The COVID-19 pandemic has infected over 92.6 million people and led to about 2.06 million deaths across the globe to date with U.S. having the highest number of cases (WHO). Other than the public health crisis, COVID-19 pandemic has caused a major economic shock thereby exacerbating the livelihoods of the world population. Of great concern is its impact on businesses across the globe particularly the micro, small and medium enterprises (MSMEs) which act as source of employment opportunities and livelihoods to 45% the developing economies’ population (Gherghina et al. 347). This essay assesses the positive and negative impacts of the pandemic on businesses. In addition, it recommends practical ways as well as policy alternatives that governments can adopt to enhance business resilience during and the pandemic.
The COVID-19 lockdown policies including curfews, movement restrictions and border closures exacerbated the livelihoods and employment opportunities as well as constrained access to business products and services. For instance, business operating in the oil sector recorded a significant reduction in the demand for petroleum products coupled with a fall in the global fuel prices. Besides, companies that relied on external markets for their inputs or final products were cut off from their suppliers and/or customers (Elleby et al. 1067).
The public health concerns such as social distancing measures, creation of safe spaces added additional cost to business operations thereby reducing their level of production and/or forcing them to temporarily stop production. As a result, approximately 43 % of the MSMEs temporarily shut down while majority of the remaining reduced their employee totals by 40% (Donthu and Gustafsson 284).
During the crisis, businesses suffered from the unfavorable exchange rates. Besides, the financial market became highly volatile, thereby depriving them of alternative sources of capital (Sansa, 2020). On the other hand, the lending institutions such as commercial banks stopped provision of loans thereby adding additional burden to companies that are already struggling to service their running loans.
The pandemic has disrupted business models and their ways of operations. According to Donthu and Gustafsson, about 80% of the business across the world had to implement new strategies to keep afloat during the crisis (284). For instance, companies have embraced working from home, high level of team collaborations, online presence and innovative ways in their production and service delivery. While some of these changes could have taken years two implement, COVID-19 made business come up with new business cultures. Besides, many start-ups came into operations during the period to produce sanitizers and face masks or offer services such as food delivery.
Recommendation and Conclusion
To address the long-term effects of the pandemic on business, the government through the central bank should direct the commercial banks to reduce the interest rates in order to cushion borrowers. They should also offer businesses emergency loans with flexible payment rates and time to sustain small businesses. Besides, tax holidays should be introduced to allow companies to recover from the economic shocks resulting from COVID-19.
Businesses are struggling to keep their employees during this period. To discourage increasing rates of layoffs, the governments should provide incentives to companies that manage to keep more that 90% of their employees during the pandemic. In addition, interventions such as can reduction of business and income tax, credits, and tax refunds will allow businesses to pay their arrears and wages without straining.
Donthu, Naveen, and Anders Gustafsson. “Effects of COVID-19 on Business and Research.” Journal of business research, vol. 117, 2020, p.284.
Elleby, Christian, et al. “Impacts of the COVID-19 Pandemic on the Global Agricultural Markets.” Environmental and Resource Economics, vol. 76, no. 4, 2020, pp.1067‑1079.
Gherghina, Ștefan Cristian, et al. “Small and Medium-Sized Enterprises (SMEs): The Engine of Economic Growth through Investments and Innovation.” Sustainability, vol. 12, no. 1, 2020, p.347.
Sansa, Nuhu A. “The Impact of the COVID-19 on the Financial Markets: Evidence from China and USA.” Electronic Research Journal of Social Sciences and Humanities, vol. 2, 2020.
World Health Organization, “Coronavirus Disease (COVID-19) – Dashboard COVID-19 Cases and Deaths.” https://covid19.who.int/. Accessed 23 January 2021.