Apart from its health impacts, coronavirus pandemic (COVID-19) has been destabilizing big economies and private sector of the respective countries are the heavily affected segments, economic experts say, calling on the Ethiopian private sector to test new business strategies to ensure accessibility thereby enhancing profitability.
Speaking to The Ethiopian Herald, Business and Finance Lecturer at Addis Ababa University Mukemil Bedru says that due to strict restriction on movement of people,the hospitality and tourism sectors are heavily impacted and hotels, restaurants and cafes are nearly empty.
The transport sector is also seriously affected by the pandemic and the national flag carrier, Ethiopian Airlines, which the country generates billions of dollars annually, is near to a complete shutdown.
The expert notes that export-oriented companies including those engaged in flower and horticulture export are also significantly affected by COVID-19 and the country lost millions of dollars obtained from the sectors.
Other exports including coffee and textile are cancelled despite the availability of products as the international market is closed and the logistic service is suspended.
“COVID-19 seriously hits Ethiopia’s financial industry too, in particular the commercial banks” Mukemil said, adding that the banks recently encountered liquidity crisis and the existing business slowdown may limit the banks’ activities and decreases their revenues.
Due to the business stoppage, the number of people require loans from banks is reduced and some of the current credits could be transformed to NPL (Non-performing loans).
Due to stiff competition in the industry, the banks are accustomed to incur overhead cost for staff and the overstretched rental and other expenses also worsen their vulnerability to be affected by the pandemic.
Despite the aforementioned facts, COVID-19 has brought an opportunity to a very limited portion of the private sector and the expert indicates that companies that are engaged in the production of consumption items as well as chemical producers are amongst the few found in a good scenario.
Sharing the above rationale, Accounting and Finance Assistant Professor at Wollega University, Dasalegn Mosissa states that both the government and the private sector should align their involvement to overcome the challenge and have to come up with a unified and effective intervention to curtail corona induced economic recession.
The assistant professor says that the government could employ the fiscal policy to avail tax holiday and other privileges to the private sector in a view to encouraging the business community play a meaningful share in stimulating the economy.
To his part, Mukemil points out that private sector’s direct involvement in the fight against COVID-19 should get utmost priority and the business community needs to move as fast as the desire and effort of health professionals and the government to defeat the disease and return to normal life.
“Unless we defeat the virus and resumes movement of people as soon as possible, whatever intervention could not work and neither government’s stimulus package nor private sector’s price cut and other measures could not bring the desired outcome in lifting the economy out of recession.”
In this regard, Desalegn expresses appreciation for the private sector to maintain staff and showing some flexibility including slashing house rents as well as directly contributing financial and material support for the needy and actively engaged in humanitarian activities.
The companies should consider these practices as part of saving their business and their role to speedy normalization.
As to him, the companies also need not hurry to lay off employees and should try their level best to maintain the staff taking into account unemployment has a trickle-down effect in increasing crime and could contribute for the spread of the virus. The government is expected to channel different supports to companies that are trying to maintain employees.
Noting that the private sector has come up with innovative ideas and make strategic shifts in their businesses, Mukemil says that manufacturers with assembly lines could adjust the system to produce personal protective equipment (PPE) that helps to fight the pandemic.
Big textile factories both in industry parks and outside the parks should transform to produce face mask with minor cost and little adjustment.
Both experts highlight that the private sector could share Ethiopian Airlines’ best experience in adjusting some of its passenger aircrafts to provide cargo service by removing seats in a bid to sustain business in such difficult time.
Ethiopia’s business community should attach prime attention to access customers as the existing supply chain and logistics are break down, shops are closed and tougher restriction on movement of people took place due to COVID-19.
Thus, the private sector has to review strategies to employ technology, e-commerce, e-delivery or house-to-house delivery service to ensure accessibility, they remark.
The Ethiopian Herald April 21/2020
BY BILAL DERSO
