Mangaluru, September 15, 2020: Coronavirus pandemic has posed the biggest challenge in history to the survival of economy and business globally. Mangalore Today spoke to leading lights of business and industry to analyse the situation and gain their unique perspectives on the way back to recovery and growth. Excerpts from the Interview with Mr. Isaac Vas, President, Kanara Chamber of Commerce and Industry:
How has Covid-19 pandemic impacted small business?
Most small businesses buy raw material, stock and all inputs in cash and sell on credit. They have not been able to realise their outstanding of the pre-Covid-19 period itself as the lockdown was overnight and money has become scarce. More importantly, there has been an enormous demand crisis which has either shrunk or is absent. Added to this, supply chain disruptions and labour issues have made it difficult for industries to renew the production process or reduce inventory. There are hurdles in production at every stage. Some of the business models particularly in advertisement, tourism, travel, catering, designing, construction, entertainment, garments, sports, event management and so on have lost their relevance in the present scenario.
What are the biggest mistakes you have seen small businesses make since the crisis hit?
We should understand that this is not a regular demand and supply crisis. The crisis is the result of a sovereign lockdown implemented by the Government to protect citizens from a pandemic. It has affected everyone across the board. Except for panic based on rumours, I don’t feel we should call anything done during a crisis as a mistake. Mistakes can only be made after the pandemic is over. Or they may have been committed before the crisis by not having sufficient reserves for a rainy day.
What are some of the smartest moves you have seen small businesses make amid the pandemic?
Adapting to the situation is always the smartest move. Adopting strategies and tactics to survive is what I call as smart moves by small businesses. There have been many existing small industries that have opened up to sales and production in Covid-19 related products. I have seen business people who quickly realized that their product has lost relevance and have cut their losses by shutting shop or taking a break. Many in the restaurant and food industry have adopted survival tactics by changing their sales format to home delivery and advertising through social media platforms.
In addition to government aid programs, what more can policymakers, financial institutions and even consumers do to respond to the needs of small businesses?
Some out of the box economic solutions are needed. To quickly come out of the current situation, the policymakers should put money in the people’s hands. They can do this by stepping up expenditure on public works and investment in critical health infrastructure and urban housing, roads and bridges, industrial and IT Parks and so on., reducing interest rates on capital investment and reducing GST slabs. This action will create considerable demand for products and services and employment. Introduction of revolutionary changes in terms of easing norms for purchase of agricultural land for industry, partial easing of APMC rules and ease of setting up new industries are welcome. But we have miles to go, especially in vital sectors like banking, power, taxation, labour, civil services scientific and medical research, healthcare and many other industries. So much more needs to be done.
As far as consumers are concerned, they need to start buying and spending, which indirectly will trigger more income for them in the long run. A positive fallout of the crisis is policymakers have begun to recognize that taxpayers are nation builders and the government is planning to come out with a charter of rights for them.
When it comes to aid and loans, there is some confusion about what needs to be paid back and when. How should small businesses approach their repayment plans?
Whatever one borrows has to be repaid with interest in future. That cannot be avoided. One needs to remember that the birds will come back to roost one day. Businesses should borrow only if they can deploy funds to generate enough revenue. Banks are ready to fund businesses with a good track record. There is no dearth of funds. But when there is no demand, what will a borrower do with funds? Each business has its unique features, so without a sound and specific repayment plan, small businesses should be careful before falling into a debt trap.
For many small businesses, reopening will be akin to opening for the first time. What advice do you have to plan – and pay – for reopening?
Reopen in stages. Lay out a schedule to ramp up. Business is likely to be slow at first. Better to run out of the product than to have too much early on. Speak to your vendors, suppliers and buyers. Focus on cash flow.
As the economy starts to reopen, what are the fundamental changes small businesses will need to make?
Understand your customers and adjust to meet their needs. Provide a safe environment for staff and patrons. Focus on customer satisfaction and quality – volumes may be down, but there is opportunity to make each transaction more profitable. The market is turning into less of a credit market and more of a cash market and everyone has begun to understand each other’s problems. That is a plus point of the crisis.
When it comes to small business, what are you optimistic about now?
MSMEs are the backbone of our economy. Ingenuity and hard work are defining characteristics of small business owners. Even in our district over 90% of the employment is provided by MSMEs and small businesses, while large industries provide less than 10% jobs. If we give them the right tools to rebuild — a New Deal for small businesses — they in turn will create jobs and economic activity on our main streets and lead the country out of the COVID-19 crisis.