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How COVID-19 is impacting the future of businesses in Ghana

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Abandoned production site of StarPoint

…the untold stories of three Ghanaian businesses

Emerging news, now and then, on the development of new vaccines to fight the coronavirus (COVID-19) pandemic has been one of the exciting new things to look forward to, daily. But despite the development of new vaccines, many are still wondering what a post-COVID-19 situation would look like.

Generally, the outbreak of COVID-19 has adversely affected almost every aspect of the economy, especially health, and the outbreak has brought implausible strain on health infrastructure.

The impact on businesses undeniably, has had far-reaching implications and businesses in Ghana have been equally affected.

The International Monetary Fund (IMF), in a report on Ghana’s “Request for Disbursement Under the Rapid Credit Facility,” projected that the impact of the COVID-19 pandemic on the local economy would be severe.

“The economic shock initially materialized through trade disruptions with China, the decline in commodity prices, and tightening of financial conditions, even before the first confirmed case on March 12,” the IMF report said.

The disruptions caused by the pandemic, for instance, in 2020, led to huge revenue losses – including a shortfall in non-oil tax revenue of about GH¢2.2 billion. It also led to a revision of the country’s GDP growth from a target of 6.8 per cent to 1.9 per cent for the year. The total fiscal impact from revenue shortfall and cost of preparedness and funding a response plan also cost Ghana about GH¢9.5 billion, according to an analysis by the IMF, United Nations Economic Commission for Africa (UNECA), Government of Ghana, and Deloitte.

Quite significantly, given that businesses thrive under a sound economic environment, the economic downturn as a result of the pandemic, created a rippling effect on productivity, employment and household living standards.

While several businesses partially shutdown or closed due to the pandemic, a key factor which drove many businesses into the abyss was the announcement of lockdowns by many governments across the world.

According to the Ghana Statistical Service (GSS), in its COVID-19 Business Tracker Report, during the partial lockdown imposed on two major cities in Ghana (Accra and Kumasi), more than one-third (35.7 per cent) of business establishments were closed down (partially or permanently) compared to almost a quarter (24.3 per cent) of household firms.

“Beyond the lockdown, in May to June, the proportion of closed business establishments decreased by 19.5 percentage points to 16.2 percent. Similarly, the proportion of household firms that were closed declined by 9.7 percentage points during the same period to 14.2 per cent.”

On employment, the report indicated that 46.1 percent of business establishments reduced wages for 25.7 per cent of the workforce (an estimated 770,124 workers). Only 4.0 percent of firms indicated that they had laid off workers, corresponding to 1.4 per cent of the workforce (an estimated 41,952 workers).

COVID-19 reality on businesses  

StarPoint Limited is a local paint manufacturing company located in Kumasi, in the Ashanti Region of Ghana. It imports chemicals from countries like Nigeria and China for its paint production, an innovative product locally referenced as ‘cement paint’ due to its advantage in preventing peeling.

“Barely two years ago, we were producing over 50,000 bags of tiles adhesive cement, but we had to diversify and go into paint production due to some issues with a competitor product. Our new product has, however, exceeded our expectations because of the positive market response we received. That was before the outbreak of the pandemic,” the Chief Executive Officer, Mr. Godwin Ameko, said.

With a permanent staff strength of 25 workers, he said, the company had to also rely on casual workers of usually five or more to meet production targets especially when orders have been placed by customers. “This should tell you that things were good,” he said with a wry smile.

“Our problem started with the outbreak of the pandemic,” he recounted. While a standoff between Nigeria and its neighbouring states had resulted in border closures, preventing the chemicals ordered from Nigeria from reaching Ghana, “the least I expected was the closure of our own borders due to a virus,” he added.

Though the company was able to clear some of the chemicals ordered from China, at the Tema port, around the same period, he noted that the greater chunk of raw materials needed to meet commercial production was locked up in Nigeria. This was just when the border issues were over.

He said when he last checked on the chemicals, after lifting of the restrictions, the chemicals had expired, costing the company a loss of GH¢400,000, Mr. Ameko said, regret plainly visible on his face.

With the month-long partial lockdown, which also saw non-essential businesses restricted from operating, the only option left he said was to downsize the workforce to only two, while acknowledging the impact that would have on the workers as majority of them were married with children.

