Conrad Dempsey
The only thing that is certain about forecasting at the moment is that it is probably inaccurate. This sentiment resounds with many Namibian business people as we all try to make sense of and understand the uncertain future of doing business during the Covid-19 pandemic and the world thereafter. This is a combined financial, health, business and personal crisis with no reference point on how to deal with such circumstances.
Namibian businesses, banks and government have come together in unprecedented ways in the past two weeks to pull resources and make plans to manage the fallout from the pandemic on the economy with a focus on keeping the economic engine going while frontline medical staff put themselves on the line every day to manage the direct pandemic impact.
Various think tanks and consultative forums have been established with leading economists, financial services players and policymakers who have come up with great initiatives. There have been strong ideas and views but what is the outlook of Namibian businesses?
To answer this question, we reached out to a broad scope of Namibian businesses. More than 600 business leaders shared what is in their hearts and minds when they look to the future during this time.
Business leaders across all sectors of the economy, ranging from small enterprises to large corporates, shared their views with us in a joint market survey conducted by FNB and RMB. Almost 90% of all businesses indicated that their operations have already been impacted by the pandemic. Some can continue as critical services but even these are nevertheless impacted.
A concerning 39% of businesses believe that their workforce will reduce by half and only 16% of business indicate that they believe they can keep their full workforce employed through the pandemic. These are certainly concerning views on the back of already high unemployment. This is further aggravated by the view that 2 out of 3 businesses believe that they can only survive for less than three months in the current environment.
At first glance, these data points may seem too pessimistic. While the resulting narrative is weighed down by negative macroeconomic sentiment in a time of uncertainty, it is also not completely surprising as businesses, in general, don’t have meaningful reserves following the prolonged economic downturn of the last three years.
Keeping core operations going in a time like this is also particularly challenging with 68% of all businesses finding themselves without any business continuity plans and about 60% can telecommute with employees. How we think about business and being crisis ready is certainly changing on the back of current experiences.
The impressive N$8 billion government-led stimulus plan and actions by commercial banks align well to the expressed needs, with the vast majority stating that the biggest assistance in this time to their business would be through the repayment of outstanding VAT and tax refunds, government-backed loan programmes and payment holidays on loans and mortgages.
Times of crisis allow businesses to re-invent and grow. Three hundred business leaders said they will take this opportunity to re-model and evolve their business while 22% of all business leaders said that their business would need a total re-invention.
Many of the good practices adopted now will become the norm and where businesses were perhaps slack in the past, these controls and good practices will now be firmed up. Hard thinking about good working capital cycle management and particularly to whom to extend credit will be very different in the cash-is-king world post the pandemic.
Growing sales on the back of an increasing debtors’ book are certainly showing to be an expensive strategy in a stress scenario. The planet for one is certainly breathing a bit better with less production and less commuting and hopefully, some of these practices become entrenched going forward.
Navigating through this time is going to be one of the biggest challenges for management teams in their careers. Strong partnerships and committed support from the shareholders of businesses are key to keep business going, albeit in a somewhat different way for a while.
The bank is already engaging with its clients to steer through this pandemic and the solutions vary from business to business. “Just adding more debt is rarely the full answer for businesses in this time and a deep review of the business model, balance sheet and cash flow management is important for all businesses from SMEs through to large corporates,” Dempsey added.
Looking towards the other side of the pandemic it is clear that not all businesses and the jobs they provided will be there when we come up for fresh air. While there are many views on the shape of the recovery, one of strongest tools is good positive business sentiment fuelled by a collective approach for a business environment that can grow in leaps and bounds as well as create jobs again at a rapid pace.
There’s a delicate balance to consider when we start opening the economy in a responsible and managed way and on the other hand avoiding an uncontrollable pandemic. The cost of a deconstructed society for an extended period of time will also have its own health and social ramifications.
* Conrad Dempsey is the CEO of RMB Namibia