INTERVIEW: How SMEs can recover from Covid-19

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The impact of Covid-19 is felt by almost everyone in the business sector, but small medium enterprises have been hit hard by the pandemic, more than medium, large firms and businesses. Some have had to close down their businesses after they ended up consuming stock and capital money during the lockdown.

Even though the government promised to help some businesses to recover from the lockdown, some were not even able to survive for a mere month after the lockdown. While waiting for funding from the government which has not yet been forthcoming, the question is: how will they recover and how long will it take?

theReporter’s ‘Majirata Latela spoke with Private Sector Foundation of Lesotho’s Chief Executive Officer, Thabo Qhesi on how Covid19 pandemic has affected the private sector.

ML: The Covid-19 crisis looks like bad news for the global economy and trade. How do you foresee Lesotho’s trade after Covid-19 and how is trade impacted by the pandemic?

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TQ: At present, most exports for Lesotho are done for USA markets under the AGOA trade arrangement, especially in textile and apparel sector. This sector has employed around 45,000 workers. With the impact of Covid-19, chances are that the level of orders from the USA market might be reduced or cancelled. This simply means that around 45,000 jobs are at risk.

The government of Lesotho seems to be aware of the impact of Covid-19 and opted to refocus on agriculture and manufacturing. The fortunate part about this option is that already World Bank and the International Fund for Agricultural Development (IFAD) have availed financial resources in this regard. If done at large scale and complete value chain, more job opportunities would be created to substitute the textile and apparel sector.

Again, relaxation of mining laws to allow small miners to do mining activities might also play a significant role in terms of job creation.

ML: Countries have imposed trade restrictions on exporting and importing. What are the chances that the restrictions may kill some of the businesses permanently?

TQ: Chances are very high that some of the business might close permanently. We have seen in the USA that some big companies are now closing down as a result of being bankrupt.

ML: What role can the private sector play in helping to fight the pandemic?

TQ: To enforce World Health Organisation guidelines on social distancing. Allow customers who put masks to enter into the shops. The corporates through social responsibility initiatives should provide food parcels to the needy people.

ML: Is our private sector currently doing enough to help fight the spread on the virus?

TQ: No, it is not due to various factors such as lack of clear vision at national level.

ML: The economic impact of COVID-19 has taken the form of demand and supply shocks and that has led to sharp declines in global trade across a broad range of industries and products. What is your take on the issue? And how is Lesotho affected by this?

TQ: The closure of borders and enforcement of lockdown in various countries played a key role in the shortage goods and services. There has been closure of certain businesses and the shooting up of prices in certain commodities.

ML: Because of the risks associated with Covid-19, the pandemic has ignited an economic crisis worse than that of 2008/09, with the global economy projected to contract by 3 per cent in 2020. If this is the case, will Lesotho be able to recover from this crisis?

TQ: Yes, Lesotho will be able to make it with the support of multi-lateral agencies such as World Bank, African Development Bank, and others to effect capital projects which can stimulate job creation.

ML: What are the areas that the country can focus on to make sure that the economy recovers?

TQ: Already World Bank and IFAD availed financial resources for the Smallholder Agriculture Development Project, and the European Union for integrated catchment management. Agriculture, manufacturing, tourism and Information communication technology (ICT) are potential sectors which can make significant impact for economic growth.

ML: COVID‑19 has had a broad-based negative impact on trade and foreign direct investment, with considerable declines in global exports and imports in a range of industries. What can you say about this statement, looking at Lesotho? Which industries are likely to be mostly affected in Lesotho?

TQ: Chances of losing textile and apparel markets in USA are very high because of low market as a result of Covid-19. On the other side of the coin, the movement of non-essential goods is very difficult because of the closure of customs borders and enforcement of lockdown in many countries. This simply means lack of accessibility of raw materials for textile and apparel products might negatively affect the production, thereby leading to the closure of factories, textile and apparel industries and other factories using non-essential raw materials.

ML: While the effects of COVID‑19 are destabilizing for many enterprises, the effects are particularly challenging for SMEs, many of which are facing severe losses in revenue and rely on limited reserves, while facing less access to finance. How can Lesotho’s SMEs recover after the pandemic and what kind of help will they need?

TQ: The government of Lesotho with the support of development partners must design recovery packages to assist SMEs.

ML: Studies further show that SMEs may face an added challenge because they often rely on a limited number of suppliers and have less flexibility in managing their costs. Is the statement true and what do you think can be done?

TQ: Generally, Covid-19 has changed the landscape globally thereby giving the essential service businesses an edge over non-essential service businesses. Therefore, the SMEs are equally affected like corporates in terms of relying on limited number of suppliers.