Businesses prepare for restricted activity

Corporate Ghana, along with their smaller counterparts who make up the micro and small business sector, are currently experiencing an acute sense of déjà vu as COVID 19 restrictions have returned to the country in response to the ongoing second wave of viral infections which is ramping up both active cases and fatalities across all 16 regions of the country. Many businesses in Ghana’s biggest urban hubs are actually panicking outright, even as the management and staff of several government institutions have retreated from their respective offices, resorting to working from home.

Although the newly re-imposed restrictions are specifically targeted as social, rather than business events, corporate chieftains fear that going by President Akufo-Addo’s tone at his most recent televised address to the nation, delivered on January 31,and the infection data emerging, further restrictions that would directly affect businesses may be on the way imminently

Indeed, several corporate events are now being cancelled as well, in response to the infection data released over the past week, some of them at very short notice. For instance, on the morning of Monday last week, the Bank of Ghana cancelled its scheduled press briefing on the assessment of the economy and the consequent key interest rate decision arising from the latest meeting of its Monetary Policy Committee, just hours to when it was supposed to start.

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Government has deliberately targeted social gatherings rather than business events with its first round of renewed restrictions for economic reasons;  with the economy striving to rebound after two consecutive quarters of contraction, it is seeking to reverse the growth of coronavirus infections by curbing events that consume income rather than events that generate it. The reintroduction of restrictions has been necessitated by a surge in new infections, as a second wave takes hold,  this time involving a new variation of the virus, the new mutation even more virulent than the original version; and by the stubborn refusal of the majority of the general populace to implement the basic protocols – the use of face masks in public, regular application of sanitizers, regular hand washing with running water and social distancing wherever possible. Indeed most citizens appear to have the grave misconception that the protocols are for the good of government, rather than for their own good, and they therefore are unwarranted inconveniences being imposed on them by the State.

To be sure, most of the newly reintroduced restrictions are aimed at social gatherings rather than the conduct of economic activity. However in Ghana’s predominantly informal economy the line between the two is very thin.

Targeting of social rather than business activity is both prudent and fair. It is prudent in that economic activity generates income while most social activity simply consumes it. Thus, the new restrictions can be expected to have a bigger positive effect on curbing the spread of infection than an accompanying negative effect on economic activity. It is fair because businesses – at least those in the formal economy –  have been far more responsible in their adhering to COVID 19 protocols that society has in their social activities.

However business leaders are acutely aware that their activities give good reason for them to be targeted too.

Dr Patrick Luma-Aboagye, the Director-General of the Ghana Health Service (GHS) has disclosed that infections at the work place are rising sharply

Consequently, he has asked the management of all the organizations to ensure that their staff strictly adhere to COVID-19 safety protocols to contain the spread of the virus at workplaces.

He adds that reduction of staff numbers working in their offices and the use of ICT facilities to perform official duties virtually could also help to curtail workplace infection of the virus

Dr. Kuma-Aboagye, asserts that active cases continue to rise day by day because people have relaxed on the safety protocols. Instructively, while large corporations have been far more diligent about enforcing COVID 19 protocols than their smaller counterparts, even they have been more relaxed in recent months with some failing to provide consistently sanitizers for staff and visitors to their offices and no longer insisting they wash their hands with running water prior to entry.

But the sharp surge in active cases has prodded both public institutions and private enterprises to mend their ways again. Indeed,  even before the president’s latest announcement some government agencies such as the Ghana Investment Promotion Centre had already reverted to working from home again, nearly six months after gradually resuming the conventional system of working from the office due to a slow down in the viral infection rate and the consequent phased removal of erstwhile restrictions. Since restrictions were re-imposed lots of institutions have followed suit, with only key management and customer service staff working from their offices. COVID 19 protocols have been restored in full too.

Even before widely anticipated restrictions on business activities are announced, business chieftains are already beginning to feel adverse effects from the renewed ban on some types of social activity. By Monday, less than 24 hours after the President’s announcement, many business people were already complaining that the ban had upset their schedules for the next two weeks at least, as they had committed to attend some social events that have now had to be cancelled, and indeed had already made financial commitments towards them – donations, transport and hotel bookings and so on. Importantly. in Ghana’s business culture some of such social events – particularly weddings and funerals – serve as prime opportunities for business networking and business to business marketing. Some entrepreneurs and corporate managers are ruing missed opportunities to expand value chains and create brand new ones at such occasions.

Many businesses, particularly the entertainment and arts sectors  will be counting their losses in the first quarter of the year following  fresh restrictions.
With these latest impositions, it appears the hospitality, recreation and creative arts industries are the hardest hit in view the nature of their business.
President Akufo-Addo has further gone on to remind Ghanaians that beaches, night clubs, cinemas, and pubs continue to be shut until further notice.

The creative and tourism industries has really suffered since the first restrictions were imposed in March 2020 as many companies particularly hotels and bars laid off hundreds of employees in order to survive the harsh economic conditions as a result. The beaches, pubs, restaurants suffered a similar fate.
However, hope was somewhat restored in the last quarter of 2020 when the President relaxed many of the restrictions due to the sharp decline in Covid-19 cases in the country. This led many companies to do brisk business during the Christmas and New Year festivities with the firm assurance that 2021 was going to be a booming year if the pandemic was brought under control.

