IMPACT OF CORONA VIRUS (COVID_19) ON BUSINESSES IN MALAWI

1. Introduction

 

The outbreak of the novel coronavirus (Covid-19), is rapidly evolving and spreading to a number of countries around the world. The first human infections were reported at the end of December 2019 in Wuhan, Hubei Province in China when a cluster of 41 pneumonia cases was identified. The rapid outbreak of this coronavirus has caused an unprecedented health crisis which the world is grappling with right now. In addition to the human impact, there is also significant commercial impact being felt globally. As viruses know no borders, the impacts will continue to spread to every corner of the globe. The 2019 novel coronavirus or COVID-19 (2019-nCoV) spread to multiple countries across the world starting from February, with confirmed cases reported in 196 countries, areas or territories as on 24th March 2020, according to the World Health Organisation (WHO). The total number of suspected cases reported from countries where no case is confirmed is on the rise.

 

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) conducted a survey on the impact of the coronavirus on businesses in Malawi. The virus has rapidly spread from China to European countries and the United States of America, and recently it has been reported in 44 African countries as on 24th March 2020. Though Malawi still has no confirmed cases, the country remains at risk. Measures have been put in place by most countries, including Malawi to ensure that the epidemic is contained such as limitation on travel into the country, school closure and a ban on meetings with more than 100 people. Flow of goods, services and people face ever-increasing restrictions in the wake of this epidemic.

 

This survey is one of the surveys undertaken throughout the year by MCCCI at a given point in time to assess the impact of different factors on businesses.  The survey measures the impact that the COVID-19 has had on businesses in Malawi which is important in guiding business planning and decision making. The survey has been conducted in such a way that all sectors where enterprises conduct business are interviewed to give a perception of doing business in Malawi.

 

The survey was conducted during the week beginning, 13th March 2020 and the responses are based on the recent events that have taken place since the onset of the Covid-19 outbreak.

 

2. Expected Economic Effects

 

COVID-19 which has been declared a global pandemic is affecting many economies throughout the world. The following are some of the potential economic effects that may be transmitted to Malawi:

  1. Disturbance of trade links with rest of the world as Malawi depends on a number of imports for its small industry. This is likely to happen as countries close and/or restrict movements of goods, services and people. Factories where Malawi’s imports originate may also be inactive as countries restrict activities.
  2. Disruption of global value chains will affect Malawi’s main export products which are mainly raw materials. Besides border closures, the dip in demand in foreign markets especially in Europe and America as a result of possible recession will lead to a loss of Malawi products’ market. Malawian industry however does not have the necessary capacity to absorb these raw products for local processing.
  3. Fiscal expenditure pressure is imminent due to higher expected spending in the health sector whilst revenues are declining partly to slowdown in industrial and commercial activities.
  4. Malawi depends on imported petroleum products which have price transmission effects in goods and services and any sudden supply shock will have consequences on our economy. On the hand, the impending global recession will lead to a reduction in global oil demand and the consequent decline in oil prices may benefit the economy.
  5. Tourism, one of the priority growth sectors in Malawi, will be greatly affected since it depends largely on the movement of people. Local hotels are already witnessing massive cancellations of bookings due to travel restrictions as well as health safety considerations.

It is expected that the growth prospects of 5.9 percent for 2020 will be hampered due to slow down of economic activities.

 

3. Responses According to Sectors 

 

Figure 1 below shows that majority of businesses that responded to the questionnaire are from agriculture, transport, manufacturing, wholesale/retail, and accomodation and food service sectors.

 

Figure 1: Share of Responses according to Sector

Figure 1

 

 

4. Responses according to Exports or Imports

 

According to the responses presented in figure 2 below, 66.67 percent are import products and 42.42 percent are exports. Some of the companies trade in both exports and imports sectors.

 

Figure 2: Businesses in Export and Import Trade

Figure2

Some of the products identified by respondents include import of raw materials for production, building materials, pens, rulers, utensils, services and exports of macadamia nuts, coffee, among others.

 

5. Malawi Trade with high Risk Countries

 

The survey segregated the countries into high risk and low risk countries. High risk countries comprised all countries with the highest count of COVID-19 and low risk countries were grouped as ‘others’. South Africa, though not considered high risk according to the statistics was also specially recognised and included in the high risk category since it is Malawi's major trading partner. Any impact on its economy would be significantly felt by Malawi.

Figure 3 below confirms that majority of trade is with South Africa at 70 percent followed by China with 43.33. A total of 67.86 percent of responses also trade with other countries outside the prescribed risk countries.

