A Namibia Statistics Agency (NSA) survey has found that 96.5 percent of businesses have been adversely affected by the coronavirus and will continue to be affected in the coming months.
“The majority of operating businesses have indicated reduction in local customer demand as the most common current and future effect experienced by 68.8 percent and 65.1 percent of the businesses, respectively. Furthermore, 63.7 percent of businesses reported revenue loss of over 50 percent with the Manufacturing sector (20.1 percent), Hotels and Restaurants (15.2 percent) and Construction sector (11.3 percent) bearing most of the blunt.”
The survey found that 50 percent of the businesses indicated that they traded partial while 25.2 percent were temporary closed due to Covid-19.
“Only 3.5 percent of the businesses cited that they were permanently closed. In the category of businesses that indicated to trade at full capacity, the ‘Manufacturing ‘sector accounted for 5.8 percent of the total businesses. On the other hand, the highest percent (5.3 percent) of businesses that were temporarily closed were recorded in the ‘Hotels and restaurants’ sector followed by Real estate sector (3.5 percent).”
Cirrus Securities Economist, Robert McGregor said the survey findings are reflective of the existing operating environment for businesses.
“I believe the survey results are broadly reflective of the ongoing environment for businesses, particularly the high percentage of businesses who indicate they are currently adversely affected and expect to be adversely affected in the coming months. Of concern is the proportion (32.3 percent) of businesses who have seen their revenue drop between 91-100 percent. Given the difficult operating environment of the past four years, most businesses do not have the reserves to survive a few months of turnover reductions at this level. The obvious implication is either cutting costs, which often results in job losses, and if that isn’t enough, more businesses closing their doors permanently,” he said.
McGregor said business will struggle to recover from the negative impact of Covid-19.
“Many businesses will be able to cut costs and streamline even further, and thereby survive. Many, however, have been struggling over the past 4 years of economic stagnation and without being able to remain profitable; will have to shut their doors. Those businesses that can survive won’t recover quickly, they will have to match pace with overall recovery in demand which we expect to move slowly,” he said.
“Furthermore, businesses will be careful in increasing costs too quickly (such as hiring more workers) given the experience now and the uncertainty of what lies ahead. Additionally, the difficulty in starting and running a business, especially in the Namibian context, means we do not expect to see a quick recovery from this aspect either. In this regard, the outlook is bleak. It remains to be seen if a sufficient, pro-business policy can be implemented to speed up the recovery.”
He said despite government measures , which included an N$8.1 billion stimulus package, incentives created by some of the support packages are not ideal.
“Government has acted relatively quickly to provide some assistance, however I do not view it as sufficient. The incentives created by some of the support packages, for instance, are not ideal. The impact on businesses will also be a lot longer than what the support is provided for, particularly the most vulnerable sectors such as tourism and construction. Many businesses generated little to no revenue during the lockdown, which may well remain muted for many even as restrictions ease, and thus the short-term limit on voluntary wage reductions (and very limited support in terms of the Government/SSC package) mean businesses simply may not have the cash/reserves to pay wages over the medium term. The result is that entities will have little choice but to retrench, or shut permanently. Neither of these is ideal – unemployment has been unsustainably high for many years and once jobs are lost, we simply do not see new ones being created (especially not fast enough to offset this),” McGregor said.
“More so, the extremely difficult operating environment means that we will see significant job losses on a net basis, and many more people being left without an income. Policy which greatly restricts how businesses are able to cut costs to ensure survival (either in terms of wage reductions or retrenchments) means that some businesses may simply have little choice but to close down – the result being a larger loss of jobs, resulting in more households losing their incomes, as well as a loss of revenue for the government. The longer-term outlook thus requires incentivizing businesses remaining operational and being able to maintain employment to the best of their ability.”