With the lockdown resulting to restriction of both vehicular and human movements across cities in the country, business operations of the Micro, Small and Medium-Scale Enterprises (MSMEs) have been greatly hampered, according to the recent National Survey on the Impact of COVID-19 on MSMEs conducted by Sierra Leone SME Forum, African Consulting Group, Business Coalition on COVID-19 and Ecomedia Corporation Ltd.
The report which titled: “Impact of Covid-19 on Micro, Small and Medium-Sized Enterprises in Sierra Leone,” targeted 1,674 MSMEs comprising 69% of females and 31% of males who participated in the survey.
According to the business survival rate in the report, about 47% of the respondents are likely to consider new business due to the opportunities and/or challenges associated with the Covid-19 period, while about 30% are undecided, and 22 % are not considering new business. Nearly half (48%) of the respondents reported creating new product/service this period, while about 51% reported in the negative.
The report indicates that more than half (57%) of the MSMEs reported that their sales had been affected, this is followed by challenges relating to cash flow (52%). “The results suggest that many businesses are financially fragile. Some MSMEs report that they only have cash to cover only for a short period of time. Usually, businesses with more cash on hand are relatively more optimistic of staying in business for long,” the reported stated.
Areas of business mostly affected
The report indicates that 49% of MSMEs reported having logistics issues and about 36% noted having challenges with their production, noting that supply chain networks have been disrupted globally and as evidence suggests, the supply chain of MSMEs have been impacted negatively by the current crisis.
“This disruption has increased the cost of business especially for businesses that have not closed. Other aspects of business operations affected include salaries (26%), customer services (23%), payments (20%), investments (9%) and foreign exchange (7%). With dwindling income and wages for employees, more than half (55%) of the MSMEs are considering laying off employees. Even for the 44% that has no plans of laying off their workers, reduced productivity and income are making them think of salary reduction while the situation persists. For some of the MSMEs, there is complete shutdown of business activities and this has continued to affect negatively for the businesses,” the report disclosed.
“In essence, while there is decline in income for some of the MSMEs, unfortunately there are costs that would still be paid for, such as rents and other fixed costs. They’ve been impacted directly by the changing social conditions, such as the social distancing measures and travel restrictions put in place to combat the Coronavirus. Most sectors like the travel and hospitality industries, entertainment, transport, mining, manufacturing, agribusiness, export, among several others, have all been negatively impacted. Supply chains have also been interrupted,” the report pointed out.
The report added that MSMEs are exploring innovative ways and means of cushioning the effects of these challenging times. Majority of them have had a rapid response to the pandemic and have taken measures to thrive. They have shifted focus towards crisis management with emphasis on measures which will likely evolve after the crisis.
The pandemic has hit the small farmers with disruption in health, food security, transport, finance and demand. It has also increased the cost of doing business. Smallholder farmers, already dealing with the effects of a climate and price crisis, are taking emergency measures for resilience. At the same time, they are preparing long-term strategies to regain competitiveness regionally and globally.
Measures to cushion effect of Covid-19
Expectedly, the report said that MSMEs need about 75% funding, apart from affordable loans. Some MSMEs require other forms of financial support including grant to cope with the challenges of the period. This is followed by technology support and access to market with 35% each. MSMEs also need mentorship support (29%), reduced interest rate (22%) and extended moratorium (on the different financing available.
MSMEs also want tax holidays (17%) and energy support (16%). Most MSMEs also want opportunities for learning especially through e-learning.
“About 90% of the participants call for the government to support the MSME sector now through grants and small loans. MSMEs in normal times require access to bank services because they often lack the necessary cash flow to make investments. Access to short-term and working capital loans is essential to help SMEs grow in increments. Such loans enable MSMEs to purchase supplies, pay employees, and meet obligations to clients,” the report stated.
By Stephen V. Lansana
10/6/2020. ISSUE NO.: 7842