However, even in post-lockdown, the Chief Executive Officer of StarPoint Limited, stated that his company has not been able to recover despite all the investment made in the operations.

Sustaining the hospitality business with zero clients

Royal Larmeta Hotel is a local hospitality business that operates a restaurant, a conference facility, as well as lodging services among others. With COVID-19 restrictions imposed on conferences, lodging and catering services, hospitality operators like Royal Larmeta Hotel were among the hardest hit businesses.

Forecourt of Royal Larmeta Hotel, in Kumasi

The Chief Executive Officer, Mrs. Afua Gyamfua Owusu-Akyaw, said the hospitality industry was just picking up after enduring a dip in business due to the power crisis that Ghana experienced some seven years ago.

“Things were levelling up after the power crises’ mainly from conferences, catering services offered as well as the lodging, the business was beginning to boom with the majority of our clients being international agencies,” she said.

With a total workforce of 63, only eight were casual workers who are occasionally engaged to offer business support. “Our staff strength could go up to 100, depending on the occasion,” she stated.

However, she said COVID-19 took a toll on the business operation when clients   began to call to cancel booked conferences and sometimes paid ones, even before Ghana recorded its first case.

“When the final restrictions were placed on conferencing, pub opening and lodging by March 11, 2020, we had no option but to shut down.”

“Almost all the workers were let go, except four security personnel and five others, a ‘skeletal’ staff, to man the facility, during the shutdown.”

She added that the business has had to depend on loans, with ‘abnormal’ interest rates, to sustain the facility until the restrictions were lifted.

Afua Gyamfua Owusu-Akyaw – CEO – Royal Larmeta Hotel

The situation, Mrs. Owusu-Akyaw shared has left the business with huge debts rendering it incapable to reinstate its full state, in the post-lockdown. “For the past seven months, we have actually been operating at a loss.”

“We had a programme line up between February to April this year totaling a little over GH¢100,000. Last year we lost over GH¢600,000 in revenue due to the closure of the facility because of the COVID-19. Currently, we have sent some workers home again because we are operating under 20 per cent capacity,” she revealed.

On the contrary, while these other sectors of the business community endured several challenges during the lockdown, there was a new window of opportunity for others with the pandemic.

Mrs. Janet Abobigu, who is the Chief Executive Officer of Unijay Limited, a garment and textile company, says despite the fact that a huge chunk of orders placed by clients remained at the stores, contracts for the production of nose masks brought the ultimate relief.

She recounted that before the outbreak of COVID-19, orders were completed and supplied latest by September and payments processes usually concluded latest by two to three months upon delivery.

While production slowed drastically leading to huge debts to suppliers and other finance houses, clients did not cancel the orders placed given the cost cutting-measures many companies pursued.

In sharp contrast to other businesses downsizing their workforce, largely as a cost-cutting measure in the midst of the lockdown, Unijay Limited rather increased   its workforce from 200 to 400 workers. Mrs. Abobigu explained that more hands were needed for the company to meet requests to produce large quantities of facemasks.

Unijay employees at work

Industry actors take on COVID-19’s impact

This difficult situation facing businesses was also corroborated by the local chapters of the Ghana National Chamber of Commerce and Industries (GNCCI) and Ghana Employers Association (GEA), the local guilds of business operators.

The Regional Manager of GNCCI, Ms. Jacqueline Bondzie, explained that members who fall within the SME category, depend on their daily proceeds to run their businesses.

She noted that the partial lockdown, therefore, adversely affected the turnover of many of these businesses. The development at the moment has made their ‘bouncing back’ very difficult, she added.

Moreover, she observed that those in the manufacturing sector had to layoff almost all their workers, due to the lockdown, and now even re-engaging the old workforce with lower salaries has become a challenge.

The Area Manager of GEA, Northern Sector, Mr. George Nyarko Aboagye-Attah, said its members in the manufacturing sector had to operate at half capacity, while those in the hospitality industry totally halted work.

