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Economic Impact of COVID-19 & Government ResponsePresentation by Yaw Lartey - Financial Advisory Leader, Deloitte Ghana
May, 2020
The Economic Impact of COVID-19 & Government Response 2© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Content
3Overview of Economic Impact
COVID-19 Trend
Impact On The Economy
Government Response
Government Response
Managing The Impact
5
8
13
17
21
COVID-19 Trend
Impact on the Economy
Government Response
Managing The Impact
Final Words
Section 1
Overview of Economic Impact of COVID-19
The Economic Impact of COVID-19 & Government Response 4© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
COVID-19 has slowed down economic activities and the impact could get worse in the next couple of months.
COVID-19 Trends
The Economic Impact of COVID-19 & Government Response 6© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Europe North America Asia South America Africa Oceania
Num
ber
of in
fect
ed p
eopl
e
Global reported cases by continent
Reported COVID-19 cases 'World analysis as at 10th May
COVID-19 Trend | WorldThe number of infections have increased rapidly over the past few months, with more than 4 million confirmed cases and over 280,000 deaths as at 10 May 2020
1,628,576
1,496,765
668,733
310,070
64,750 8,539
Source: Worldometer
1,368
264.7k 221.3k 219.2k 219.1k 177.0k 171.9k80.8k
26.6k 2.0k 31.9k 30.6k 26.4k 7.6k -
200
400
600
800
1,000
1,200
1,400
1,600
USA Spain Russia UK Italy France Germany
Num
ber
Top 7 countries - No of reported cases and their death
cases
Reported cases Death cases
256,336
176,439 145,600
105,186 92,691 86,143 78,144
(5,000)
15,000
35,000
55,000
75,000
95,000
115,000
135,000
155,000
175,000
195,000
215,000
USA Spain Germany Italy Turkey Iran ChinaNum
ber
of re
covere
d in
fecte
d p
eople
Top 7 countries- No of recovered cases
Recovery cases
The Economic Impact of COVID-19 & Government Response 7© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
COVID-19 Trend | WorldGhana has equally seen a rapid surge in the number of cases, adding more than 1,500 cases in the month of May 2020, taking the nationwide total to 4,700 cases, 494 recoveries and 22 deaths as at 10 May 2020
3892
99
12749
56
32
24
16
355
Geographic distribution of cases
21
26
2
1
2 6 7 9 11 16 21 24 27 53 68 137141152 195204205 214 287313378408566 636 641
8341,042
1,154 1,279
1,550 1,671
2,074 2,169
2,719
3,091
4,012
4,263
4,700
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Num
ber
COVID 19 cases in Ghana
Total confirmed cases New cases Total death cases = 22 Total recoveries = 494Source: National Security Council Secretariat ("NSCS")
Male59%
Female41%
Percentage distribution of Ghana's COVID 19 cases by sex
Male
Female
Source: NSCS
Impact on the Economy
The Economic Impact of COVID-19 & Government Response 9© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Economic Impact of COVID-19 | General Impact
Disruptions in global supply chains, with significant supply
shortages and consequent price hikes
Slowdown in investments and remittances and resulting job losses
Volatility and collapse of stock markets due to
uncertainties
Decline in oil demand leading to decrease in oil prices and cut in revenue for oil exporting countries
Decline in tourism and international travel and
resulting job losses
Unanticipated increase in health expenditure
and resulting upsurge in public debt burden
Tighter global financing conditions despite
interventions through monetary policy to cut
interest rates
Lending will become more stringent since
most economies will not be doing well. Only
companies that can show that they can survive will successfully obtain loans.
The Economic Impact of COVID-19 & Government Response 10© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Impact of COVID-19 | Specific Industry Impact
• Hospitality industry adversely impacted due to the closure of borders and general slowdown in tourism and demand for international travel.
• In Ghana, some hotels have reported revenue losses due to cancelations of room bookings and conferences scheduled for March, April & May 2020.
• Average occupancy rate of hotels are expected to decline from 70% to less than 20%.
Tourism and
hospitality
industry
Manufacturing
companies
• The COVID-19 pandemic is already ushering in a host of challenges to Ghana’s industrial manufacturers, especially those that depend on workers whose jobs cannot be carried out remotely.
• However, the extent of the financial impact depends largely on the type of product and its associated demand (whether the products are considered to be essential good or not)
From
hard
est to least h
it
Transport
(Aviation and
road)
• The next hardest hit sectors are the aviation and public road transport sectors.
