AZA’s Trading Desk Manager, Murega Mungai, based in Nairobi, speaks on way out for African businesses in the face of COVID-19. Excerpts:
How can we survive the pandemic as businesses?
Our key resource is staff; it is the workforce we have as entities, as companies, as institutions. It is best to manage the workforce to ensure that they adhere to the health and safety guidelines, limit their business travel, at least try to have scenarios and situations where you can support remote working schedules, ensure constant communication.
I know there will be a lot of pressure in terms of cost and downsizing at this point in time. I think this is a U-shaped period, meaning, you are going to come back. Staff or workforce are the people who will be able to support the business; they are the faces of the company.
The other thing that is very crucial is to have a coordinated response team to assess the impact and come up with contingency plans. This is a scenario that hasn’t happened before, of course. We need a dedicated team within our businesses that will be able to monitor and respond to developments, address the stresses that will affect the business, and come up with solutions to guide senior management to cushion against these harsh times. Remember, we still don’t have a vaccine for this and we are not really sure what is going to happen to consumers. Try to diversify and maneuver: we need a coordinated team to manage these scenarios who are going to work way beyond their normal business routine.
Try to manage contractual obligations. I am sure as companies we each have contractual obligations with printers, financiers. We have contractual obligations with suppliers and all sorts of intermediaries or counterparties that we are working with. So, at this point in time, looking at the unforeseen scenarios, it is best to try to manage the contractual obligations. Try to renegotiate terms of engagement. Stick with a moratorium for facilities that you use as you try to wade through these harsh times. And, of course, consider insolvency risk, and take steps as businesses to manage your cash flows. It’s best for businesses at this time to be cash liquid because we are not really sure how soon or how fast we are going to get out of this scenario.
Reevaluate all fixed costs. I know this is a tough one. As businesses, we need to look at maybe downsizing operations, depending on the nature of the business, because, if this pandemic continues, we may not be able to sustain the period, and it’s best as businesses to be cash liquid in this scenario to weather the storm.
Consider potential insurance claims. A lot of insurance policies won’t cover for this, but there are some potential insurance claims for interrupted business. It’s up to you as business people to look into this, check on your insurance contracts and see if you are be able to negotiate with your insurance on the anticipated loss of revenue so that you are at least able to share some of the risk.
Businesses should establish war rooms to be able to track and observe orders, push on revenues, push on cash flows. In these war rooms, work tirelessly within the mandate to apply scenarios. Assume this is a battlefield and we have to survive the battle.
It is advisable for companies to prepare succession plans for key positions. It’s very clear. We’ve heard some countries’ top dignitaries, top people in the government, top people in the corporate world being diagnosed with coronavirus and, given the fact that we have no cure, we as businesses need to have contingency plans, succession plans for key roles that drive the organization, and it is important for us as businesses to look at these scenarios from 360 degrees and not take anything by chance. Remember, this is not a lifetime epidemic, it’s something that is coming through and is going to drop off.
Planning for all potential outcomes means you look at alternative suppliers, prepare for plant closures, conduct global scenario planning. Consider Africa’s position as a key importer of Chinese commodities: what other alternatives do we have as businesses? This is a point in time when we need to look at other alternatives and diversify our portfolio in terms of investment, in terms of where we source our commodities.
As businesses, we need to align IT systems to be able to support changing situations. Looking at some major African businesses, we are entwined to a work station. A lot simply aren’t able to support this digital economy and remote working. Right now I know some companies, I don’t want to mention them, but they are at a standstill because quarantine measures are being instilled within their jurisdictions. If we are able to adapt remote working sessions, and have the right infrastructure to support remote working, we can get through this storm.
Most important is to engage our stakeholders. Every stakeholder is aware of what is happening in the global economy. It is advisable at this time to negotiate and to engage, to create greater transparency with your customers, and in terms of ROI for investors. Of course, returns on investments may go down at this point in time because things have really stagnated. It’s best to engage our stakeholders because stakeholders are the same people who will be able to engage our businesses in the future and assist recovery.
Last but not least, redesign your 2020 strategy. As businesses, I am sure a number of us towards the end of last year, when we were looking at strategies for 2020, did not have in mind this epidemic that emerged in the first quarter, so the projection and goal settings may not be in line. Of course, circumstances have changed, variables have changed, the parameters have changed, so it’s best for businesses to look at and redesign the business strategy in line with the pandemic – and consider that recovery may start coming in the second or third quarter.
