or services temporarily), decreased consumer spending on clothing, recreation/entertainment, travel, due to widespread restrictions on travel and movements, purchase and import cycles, increased global uncertainty, temporary business closures, realignment of budgets towards healthcare spending, revision of FY 2020 and 2nd Quarter targets by Businesses, loss of Income by certain employee classes, revision of global economic targets, disruption in global trade, markets and investments.

With increased mobile penetration and usage yet lack of digitized services or patronage in Africa (Payments, Service Delivery etc.), without proper planning, vaccine or enhanced contact tracing to slowdown the pandemic, African economies and Human Development indexes for Citizens will be threatened.

African Economies like the rest of the world are pursuing global approaches summed up by the address of the OECD Secretary General Angel Gurría, at the G20 Summit, “Recapitalize health and epidemiological systems; Mobilize all macro-economic levers: monetary, fiscal, and structural policies; Lift existing trade restrictions especially on much needed medical supplies; Provide support to vulnerable developing and low-income countries; Share and implement best practices to support workers and all individuals, employed and unemployed – particularly the most vulnerable; Keep businesses afloat, particularly small and medium-sized firms, with special support packages in hardest hit sectors such as tourism.”

Context

The impact of the widespread lockdowns will be felt by all classes of businesses, Micro, Small, Medium Enterprises, Individuals and Bigger corporates, including Household Enterprises. Across Africa, Government’s must re-examine macroeconomic stimulus packages to reflect the structure of the African economy with varied mismatches such as lack of structured ID systems, untargeted, unstructured, unidentified rural and urban poor or vulnerable, the increasing risk for Government’s to offer social reliefs and safety nets means increased budget/revenue gaps for African Government’s. The socio-economic cultural nuances demand regarding the provision of tax penalty reliefs and extensions, revision of base points and interest rates on loan facilities and a corresponding low draw down in an economic shutdown, increased KYC requirements post COVID-19 regardless of banking relationships may cause increased investments/businesses to some sectors at the expense of others.

Businesses with no contingency, dwindling revenues for direct contact businesses (given the fact that most African economies are brick and mortar) yet must meet employee obligations (Salaries et al), increasing weight of overheads albeit reduced but affected by revenue gaps, disruption in credit cycles, funding cycles, debt recoveries, inventory, project timelines, construction targets, procurement delays and changes, will certainly mean that some businesses may not survive.

What Governments Must Do:

Ghana’s macro-economic environment was stabilizing; an economic restructuring program being pursued by Government under its short to medium term program touted as yielding positive economic returns, reducing interest rates, reduction in tariffs, aggressive digitization, favorable balance of payment, positive external reserves, a stabilizing banking sector after a purge, decreasing non-performing loans amid limited revenue inflows and a fairly managed debt-GDP ratio.

Regardless, Ghana’s Business environment is on a reset, restart button demanding a review of Strategy, Cost, Operations Management, Finance and Improvement in Service delivery. Governments have announced Stimulus Packages due to COVID-19 (These will be reviewed in the subsequent article).

However,

Government has an opportunity to redevelop traditional retail/wholesale markets and operations, an opportunity to scale up ID mapping and systems integration to enhance service delivery, pursue an active local industrialization Agenda by supporting local industries and manufacturing by establishing some Positive Bias Comparative Advantage Agenda to improve sub-regional position and trade especially given the advent of the Africa Continental Free Trade Area (AfCFTA).

Government has an opportunity to stimulate the growth of the digitization value chain, from functional yet affordable smartphones to discussions on data plans, reliable bandwidths that ensure rapid uptake, with the fiscal measures introduced to support industry.

Increased support to Research and Development by Public, Private Businesses to enhance our Innovation Culture and market ready solutions.

A unique opportunity to redesign the market development dynamics and Agency/Inter Ministerial Approaches to MSME Growth.

The Africa Beyond Aid and Agenda plan is needed more now than ever.

What Must Businesses Do:

In 2019, I wrote about "WHAT EVERY ENTREPRENEUR MUST KNOW ABOUT DOING BUSINESS IN AFRICA”, I highly recommend that you click on the link to read it, it offers some good perspective on measures to take in these times, summarized here:

Companies must endeavor to put Staff on a strict skills development program that affects Company Productivity and Efficiency either in learning new skills or improving on skills gaps most needed to improve bottom line either in customer acquisition or otherwise. Strict monitoring and reporting regimes will ensure compliance.

Consolidation of Financial Reports, Fundraising Proposals, Strategic Plans and Business Development approaches must be pursued during this lock down.

Re-examine products or services that contribute least to Revenue and take a firm decision to let go or redesign.

Create and increase engagement schedule on platforms and channels to ensure Business Resumption Strategies are on track for a Post Covid-19 scenario when it happens.

Increase Engagement with Board/Management to evaluate Business Performance and Strategy.

Determine if this is the time to take the risk in finding companies that have solutions that expand service delivery to acquire or partner or perhaps develop in-house Research and Development teams to figure out what the next frontier of products must be presented to Consumers, this will decide if you are a market leader or player.

To achieve optimum growth commensurate with the projected company goals, many Ghanaian businesses must restructure and restart, revising their Company goals along the following lines: Pursue Reduction in Production and Customer Acquisition Costs, Better Understanding of Customer Segments vs. Product Development, Evaluate Operational Expenditure to elicit cost savings, Review Marketing Strategy and Customer Targeting including pursuing digitization, Review Inventory Management and Sourcing, Digital Expansion and Consolidation, Revise Organizational Plans, Improve workflow processes, Planning and Goal Setting and establish consistency in contingency plans.

The outlook for the year may be tough but promising, If Companies can pursue “Cost Rationalization” approaches and maximize gains on efficiency, profitability ratios, Revenue especially may increase towards Quarter 4.

NB: The value for money just shot up even more, and Post COVID-19 will be an interesting race for it. What Individuals Must Do:

Pursue a rapid Personal Development Strategy with an appropriate SWOT to determine which areas of your life require change: fitness, cognitive skills, work related skills (advanced accounting, negotiation/marketing/proposal development), career plan development, digital skills improvement.

Pursue an aggressive expenditure management program to ensure Cash burn out doesn’t happen sooner than expected, evaluate household needs and areas to cut back on, employ a hoard than spend mentality.

Create an Investment Plan that ensures that adequate contingencies are built for family and self to avoid drawbacks.

Find and utilize tools to improve mental health and emotional intelligence.

Risk, Build Confidence, and Networks.

Find an Accountability Partner to keep you on track for both your personal and career goals.

Pursue genuine friendships and remember to #StayHome #StaySafe #ProtectLives



The Writer:

John Armah is a Business Development Practitioner and Trainer in business start-ups development, with experience in the development of new markets, start-ups, MSME’s and business strategy, business financing and business development. He is the Board Chairman of Junior Achievement Ghana, and the Chairman of the JA Africa Board Chairs Council, a global non-profit organization committed to promoting entrepreneurship development around the world. He serves on other Boards advising Startups and SME's on Restructuring, Capital Raising, Growth, and Business Development.

John Armah consults for Governments, Major Corporate, Donor Partners, Institutions on Business Development, Business Financing, Startup Ecosystem and Entrepreneurship Development, He has worked in key markets across the world and named as part of the Forbes 30 under 30 Most Promising Entrepreneurs in 2016 and 20 under 40 Most Influential Business Leaders in Ghana among others.