 

Figure 3: Trading with High Risk Countries

Figure3

 

6.Impact on Exports and Imports

 

Figure 4: Impact on Trade

Figure4

Figure 4 above shows that majority of businesses who import and export their products and services have been affected. Some businesses that transact with China have indicated that their imports from China have reduced by at least 50 percent and have not received their consignments from January to date. Small businesses which rely on imports from China have seen their business come to a standstill. Some of the transit ports are also being closed. This has compounded the problem.

 

7.Extent of Impact

 

Businesses were also asked to assess the impact of the COVID-19 virus on turnover, production, availability of inputs, products and services. The responses are provided in the figure below.

 

Figure 5: Impact on Business Parameters

Figure5

As shown in figure 5 above, majority of businesses have been affected in all areas of turnover, production, and the availability of inputs, goods and services. It is clear from the graph above that some businesses have been significantly and extremely affected by this epidemic. Tourism and travel industry, in particular, has been heavily affected in terms of provision of services.

 

8.Notable Issues Raised by Businesses

 

The following are some of the issues raised by businesses that should be taken into consideration:

  • There are a lot of cancellations of bookings particularly faced by the hotel industry from both local and international customers.
  • Some businesses do not want to access sea ports such as Dar es Salaam port which are considered risky.
  • Some Countries have instituted cross-border travel restrictions and Malawi must adopt the same.
  • Some businesses have been affected mildly, but are worried of the future outlook and therefore are taking precautionary measures.
  • Local activities which attract larger gatherings such as market events are being cancelled as cautionary measures
  • Some businesses are worried that Malawi border remains open and goods are moving across thus putting the country at risk of having the virus.
  • There has been a concern by some businesses particularly on strategic products such as fuel which is imported. Malawi should ensure that there are adequate reserves for all imported essential items including fuel
  • Some businesses in the health sector are concerned with movement of patients and experts. There are instances where some of the patients are stuck in hospitals outside the country because of airport closures. Others are unable to go for international treatment due to the same challenges. It is also projected that patients suffering from other diseases such as heart attacks will not be adequately assisted as most hospital personnel will be focusing on COVID-19 patients. The current level of service providers especially at clinics do not have the facilities to deal with COVID-19 on a large scale, and as such offering medical services to people on medical schemes will be a serious challenge. It is projected that once Government gives a directive that organisations should close, this will have an extreme impact on revenue of many people thus making it impossible to pay hospital bills and clinics, ultimately leading to serious shortages of medicines.
  • Some of the businesses have indicated that during the first quarter of the year, business is usually slow. It picks up after harvesting season so the effects of the outbreak may not be evident now. This was mostly noted in the construction sector.
  • Due to COVID-19, the transit time of goods from import countries has gone up due to non-availability of containers to move the cargo. Informal exports from customers coming from Mozambique & Zambia has gone down due to fear of denial of entry visa at the border.
  • Importation of goods from China and travel to China has come to a standstill. Furthermore, goods that were bought late last year are yet to be dispatched as there are not enough volumes to allow for containers to be fully loaded and shipped. To put it in perspective, in normal times with Malawians regularly travelling to China, goods could be loaded and shipped within a week or a fortnight. This has greatly affected many businesses.
  • Government should be more stringent with the entry of passengers from infected countries in order to avoid entry of COVID-19 into the country.
  • Some of the businesses have had all raw material orders from China withheld. The delay has resulted in slow down as well as reduction of production of goods. If the trend continues a shut down of production is likely.
  • Less international travel is affecting airline and ticketing companies. Travelling outside the country has reduced significantly in particular to and from Europe (especially Italy where connection flights pass through Rome extensively) and China. If this pandemic continues, it will bring business on its knees.

 

9.Conclusion

 

Malawi Confederation of Chambers of Commerce and Industry advances the following recommendations:

  1. Malawi Government should prioritize its expenditure to mitigate further negative impacts from COVID-19. Part of the expenditure should be in the form of provision of incentives to private sector which participate in the provision of health services in Malawi. Furthermore, the Government should review the whole health system to ensure adequate services are available and accessible to its citizenry.
  2. Government and the Reserve Bank of Malawi should have conversation with stakeholders especially businesses on how they can work together to curb the threat of the COVID-19 and ensure that the impact on businesses and economy is minimised. Some (even African) governments are promising to guarantee payment of wages for low level staff who are likely to feel the impact of the pandemic more.
  3. Banks should consider restructuring the loans owed to businesses whose cash flows have been affected by the COVID-19 pandemic.
  4. Government should ensure that Malawi has adequate reserves for all imported essential items including fuel and drugs.
  5. Government should institute and sustain cross-border travel restrictions for Malawi regardless of position of office.
  6. Banks should ensure that digital payment infrastructure is always operational to ensure digital payments are encouraged and consider reducing fees and removal of limits in amount of money transactions
  7. Businesses are also encouraged to adopt electronic methods of payment