The last quarter of 2019 was characterized by the outbreak of the coronavirus disease 2019 (COVID-19) across the globe and in Ghana, like other countries, the outbreak of the pandemic has caused a lot of damage to businesses and individuals. This article presents part one (1) of a series that aims at exploring the business outlook amidst the pandemic and to provide some strategies that businesses can adopt to stay afloat during and post the pandemic.
The devastating effects of the coronavirus disease are well known and documented. In order to combat the spread of the virus, governments across the world have been confronted with the need to take some difficult decisions including closure of borders, curfews, ban on exports/imports, cancellation of large gatherings amongst others. Even though these decisions have been targeted at minimizing the spread of the virus, the economic repercussions on their citizens and countries as a whole cannot be overlooked and Ghana is no exception.
The first two cases of the virus in Ghana were confirmed on 12 March 2020 and following this, the Ministry of Finance, amongst other national and international authorities have sought to analyze the economic impact of the outbreak and consequent measures taken by the Government to curtail the spread.
In an article written by the Finance Minister, Mr. Ken Ofori-Attah on the 17th of April, 2020, he stated “…economic activity has been massively disrupted; hotels are closing, industry is tottering, airlines are grounded, and our toast-of-the-region airport lies asleep. The Bank of Ghana cut rates by 150 basis points and reduced the reserve requirements by 2 per cent, enabling banks to increase their lending to the private sector by some $500m — a good effort, but an underwhelming response to what should be done”.
At the national level, reports from the Ministry of Finance show that all the key macroeconomic indicators are pointing to difficult years ahead of us. Our Gross Domestic Product (GDP), Foreign Direct Investments (FDIs), External Debt Stock, Primary Balance, National Reserves, Budget etc. are all expected to deteriorate for at least the rest of the year.
Equally, at the micro level, many businesses are confronted with a number of challenges including serious supply chain disruptions; increasing redundancies, declining sales causing liquidity problems; operational constraints, increasing bad debts, compliance challenges for some regulated businesses; business continuity challenges among others. The aforementioned challenges facing businesses in the country and indeed the global business environment cuts across different sectors of the Ghanaian economy including the financial sector, energy, education, hospitality, aviation, agriculture, health and marine. What makes the current situation even more onerous is the fact that the impact of the COVID-19 is yet to be fully understood and indeed assessed.
In spite of the above challenges, the situation is not all doomed. In other words, there are some positives businesses can take away as they strive to adjust to what in now being referred to as ‘the new normal’. Business owners and managers cannot afford to throw in the towel and fold their arms in despair. Presented are some suggested actions that business owners and managers can take to reorganize themselves and respond to the immediate challenges confronting them.
- Expedite action on your receivables– It is highly likely your customers are equally facing cashflow challenges. Waiting on them to make payments will therefore not be a good idea. Collection efforts must therefore be intensified. Consider invoice discounting or factoring on customers you are willing and able to lose.
- Extend your payables wisely-For reasons of continuity, managing relationships with suppliers is critical. Negotiate and persuade delayed payment options to ensure both parties are comfortable with the new arrangement. A managed relationship helps secure future supplies as supply chain bottlenecks will heighten in the coming days and months.
- Enhance due diligence on your cashflows– This is the time to scrutinize every payment or receipt. Ensure customers are paying the right invoiced amounts and ensure you do not overpay suppliers. Pay attention to discounts and other flexible payment options and take full advantage of them.
- Claim your business insurance– Some trade terms and bank products/charges have embedded insurance upon business interruptions. You may also have signed on to particular insurance policies that the risks have crystallized. Review your insurance policies to understand what claims are available to you and put in the claims immediately. Seek professional advice if need be!
- Improve your cost control measures– Perhaps there cannot be a better time to adopt prudent cost control measures than now. Segregate your costs into fixed and variable components. Convert as many fixed costs as possible to variable ones such as selling vehicles, warehouses etc. and leasing them back. Reduce the activities that drive variable costs and hold individuals accountable.
- Find alternative revenue streams– This may come from new markets, refined products etc. For businesses involved in exports, finding local markets may be necessary. For fashion houses, nose masks may be the new product. Renting part of your warehouse, office space etc. (if you own them) could be considered.
As the adage goes, every situation is a learning situation and there is an opportunity in every misfortune if you can maintain your composure. Business owners, entrepreneurs, managers and whoever is involved in managing any enterprise knows that this is not the most pleasant moment to be in the driving seat of a business. But we are there now and must look for opportunities that we can take advantage of. Here are few areas that are worth considering for possible opportunities even in the midst of COVID-19.
- Develop new products and/or refine existing ones- As boarder restrictions remain, Ghana will be forced to rely on local manufacturers and suppliers for the manufacture of local PPEs, drugs, healthcare consumables etc. Opportunities also abound for import substitutions for food items, print works, educational materials among others. Manufacturers in the United States and Europe could greatly shift component manufacturing to Africa as Africa could be deemed as the next destination for contracting out various elements of the component manufacturing. COVID-19 continues to create uncertainties in farming and processing. Big and small farms worldwide may be crippled before restaurants, hotels and food joints bounce back and this could lead to food security issues. The world may turn its attention to Africa as a quick route to recovery. If the opportunities are well-seized, local industry could immensely benefit.
- Identify the emerging markets- regional markets & local markets etc.- As the world continues to struggle with the pandemic, African governments will place emphasis on local and regional trade. The call for operationalization of African Continental Free Trade Area (AfCFTA) amidst the pandemic could greatly facilitate an increased regional trade. Ghanaian businesses can take advantage of the Ghanaian goodwill to trade with other African countries. Starting with neighboring countries with plans to expand to other African countries could prove a good strategy. Export businesses could also find local markets for their goods and services as local demand increases due to reduced imports.
- Partnerships and collaborations- COVID-19 is leaving in its wake, a risky business environment. Investors will therefore adopt the most risk effective approaches to increasing their investment portfolios. Subsequent foreign direct investment (FDIs) may come in on joint venture, franchising and debt financing approaches as this manages risk for foreign investors and utilizes local expertise. Ghanaian businesses must however demonstrate strength in specific areas such as local expertise, well-run small sized business, existence of appropriate documentation, processes and structures etc.
- Process (technological disruptions)- COVID-19 has disrupted business processes and this is likely to continue post the pandemic. There is no better time than now to explore e-commerce and other electronic aided business processes. Businesses should consider building a heavy online or social media presence, using digital channels to market and sell their products and service etc. The time is prime for advocating technologically related services such as use of digital educational platforms, drones for delivery of healthcare consumables, spraying of farms, monitoring of mining fields etc.
- Pricing- COVID-19 has facilitated the increase in volumes, prices and margins for some commodities. This presents businesses dealing in such commodities the opportunity to make adequate revenues and cash flows especially for diversified businesses which may be experiencing sharp losses in other business lines. This opportunity may be short-lived but it may well be the solution in the short term.
- Government interventions- Finally, take advantage of government stimulus packages. If your business meets the eligibility criteria, apply for the financing and take full advantage of the tax reliefs.
In conclusion, we must view the current situation as a glass ‘half-full’ and not ‘half-empty’ if we are to make any progress. There is light at the end of the tunnel. There is hope for business owners, managers and indeed the country as a whole if we take bold steps to embrace the needed change that is confronting us. As Ghanaians, we must begin to think smart and fast because the world may never be what it used to be and we cannot afford to be left behind.
WATCH OUT FOR THE NEXT EDITION: Key drivers to be considered when taking advantage of the opportunities outlined in this article.
Remember to wash your hand under running water, wear your nose mask when going out and never forget to comply with the social distancing protocol.
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