Contrary to those expectations though, Covid-19 cases are increasing at an alarming rate with more deaths being recorded on daily basis, compelling the government to re-impose restrictions.
With these new restrictions, the fate of businesses hangs in the balance.

The worst case scenario is another outright lock down and indeed the spectre of this is serving as the sword of Damocles hanging over the country’s business sector. But there is a school of thought that  the threat of a lock down is just that – a threat being used by government to scare everyone into compliance with the COVID 19 protocols. This suspicion is based of the indisputable fact that neither the Ghanaian economy or any of its key stakeholders – households, businesses nor government itself can afford one without devastating repercussions.

The three week lock down instituted in Greater Accra and Kumasi in April last year had the worst consequences with regards to economic impact since the Ghanaian socialist “revolution” of 1979 to the early 1980’s; an impact heavy enough to persuade the government that did it to reinvent itself as a liberal economic reformist one, committed enough to be used as a model for the rest of Africa.

After three years of resumed strong economic growth of between six percent and over eight percent between 2017 and 2019, the arrival of COVID 19 – and more impactful, the consequent restrictions imposed by government to curb its spread – instigated a 3.2 percent year on year economic contraction for the second quarter of 2020 followed by another albeit shallower one of 1.1 percent for the third quarter. The data for the last quarter of the year is still being awaited but if it also produces yet another contraction it would mean Ghana is officially in recession – which is defined as three successive quarters of negative economic growth.

This has been accompanied by a surge in the already inordinate unemployment rate; a rise in the fiscal deficit to a record high 11.4 percent of Gross Domestic Product ( which was the revised target but with the deficit already at 10.6 percent by November and a general election held in the following month the actual out come is most likely to be higher still); and a surge in the public debt to GDP ratio to 74.6 percent by the end of November, well above the 70  percent generally accepted threshold for debt sustainability (which Ghana had postponed over the past decade with two rebasings of the economy, the deliberate overstating of GDP  by using projections rather than actual, and outright dubious understating of the fiscal deficit). With an election driven spike in public spending in December this also certainly ended the year significantly higher still.

To be sure, with re-election already under its belt and a more precarious, fragile situation than at any other time in nearly two decades, government would have neither the will not the political need to repeat the fiscal stimulus packages it gave businesses after last year’s lock down nor the social interventions it provided for households either. But while this would make a second lock down cheaper to implement, it would also mean a much worse economic impact all round.

Besides its constraints, opponents within government itself to a second lock down point to the very limited success achieved by last year’s lock down with regards to meeting its objectives; by the time it was lifted, the number of active cases had quadrupled. Supporters of lock downs as a tool for combating the spread of the coronavirus infection however point out, and correctly too, that the spread would have been much worse if not for the lock down; but in failing to prevent the commencement of communal spread it ultimately failed to fulfill its primary objective.

Government would therefore be loath to implement a second lock down, preferring instead to use the threat of one, along with incremental, less draconian socio-economic restrictions to elicit more responsible behavior from enterprises, institutions, individuals and households alike.

So far this is already achieving some measure of success, albeit not enough to achieve the ultimate objective; a recent survey reveals that compliance to wearing masks in Accra has risen from 10 percent of the adult populace to 42 percent over the past couple of weeks since new restrictions – and the threat of another lock down – were announced. Instructively, among medium and large sized enterprises compliance seems to be much higher although no specific survey has been targeted to confirm this.

Among the hardest hit businesses immediately following the new restrictions are event organizers. Kate Hassan, speaking on behalf of their professional association laments that they now stand to lose millions of cedis over the coming months, first from the social events they organize for their clients, and possibly from a ban on corporate events which may follow subsequently. They point out that their losses will also dent the direly needed economic rebound to some extent, no matter how small.

However even members of the business class that fret over the possibility of renew economic restrictions admit that Ghana has little choice as the infection rate continues to ramp up with alarming speed. Most acknowledge that with government having run out of fiscal space to provide the kind of fiscal stimulus packages provided last year, the best way to go is to accept the new restrictions, become more disciplined because of them and thus avert the need for another outright lock down.

They concur that since the informal sector accounts for some 80 percent of the work force, compliance by medium and large sized enterprises without similar high compliance by the micro and small scale enterprises where this overwhelming majority work cannot stem the spread.

Furthermore, the impending importation and distribution of vaccines will not be a pivotal panacea either. President Akufo-Addo gave figures for the number of doses that will become available starting from June, rather than the number of targeted beneficiaries. This was deliberate; two doses are required for each person so the 17 million doses quoted by the president in actual fact translates to half that number in terms of beneficiaries – which is 8.5 million , well below a third of the populace. Besides even if the timetable for acquisition of those vaccines is achieved, distribution will be a complex, and therefore slow and tedious task.

Businesses prepare for restricted activity
Businesses prepare for restricted activity

Finally, the conventional wisdom is that the elderly – who are the most vulnerable to dying from contracting the virus – will be the first priority, but few of them are part of the work force. Therefore Ghana will still have to look to other ways of keeping the economy running.

Indeed, as unpalatable as a second lock down would be for all stakeholder segments, if the number of new infections continues to rise at its current rate of some 700 a week, government will have little choice but to impose it. As the president correctly stated at the height of the crisis last year: “We can bring the economy back on track but we cannot bring people back from the dead.”

So stuck between an economic meltdown and a population melt down the choice is simple, despite the consequences for business and the millions of households who derive their livelihoods from it.


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