• The airline / aviation industry will likely be especially hard hit because of a ban on international flights and even some restrictions on domestic flights.
• Road transports has not been spared as people are encouraged to stay home.
Oil & Gas
• World market prices of oil fell to an all time low of U$0/barrel putting some major economies at risk of deep recession. This development has adversely impacted the cash flow of oil and gas companies in Ghana
• As many people continue to work from home and avoid travel, the demand for oil and gas has plummeted in Ghana.
The Economic Impact of COVID-19 & Government Response 11© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Impact of COVID-19 | Specific Industry Impact
• Decline in trading volumes and values of imported goods due to disruption in supply chain globally as a result of closure of many boarders.
• Shortage of some basic consumer goods imported from China and Europe have led to price spikes in Ghana.
• Overall decline in consumption of certain goods, especially those that are seen to be luxurious but not essential.
Retail /
Consumer
Products
Agriculture
• The agricultural sector is expected to experience adverse disruption in the supply chain. Low demand activities could cause perishable goods to go bad..
• If the pandemic continues, this could lead to shortage of food and spike in food prices.
From
hard
est to least h
it
Financial
Services
• Risk of loan default as incomes of businesses and individuals are adversely impacted by COVID-19.
• There is also pressure on banks to restructure loan facilities with possibility of granting moratorium on loan repayment and reduction of interest rate.
Construction
• As the coronavirus hit Ghana’s economy, companies will likely pull back on expansion, leaving a huge gap in the construction industry.
• Government of Ghana intends to adjust expenditures on Goods & Services and Capex downwards by GHS1.2 billion as a result of COVID-19 leaving most of the construction projects on suspension.
Government Responses and Proposed Measures for Businesses
The Economic Impact of COVID-19 & Government Response 13© 2020 Copyright. All Rights Reserved. Deloitte Ghana. 13© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Fiscal MeasuresThe Government is also implementing the following fiscal measures to mitigate the impact of the pandemic on businesses and households
External Financing The Government has secured the World Bank DPO of GHS 1.7 million and the IMF Rapid Credit Facility of US$ 1 billion
Utilization of Stabilization funds"The Government has lowered the limit on the GhanaStabilisation Fund from US$ 300 million to US$ 100 million. Also,the Petroleum Revenue Management Act (PRMA) is to beamended to allow withdrawal from the Heritage Fund toundertake emergency expenditure.
Adjustment in ExpenditureThe Government has adjusted its projected expenditure on goods and services and capital expenditure downwards by GHS 1.25 billion.
Tax IncentivesTo be discussed in the next section
Government Response | Fiscal Measures
The Economic Impact of COVID-19 & Government Response 14© 2020 Copyright. All Rights Reserved. Deloitte Ghana. 14© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Prime Rate & GoG Borrowing• The Bank of Ghana (BoG)
decreased the monetary policy rate by 150 basis points to 14.5 %.
• Amendment of the Bank of Ghana Act to allow for government borrowing from BOG up to 10% of previous year’s tax revenue in the event of tight domestic financing market conditions
Regulatory Reserve & Buffer
• Reduction in the requiredreserve requirement from 10% to 8%.
• Capital Conservation Buffer (CCB) for banks of 3.0% is reduced to1.5%
• This is the first time since 2019
that the Central bank of Ghana
has lowered the policy rate. The
aim of the Government is to
boost economic activities by
enhancing access to credit at
lower cost.
Commercial banks
• Commercial banks engaged to provide syndicated facility of GHS3 billion (US$500m) to support key industries;
• to grant six-month moratorium on principal repayments for selected businesses; and
• reduce interest rates by 200 basis points, also to increase credit supply to the private sector
Government Response | Monetary MeasuresThe Government of Ghana has initiated the following monetary measures to mitigate the impact of the pandemic on businesses
The Economic Impact of COVID-19 & Government Response 15© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Government Response| Other MeasuresAs part of the various interventions made by the Government to mitigate the adverse impact of the COVID-19 outbreak onbusinesses, the following are also in place;
Coronavirus Alleviation Programme
to ease the impact of COVID-19 on businesses and households. It was funded with an initial seed fund of GHS 1 billion (US$166 million)
COVID-19 Fund
to receive donations to support CAPand to assist in the welfare the poorand vulnerable people.
