The Economic Outlook and the New Normal- Businesses in Doldrums-by MULUGETA GUDETA

Like wars and natural disasters, diseases of a global magnitude have their own ways of changing the world and impacting the lives of hundreds of millions of people in global business. Although the scale of the ongoing economic depression varies from country to country and from region to region, its impacts are everywhere to be seen. In Ethiopia, it did not take long for the current corona virus pandemic to impact the economy in an unprecedentedly brutal way.

It is to be recalled that the famous Ethiopian Airlines, one of the most successful airline companies, not only in Africa but also in the world, was the first to be hit hard by the corona crisis. The company lost hundreds of millions of dollars in incomes within a couple of weeks and its loss is now estimated to be bigger than the initial shock. However the most successful company in Ethiopia has faced the crisis with creativity by shifting from passenger service to cargo transport. It converted some of its latest aircrafts into cargo carriers in a record time.

According to recent information from the company, the airliner is still alive and kicking in the industry and paying salaries to its employees without resorting to layoffs as many companies in Africa and elsewhere are forced to do. Many big airline companies have sunk into the quagmire of bankruptcies while our national flagship is still floating over the clouds, thereby creating pride and hope in the otherwise bleak future.

Unfortunately, Ethiopian airlines is an exception to the rules of the new normal. This is not  the case as far as smaller companies and still smaller businesses are concerned. There, sheer survival has become very difficult if not impossible.

In richer countries like the US, the governments tried to stabilize the economy by lending money to the failing businesses and by providing trillions of dollars in order to absorb the shocks of the economic depression. In the US alone more than 40-50 million workers have lost their jobs and survive on unemployment benefits amounting only to a small share of their former salaries.

Poor economies like the one in Ethiopia have little reserve financial assets to save businesses from bankruptcies  as it has become evident in the last few months since the outbreak of the pandemic. The tourism, entertainment and hotel industries are most affected by the pandemic in Ethiopia. Their financial losses could reach hundreds of millions of dollars at this initial stage of the crisis. Their former employees are often left without income as the industry was left without alternative revenues.

Some other often smaller businesses have tried to adapt to the economic slump by converting their factories into producers of much -needed consumer goods such as hand sanitizers, medical alcohol and face masks that are in great demand. These are companies whose flexibility and adaptability have allowed them to float above the crisis and survive these bad days by providing jobs and incomes to their workers.

Apart from the successful and adapting businesses, tens of hundreds of smaller businesses have closed down shops, laid out their employees and disappeared without a trace because there was no one to help them survive these bad times. Although some of them could get a helping hand from banks, they could not make it simply because things have gone so bad that nothing could spare them from impending bankruptcies and losses.

Statistics about the condition of Ethiopian businesses may not be fully available at this stage but the general consensus is that the economy has entered a period of no growth, bankruptcy or stagnation at best. Who is going to help these businesses survive the crisis if not the government that has the ability to allocate money from the foreign loans and assistance it is getting in the context of the pandemic?

It is true that the Ethiopian government has thus far taken measures to help some businesses survive the crisis by issuing regulations to make them free from payment of outstanding dues. It has reduced or cancelled outstanding and new taxes, ordered banks to scrape loans and interests from banks while writing off a good part of the dues they owe to government institutions. The government’s unprecedented generosity was brought about by the health crisis and this relationship between businesses and government need to be maintained until normal economic conditions are created.

The state of solidarity between government and businesses could not materialize during normal times. Yet, bad times have shown that the two entities can overcome any misfortune if they simply decide to come together and work in unison. This should also serve as a vital lesson that may be put to good use in the post-COVID period that may be long to come but will inevitably come.

There are also many positive signs indicating business communities everywhere in the country are displaying dand continue to display their generosity and good heart by providing financial assistance worth tens of millions of dollars to help the underprivileged members of our societies and by handing over their hotels and establishments for use in the context of the pandemic.

Thus the Ethiopian business communities have used these difficult times to prove once again that they are the true patriots who come to the rescue of their compatriots whenever hardship visits our economic shores. This has no doubt deservedly earned them respect and appreciation in the eyes of the people of Ethiopia.

As no economy in the world will survive without generous support or government assistance in this difficult period, the challenge now is for Ethiopian businesses to receive more support from the government which is getting loans and donations from multinational financial institutions or from other donors. As the pandemic takes longer to abet or improve, many businesses in this country are bound to go out of business while others stand on the edge of bankruptcy. Government is therefore the only viable entity that can come to the rescue of these companies.

Both the government and the business community need to keep the dialogue going on between the two so that they can chart out new strategies to save private businesses that are hard-pressed due to the ongoing crisis. This is a good opportunity for the government to prove that it is the friend of the private sector and, s the saying goes, a friend in need is a friend indeed.

We need to recognize what has so far been achieved by the government to avoid the worst of the economic crisis but we should also remain confident that it will partially use its hard currency reserves to come to the rescue of businesses that are in real financial hardship and need urgent rescue package to keep their heads above the water to avoid economic asphyxiation.

The new normal in business is such that no entity is able to survive the bad times without receiving some form of support either from government or from private banks that have already showed their generosity on many occasions. Hundreds of businesses are in doldrums and believed to face even worse situations during the coming few months when the situation is expected to be getting worse before it gets better.