Economic Impact Of Covid-19 And The Survival Strategy Of Local Businesses In Ghana
Whiles we focus almost all our attention on the provision of PPEs which at the moment are the very important commodity needed for the fight against Covid-19 in Ghana. It has become imperative for us not to lose sight on the impending economic implications arising from the pandemic especially on private sector survival and on household consumption. This had necessitated for the need for us in the Economics and Business development sub-sector to also educate Ghanaians on how we can manage our limited economic resources to help us mitigate the adverse economic effects of the pandemic.
Research has it that the economic implications of the pandemic can last up to about 1-3 years and could cost over $4trillion covering about 4.8% loss in global GDP (Asian Development Bank). This is largely due to the cracks created in economies across the world. Almost all the major global economic power houses have been badly affected by the pandemic. It is therefore incumbent on all countries to start thinking of ways of dealing with the possible economic hardships that is speedily emerging from the pandemic.
We suggest that government will cut down budgetary allocation on Capital Expenditure of Ghc9.3 billion particularly given the reality that it cannot meet its Revenue projection as indicated in the 2020 Budget. There have also been a sharp rise in the amount to be spent on Health expected to be distressingly above the initial Ghc2 billion (ie. 32% of amount allocated for Social services such as Education, Health and others in the 2020 Budget). The government of Ghana’s overall Budget for 2020 fiscal year was projected at Ghc84.5 billion for all sectors. The government is expected to raise its Revenue from traditional revenue sources such as Taxes on Import and Exports, taxes on incomes and Property, taxes on domestic goods and services, Grants, refunds and from others sources. However, it is unlikely that government may not be able to meet its 6.8% GDP growth as projected considering the impact of the economic impact of the Covid-19.
Moreover, following the fallout from the pandemic there has been steady fall in oil prices on the global market (from $60.00 in December, 2019 to $24.00+). Revenue from petroleum production which constitutes about 30% of our expected revenue as well as the shutdown of landing ports and other multinational companies by our major trading partners such as China, USA and Europe will adversely affect the country’s revenue streams and inflow of Foreign Direct investment (FDI). There is has also been drastic fall in prices of Cocoa from the earlier global market price of %1,330 per tonne and as prices in other major commodities. This and many other factors will affect domestic revenue mobilization.
It is worthy to note that the pandemic has forced most of our local businesses to either shutdown or have drastically reduced their capacity. This is a looming upsurge in unemployment especially in the private sector since most people are rendered redundant particularly firms that do not have the capacity to diversify in their product line. The attempt by government to support private sector businesses with financial incentives is a step in the right direction since it will help local firms to survive in these abnormal times.
Nonetheless, as government intends to do its bit to support local businesses it is incumbent on managers of Small and Medium scales enterprises to review their operational strategies to adjust to the changes in the consumption pattern and improvise measures to take advantage of the pandemic by coming up with product and services that will meet the immediate needs of people.
It is expected of Small and Medium scale businesses to diversify to produce product and services to meet the demand for household consumables or health and sanitation based products. For instance, Kasapreko Company Ltd and GIHOC Distilleries; both producers of several alcoholic and nonalcoholic beverages have quickly switched to mass production of Alcohol based Hand Sanitizers to meet the market demand of such product. I hope going forward other local firms will follow suit to keep them in business.
We also recommend individuals to cut down their household consumption in order to reduce their spending since income streams will be negatively affected sooner than later by the fall out of covid-19. This indeed are not normal times hence all persons must decide to endure some form of economic hardship by adjusting consumption patterns to enable all persons to be able to quickly adapt to the situation at hand until the economy bounces back from the crisis.