As at end of April an amount of aboutGHS13 million (approx. US$2 billion)had been received into the Fund.
Absorption of Utilities
Government is to absorb 50% electricity bill for commercial users
for the next three months (April, May and June)
600 million GHS Scheme
for Small and Medium Scale businesses in the country. The loan scheme is expected to have a one-year moratorium and two-year repayment period.
The Economic Impact of COVID-19 & Government Response 16© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
SME Fund of GHS 600 million (US$ 100 million) | Stimulus loan
• This is a soft loan facilities for SMEs in Ghana
• The facility is to be administered by the National Board for Small Scale Industries (NBSSI) in association with Business & Trade Associations and selected Commercial and Rural Banks
• The facility was launched on 7 May 2020.
Background
Terms
• The targeted sectors are micro, small and medium scale businesses in Ghana
• The facility will have a one-year moratorium
• A two-year repayment period for micro, small and medium scale businesses
• The facility is to be administered through an online technology portal which is yet to be launched
Managing the Impact
The Economic Impact of COVID-19 & Government Response 18© 2020 Copyright. All Rights Reserved. Deloitte Ghana. 18© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Managing the Impact of Covid-19| On BusinessesBusinesses can Adopt the Following Measures to Control the Economic Impact of COVID-19 on their Businesses
Fund Raising SolutionsStakeholder Management
Action Plan –
▪ Utilise whatever Government support is available
▪ Take advantage of COVID Funding support available from banks and NGOs
▪ Seek support from existing fund providers
₋ Lenders
₋ Shareholders
▪ New fund providers who can act quickly
₋ Asset based lenders
₋ Alternative lenders: many ready to lend in the wake of COVID-19
Action Plan –
▪ Communicate regularly with all your key stakeholders
o Lenders
o Shareholders
o Employees,
o Suppliers (incl. landlords),
o Customers
o Authorities (tax, government etc.)
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Managing the Impact of Covid-19| On BusinessesBusinesses can Adopt the Following Measures to Control the Economic Impact of COVID-19 on their Businesses
Contingency PlanningContracts
Action Plan –▪ Review your legal entity structure to identify
pockets of value
▪ Understand critical assets, contracts, customers and suppliers
Action Plan –
▪ The COVID-19 is likely to lead to legal / insurance claims
▪ Keep track of the financial impact of:
₋ Breaches of contract
₋ Additional costs incurred
The Economic Impact of COVID-19 & Government Response 20© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Managing the Impact of Covid-19 On Cash FlowsCash is said to be “king” so must be Managed Carefully in Times like this.
Inventory1
Receivables2
Managing Inventory
• Minimise order quantities and batch sizes, increase order and production frequency
• Review your constraints and bottlenecks of your business operations and streamlineproduction to avoid over stocking
• Dispose of slow moving and obsolete stock by offering discounts or any other promotionalstrategy
Managing Receivables
▪ Raise invoices ASAP and in a timely manner
▪ Monitor cash collections daily by prioritizing customers with large debtor balances first
▪ Engage with customers, and be proactive in minimizing the risk of disputes and latecollections
Managing Payables
▪ Map your business’ critical suppliers to determine priority of payment
▪ Make sure that payment is performed through the agreed payment method
Payables3
Final Words
© 2020 Copyright. All Rights Reserved. Deloitte Ghana. The Economic Impact of COVID-19 & Government Response 22
“COVID-19 will reshape our world
We don’t know when the crisis will end
But we can be sure that when it does,
Our world will look very different”
Joseph Borrell
The Economic Impact of COVID-19 & Government Response 23© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Final WordsFlatten the curve – Stay home, Wash Hands Regularly and Keep Physical Distance
Stay at Home Wash your hands Keep your physical distance
Stop the spread of COVID-19
The Economic Impact of COVID-19 & Government Response 24© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
Contacts
Yaw Appiah Lartey
Financial Advisory Leader
Deloitte Ghana
Office tel: +233 307 086 336
Mobile tel:+233 244 158 377
Email: ylartey@deloitte.com.gh
Dennis Brown
Manager, Financial Advisory
Deloitte Ghana
Direct: +233 302 775 355
Mobile: +233 243 320 5800
Email: dennbrown@deloitte.com.gh
The Economic Impact of COVID-19 & Government Response 25© 2020 Copyright. All Rights Reserved. Deloitte Ghana.
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