Accra, Ghana, April 16, 2020//-Walking through the principal streets of the Accra metropolis in the Greater Accra Region of Ghana, one noticeable feature is the closure of shops and offices operated by Small and medium enterprises (SMEs) and large businesses in the country.
This is principally due to the partial lockdown of country’s major cities-Accra, Tema, Kasoa and Kumasi and its surrounding communities by the government in its efforts to contain the spread of the deadly coronavirus disease 2019 (COVID-19).
Majority of SME operators who are not providing essential services are affected by the lockdown directive, while their colleague essential service providers namely food, grocery and pharmaceutical retailers are exempted.
Biting the economy hard
On the whole, the pandemic is biting hard on countries across the world by grinding trade and other productive activities to a stop.
Minister of Finance, Ken Ofori-Atta lamented that country’s economy would experience its slowest growth in almost 40 years, making it the worst year since the historic 1983 economic retrogression.
The deadly pandemic according to him will cause Ghana’s economy to see GDP growth drop largely to 2.6 percent from a projected 6.8 percent.
While growth in Sub-Saharan Africa has been significantly impacted by the ongoing COVID-19 outbreak and is forecast to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020, the first recession in the region over the past 25 years, the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for the region, said.
“The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said Hafez Ghanem, World Bank Vice President for Africa.
“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with COVID 19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security.”
At the time of this publication, COVID-19 cases have surpassed 2 million globally with several thousands of deaths worldwide. Specifically in Ghana, 641 COVID-19 cases with eight deaths have so far been recorded since March 12, 2020.
COVID-19 economic impacts on SMEs
Although, the ongoing lockdown is laudable, its effects and that of the pandemic’s economic impacts on large and SMEs are devastating.
Market and revenue losses
Generally, the COVID-19 does not allow the under-funded Ghanaian SMEs to work that leads to loss of market and revenue, Prof John Gatsi, economist and professor at the University of Cape Coast (UCC) told African Eye Report.
Additionally, because of the pandemic most people in the country have been asked to stay home which is having effect on their finances as well as their purchasing power. People do not have money to demand for items hence fall in demand of the goods and services.
Loss of jobs
The Ghanaian SMEs who employed 71.4 percent of the country’s total workforce will not be able to withstand the negative effects of the deadly pandemic. One of the things they will do enable them stay afloat is to lay off workers, according to him.
Difficult to pay loans at post COVID-19
Another challenge most of these SMEs will face is the difficulty to pay loans at post COVID-19. Although the Bank of Ghana was the first in sub-Saharan Africa to reduce its monetary policy rate to 14.5 percent from 16%, this may not save them from the debt burden.
Little or no expansion
SME players who had plans to expand their operations to other parts of the country and beyond will not do so because of the difficult environment.
Those may bite the bullet to expand, will do it on small scale. As some SME owners, said: “This is not the time for massive investments in factory buildings and machineries. It is rather time to efficient management to sail through the coronavirus crisis “.
Collapse of some SMEs
Some of the SMEs will not open their shops and offices even when the COVID-19 is over, while some will be counting their losses because of property damages during the 21 days of the lockdown.
What players in the SME sector say
Some SME operators who spoke to African Eye Report admitted that they are facing one of their toughest times in their lives.
Ms Sauda Amin who runs boutique in the Central Business District of Accra, said the lockdown as well the COVID-19 is affecting her business which employs about 10 workers negatively.
“Since the first outbreak of the disease and subsequent lockdown, I have been thinking about how I’m going to pay my suppliers in Dubai, London and China. My brother, it is really not easy at all”, she told African Eye Report.
For Ms Akorfa Cudjoe, a fashion designer with over 10 employees said she is contemplating on laying three or four of her workers off to save her business from collapse.
Even before the lockdown was enforced, the demand for her fashion designs had dropped significantly, she revealed.
This was because most of the customers had shifted to foodstuffs and beverages aimed at boosting their immune systems to enable them fight the virus in case they contracted it.
Kwesi Yeboah who owns mobile phone and mobile phone accessory shops at different locations in the Accra metropolis said the COVID-19 put sand into his food.
What is being done to save SMEs from collapse?
Knowing the crucial role the SME sector play in the creation of jobs, the President Nana Addo Dankwa Akufo-Addo in its fifth COVID-19 address to the nation, had directed the Minister for Finance to send to Parliament the Coronavirus Alleviation Programme (CAP).
The Programme which had been by Parliament is to protect households and livelihoods, support micro, small, and medium-sized businesses, minimise job losses, and source additional funding for promotion of industries to shore up and expand industrial output for domestic consumption and exports.
Also, the government, in collaboration with the National Board for Small Scale Industries (NBSSI), Business & Trade Associations and selected commercial and rural banks will roll out a soft loan scheme up to a total of GH¢600 million), which will have a one-year moratorium and two-year repayment period for micro, small and medium scale businesses.
Checks from NBSSI showed that this directive is being worked on. It is working on the modalities to ensure that the SME operators have the support.
To this end, we are setting systems including application process for affected SMEs to apply for financing, senior official of NBSSI said.
From the above, one can conclude that some of the SMEs will survive the coronavirus crisis, while a chunk number of them may wither with the virus.
By Masahudu Ankiilu Kunateh, African Eye Report
Email: mk68008@gmail.com
