COVID-19 has brought the world to a standstill. No one has been spared, big and small countries have all equally been affected and no one was prepared for the extent of the damage this epidemic would bring.
Many businesses have temporarily stopped trading. There is no doubt that the impact will be felt more by smaller businesses as compared to the larger corporates in pretty much the same way the impact of Covid-19 will have a much more adverse impact on emerging economies as compared to their larger counterparts.
A gloomy outlook
The prospects are gloomy. Almost all of the world economic activity and trade have been brought to a halt as people adhere to lockdown restrictions, which forced people to stay at home to prevent the rapid spread of the menacing disease, which does not have a cure or vaccine.
People are dying in their thousands around the world and many have filed for unemployment benefits where these are available.
The losses to the world economy will add up to billions. Experts are predicting a global recession and the emerging economies will feel the impact much more as they rely on developed countries for economic assistance and imports of manufactured goods. These countries might not be able to help as they look to solving their own crisis first.
For every problem there is a solution and every cloud has a silver lining. It is now important to look out for the positives to be taken out of this experience even as we acknowledge the challenges and difficulties that lie ahead. It is also important to look back and draw lessons from similar experiences which have occurred in the past as we figure out how to get out of this mess and move forward.
A global economic recession is not something to look forward to, the impact will be far reaching and felt by everyone. Necessary adjustments will have to be made but we all must keep on moving. The last global recession took place in 2008 and was labelled the worst economic disaster since the Great Depression of 1929. The International Monetary Fund predicts that the “Great Lockdown” recession is going to be the worst since the Great Depression.
The takeaway from both recessions is that these periods do not extend for too long. The important thing to do is to look for opportunities that will help us get out of the crisis.
It is clear that life will never be the same post-Covid-19. The advantages of the global village concept, with easier and faster travel between countries, is the reason why the disease was able to spread across continents with ease and with speed. Post-Covid-19, countries will need to develop local solutions and focus on import substitution.
Whilst globalisation enables countries to source that which they do not have from external markets, it also inhibits growth and innovation as there is simply no motivation to produce your own products if you can import them from other countries and this tends to slow down development.
Zimbabwe relies heavily on imports of finished products from other countries. Boutiques, furniture shops and the like are adorned with goods imported from other countries. The fate of these businesses hangs in the balance as the countries from which these goods are sourced are likely to maintain travel restrictions in the short to medium-term. It is inevitable that the businesses affected start considering import substitutions and producing these goods locally.
The absence of production in Zimbabwe has long dealt the economy a heavy blow. A country simply cannot be sustained on imports without producing anything for export. This is the opportunity for Zimbabweans to pool resources and ideas together and consider reviving the local industry and start producing its own products.
Sometimes it takes one to be put in a difficult situation, with little or no choices, for one to be creative in order to solve problems. The current situation should spur Zimbabweans in that direction. If we remove imports, we will not be able to sustain our economy for long.
Without local production, however, jobs will remain scarce and the majority will have to make do with what they can get from the informal sector. The current situation has also brought to the fore the dangers of an economy that is heavily reliant on the informal sector.
The informal sector operates on a hand to mouth basis where it makes only enough for the day. The little savings in that sector will not be enough to sustain it through an extended lockdown.
Government should focus on ways to formalise the informal sector and come up with policies and programmes that will stimulate growth and increase production in the small to medium enterprises sector.
There is evidence that small to medium enterprises (SMEs) play an important role in the growth of an economy, but this will not be felt unless interventions are put in place to help SMES achieve their full potential. Intervention is not necessarily in the form of financial assistance, but could also include training services to help SMEs run their businesses in a more formal and organised manner, tax breaks and the creation of a conducive business environment.
Good corporate governance practices need to be adopted by small businesses in order for them to improve the performance of their companies.
Organisations such as the Institute of Directors Zimbabwe (IoDZ) could play a crucial role in coming up with training programmes tailor-made for directors and owners of SMEs in order to equip them to incorporate good corporate governance practices into their company operations.
In these times of Covid-19 and beyond such training sessions can be held at a reasonable cost through hosting webinars. Good corporate governance practices are essential not only for the improved financial performance of small businesses but also helpful for succession purposes.
These are usually ignored as the shareholders of the company often act as the board of directors and management which means that there are no checks and balances. This is one of the major reasons why SMEs fail to grow or to succeed beyond their first owners. Organisations such as Institute of Directors of SMEs are more dependent on their business ecosystem and are thus more susceptible to market failures, policy inefficiencies and inconsistencies and sudden changes to the operating environment.
No doubt the impact of Covid-19 will be felt much more severely by SMEs as compared to larger entities. There is need to think outside the box and employ measures to quickly adapt to the situation whilst government should do the best it can to support this sector which constitutes a large part of the economy.
Sande is a lawyer, realtor, strategist and a councillor at the Institute of Directors Zimbabwe (IoDZ). IoDZ is a leader in the advancement of corporate governance best practice in Zimbabwe. Become a member and join a community of leaders. Contact the marketing and membership executive, Cathrine Nyachionjeka, on firstname.lastname@example.org or +263 774 377 640.