Malawi Confederation of Chamber of Commerce (MCCCI) says 2021 will be challenging for the business sector due to the second wave of the COVID-19 pandemic as its duration and extent of devastation can not be estimated with exactitude.
This is contained in its 'Assessment Of The Business Environment In 2020: The Private Sector Perspective' report put out on Monday, signed by MCCCI President James Chimwaza and Chief Executive Chancellor Kaferapanjira.
“MCCCI thus forecasted that the business environment in 2021 would be just as challenging especially in the first half. Going forward, concerted efforts were needed to constrain any further spread of the virus through stringent public health measures, while providing targeted monetary and fiscal incentives to sustain the core economic activities (informal, manufacturing, SMEs, and hospitality sectors) that ensure household food, nutritional, and income security, as well as improved resilience,” it reads.
It highlighted that COVID-19 exacerbated the already hostile doing business environment which continued to chock business operations in 2020 with some of the issues raised by the private sector, which still needed necessary attention by authorities.
These included unreliable power supply; poor and costly telecommunication services and delays in payment of private sector arrears by government.
The assessment report indicates by November 2020, Government owed the private sector MK10 billion in tax refunds.
“If timely payments were made, businesses’ liquidity position would be improved considering the hostile business environment they faced."
In its assessment the year 2020 faced political uncertainty, created by pre and more particularly post 21st May 2019 Elections demonstations, which continued to negatively impact on the pace of business activities until the new administration was ushered into Government in June 2020.
To make things worse, the political uncertainty coincided with the onset of the COVID-19 pandemic pointing out the measures imposed to combat the spread of the pandemic such as social distancing, lockdowns, transport and passenger travel restrictions, curfews, cessation of movement of people, closing of schools, limiting hotel and restaurant operations, restricting non-essential trade, government ‘work-from-home’ orders and reduction in operating hours, all led to reduced business activities and work force productivity especially during the second quarter.
“The impact on firms was quite mixed across sectors. Generally, small and medium enterprises were more concerned about reduced cash flows and fell into the risk of closing down due to the COVID-19 pandemic. At the same time, large firms equally bore the brunt of the pandemic, especially air transport and tourism operators. In these firms, the concern was largely how to change the business strategies and meet new customers.
“The industry sector was hit the hardest, with its value added falling by 15.2 percent, followed closely by services (-14.8 percent). However, because of the relative sizes of the two sectors, services were by far the most affected in absolute terms with estimated losses of US$ 155 million over the two months’ period (April and May) compared to US$ 48 million in industry as indicated below
The manufacturing operations, travel and hospitality, and transportation services operated at their lowest capacities for a long time. Specifically, by August as Only 9 percent of businesses were operating within the capacity utilisation range of 76-100 percent.
Companies in the manufacturing and hospitality sectors faced difficulties related to sourcing of key inputs, maintaining pre-COVID-19 productivity levels, meeting their near-term financial obligations and honouring the agreements they signed up, to like ESCOM’s premium electricity charges during peak hours and maximum demand charges.
Larger manufacturing firms were the most affected owing to their stronger reliance on supply of raw materials from global and regional supply chains as opposed to smaller firms.
“Most firms closed down or scaled down production thereby rendering thousands of people underemployed or unemployed. The most affected were less-skilled, lower-income and informal workers and the majority of the casualties came from retail/wholesale businesses, transport sector, and entertainment/hospitality industry. For instance, the hospitality industry alone shefded 50-70 percent of jobs from its pre-coronavirus level of 526,000 jobs.
The assessment said despite the challenges, the pandemic also created opportunities for firms to innovate, develop 'new' strategies and products such as sanitizer dispensers and added firms offering IT related services experienced boosts in business due to shift to on-line transactions.