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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


COVID-19 has slowed down economic activities and the impact could get worse in the next couple of months.

COVID-19 Trends


-

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


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


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.


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.


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


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


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.


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


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.)


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


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


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


Contacts

Yaw Appiah Lartey

Financial Advisory Leader

Deloitte Ghana

Office tel: +233 307 086 336

Mobile tel:+233 244 158 377

Email: [email protected]

Dennis Brown

Manager, Financial Advisory

Deloitte Ghana

Direct: +233 302 775 355

Mobile: +233 243 320 5800

Email: [email protected]

mailto:[email protected]

mailto:[email protected]


Questions?

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Economic Impact of COVID-19 & Government Response ...investinafrica.com/uploads/covid-resources/COVID 19... · The Economic Impact of COVID-19 & Government Response 11 Impact of COVID-19