Coronavirus: What is the Stimulus Package Going to Stimulate?

Sadly, the novel coronavirus has not just taken lives but has also collapsed businesses and plunged economies into serious downturns. Many people have lost their jobs, bottom lines have been affected, and for those who are running their businesses, they are unable to meet basic operational expenditure. The lockdown; restriction on movements, practicing social distancing and ban on gatherings have seriously impacted the global machinery for economic activities.

The International labour Organisation (ILO) has warned that some 1.6 billion workers in the informal economy – which represents almost 50% of the global workforce – stand in immediate danger of having their livelihoods destroyed due to the decline in working hours and the ban on movements.

In Ghana, SMEs across the country have been negatively affected by the outbreak of COVID19. As the backbone of economy, SMEs contribute about 70 per cent to Ghana’s Gross Domestic Product (GDP), and account for about 92 per cent of businesses in the country.

Stimulus Package
Objectively, every stimulus package must encourage spending which intends to increase demand for goods and services and also translate into increasing employment. Cyclically, this must continue until the economy recovers from the collapse.

To this, President Nana Addo Dankwa Akufo-Addo has launched a GH¢600 million Coronavirus Alleviation Programme (CAP) business support scheme intended to support small and medium-scale enterprises (SMEs) impacted by the novel coronavirus (COVID-19).
“Government, in collaboration with the National Board for Small Scale Industries (NBSSI), Business & Trade Associations and selected Commercial and Rural Banks, will roll out a soft loan scheme up to a total of GH¢600 million, which will have a one-year moratorium and two-year repayment period for micro, small and medium scale businesses,” he stated.

The Issues
In the quest to slow the spread of the virus, government has imposed ban on gatherings and the imperative need to exercise social distancing. We have been told to stay home and be safe. These impositions have directly affected some businesses within the SME sector. For instance; schools (particularly private schools), hotels, travel agencies and many more. Services and goods provided by some of these businesses have no or low patronage.

It is then obvious that the low economic activity levels is making it difficult for the businesses within the SME sector to make income. Buyers have disappeared, and are avoiding public spaces.

On the back of this, it is important to know exactly how the loan will be used by the businesses. Has their real needs been identified? Which expenditure lines are they going to use the loan to support? Staff salaries? Payment of rent and other fixed costs? What are the operational sustainability needs of these businesses? Contrary to the purpose of the stimulus package, some business owners will use the money to pay off their loans with financial institutions. Sadly, most of these businesses have laid off most of their workers due to the low or no patronage. Will business owners call back these employees to pay them their benefits?
Like many other businesses within the SME space, how does the package stimulate the commercial drivers who have lost most of their trips due to social distancing and the effect of ban on gatherings?
How profitable are these businesses going to be to repay the loans?
Is the stimulus misguided?

Will the politicization of our institutions and the political interferences, which in the past has bemoaned similar relief projects not impede the following of due diligence in disbursing the loans, as well as improper documentation of beneficiaries?

What are the modalities for recoveries of these loans considering the vast and widespread of these businesses? A case in point is how Microfinance and Small Loans Centre (MASLOC) failed with recoveries. As at 2018, MASLOC was able to retrieve only 16% of GH¢100m owed it. Just like this stimulus package, the intention was good but the results has always been bizarre. Since the beginning of 2017, MASLOC has not been able to embark on any serious activity owing to the huge indebtedness to it.

Is it not another opportunity to spend money without addressing the real issues?
Importantly, these concerns are not to say the SMEs do not need any support, rather, is it the real solution to their problems in the face of the pandemic?

I hope that the stimulus package will be implemented to revive the economy by maintaining jobs, which should be supported by a robust employment policies, with a comprehensive livelihood support system.
Also, there should be some debt relief measures, so that the loan can be an incentive for SMEs to keep employees on the payroll.
Unlike the wholesale approach to the package, some selected sectors of the economy like healthcare and pharmaceuticals, Agri and Agro-businesses should be supported to help increase their productivity.
Also, I hope this stimulus package will be free from political interferences.

Like, President Nana Addo says, this too shall pass. And may God bless our homeland Ghana.