SMEs show flexibility in Covid-19 era: World Bank

ZIMBABWE’S small businesses showed flexibility during the Covid-19 pandemic by implementing mitigatory measures to minimise the financial impact of the shocks, the World Bank has said.

According to the Bretton Woods institution’s 2020 Enterprise Survey Follow-up in Zimbabwe, firms re-purposed and increased use of technology to boost demand during the pandemic.

“Close to half of the firms adapted their products or services to evolving demand, 30 percent adjusted their ways of delivering goods or services,” highlighted the survey.

“Twenty-seven percent of the firms started or increased online business activities.”

There were also significant adjustments to workforce. Reduction to working hours was the most common workforce adjustment implemented by 94 percent of the firms, followed by reduction in temporary employees. About 37 percent of the firms have also reduced wages while 26 percent reported reduction of the number of permanent employees.

On average firms shed about 10 percent of their full-time permanent employees compared to February 2020. Despite these adjustments, Covid-19 still had significant impact on the country’s small business sector, especially with regards to disruptions to demand and supply, sales, employment of women and as expected financial impact to firms.

The World Bank report outlined some of the key Covid-19 disruptions: “Close to 90 percent of formal businesses suspended operations (more than twice the figure in Zambia). Suspension was for about seven weeks on average. Impact is largest among micro and small firms, in Harare, in the textiles sector, and among exporters.

“Most firms (86 percent) experienced a drop in demand, and disruptions to supply of input, raw material and merchandise for resale (76 percent). Large firms and those in the food sector seem to be impacted less.”

Beyond disruptions at an operational level, Zimbabwean firms also took a financial hit. For instance, the report showed that for an average firm, sales in May/June contracted by 51 percent compared to the levels in 2019. “The magnitude of the damage is further visible from the financial woes facing the business, where about 90 percent have reported having liquidity and cash flow shortages.

“As a sign of potential ripple effect, about 64 percent of the firms had to delay payment to service providers and tax authority,” reads the report.

Business owners and top managers of 600 firms in Zimbabwe who were interviewed between July 2016 and February 2017 as part of the standard ES were re-interviewed from mid-June to mid-July 2020 to track how affected they have been by the pandemic.-chronicle.co.zw