They lost their jobs due to COVID-19

Rexford Agyepong, before COVID-19, was an employee of StarPoint Limited – serving as one of the site supervisors. The married man with three children said while what is mostly earned from a young business such as StarPoint could not be compared to what could be earned working in a government employment, the monthly earnings were quite appreciable. He earned a monthly salary of GH¢1000. With this, he was able to look after his three children, wife as well as some other dependents at the moment, Agyepong conceded, he and his family are at their lowest ebb due to the pandemic. He said the health crisis has brought undue hardship since he lost his   with StarPoint Limited. “The work was all that we had and depended on.” Several months after losing his employment status Agyepong narrates that he is still struggling to make ends meet.

What has saved his situation, he disclosed is the little money the wife makes from her petty trading activities. “The children have to be fed, there is school fees to be paid and all these now rest on the shoulders of my wife,” he says.

Although the government has ‘shouldered’ the cost to vaccinate the Ghanaian public, targeting to reach over 20 million of the population, Agyepong would like the government to provide the mechanism also to identify people who have lost their means of livelihood due to the pandemic and provide them with some support.

Agyepong, who shared his story in an interview made the point that the only approach to prevent destitution in these current times is also for the government to help sustain small businesses which provide employment for large numbers of the Ghanaian population.

Similarly, Mercy Appiah, a married woman with two children, had lost her formal employment months before the outbreak of COVID-19 in Ghana. With the support of her husband, Mercy set up a pub at one of the popular beaches in Takoradi; investing over GH¢10,000 in her new business.

“Running the pub wasn’t easy but the prospects were good considering the investment we made,” she said. In addition to selling assorted drinks to beachgoers, she also traded accompaniment like khebab, sausage and other finger food making a weekly return between GH¢400 and GH¢500. This meant that the business was generating a monthly revenue of about GH¢2,500.

She however said, all the investments made went down the drain with the advent of COVID-19. “The upkeep of my family depended on the proceeds we made from the business since my husband’s consultancy work had halted due to the cancellation of arranged conferences.” So, when the government directed all beach and social activities to be closed down, feeding the family became an ‘uphill task, apart from the loss of investment,’ she indicated.

She explained that the family fed on all the items bought earlier for the business, until everything ran out of stock. “Being able to keep head and tail intact, has been by the grace of God,” she   lamented bitterly

Opportunities in crisis, and adapting to digitization  

A full recovery immediately may be difficult to attain, but it lies ahead, depending on how businesses take advantage of the opportunities presented, the Ashanti Regional Head of the National Board for Small Scale Industries (NBSSI), Mr. Manu Bashir said during an interview.

The pandemic has two sides to be considered for almost every entrepreneur, he said. “We share the view that anywhere you see people crying then there is a business opportunity.”

He explained that businesses are created to solve problems, so, there was a need for businesses to assess and exploit the opportunities that the pandemic brought, despite the other unpleasant side.

For instance, he said, the agency engaged tailors and seamstresses registered with it in the period of the outbreak, to enter into the production of facemasks while those in cosmetics were urged to go into the production of hand sanitisers. Also, people with an interest in the business were encouraged to take sewing lessons online.

However, he conceded that many other businesses collapsed; given the nature of those businesses did not in any way provide a means to take advantage of the opportunities the pandemic presented.

The NBSSI, is an agency under the Ministry of Trade and Industry (MoTI) mandated by Act 434 to promote and develop micro, small and medium enterprises (MSMEs) in Ghana. The Regional Head said operations were also in a way affected but overall, the center was challenged to innovate – making use of technology to limit face to face interactions.

To alleviate the impact of COVID-19 against job losses, livelihoods and support MSME, the Ghana government through the NBSSI, introduced the Coronavirus Alleviation Programme (CAP) Business Support Scheme, worth about GH¢600 million.

Although many business operators have expressed mixed views on the stimulus package, Mr. Bashir said his last checks showed that close to GH¢55 million has been disbursed to businesses in the Ashanti Region.

While it is hoped that the financial support could cushion businesses that have been worst affected by the outbreak of the pandemic, as economies all over the world battle the impact of this global health crisis, it is also hoped that lessons learned from the pandemic would shape the local business community.

By Kizito Cudjoe

This report was produced by Kizito Cudjoe with the support of CENOZO within the framework of the project “COVID-19 Response in Africa: Together for Reliable Information” funded by the European Commission.

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