Finance Minister Colm Imbert’s announcement on Tuesday of a plan to support micro, small, and medium enterprises through a $300 million loan programme is a welcome acknowledgement of the challenges faced by a key segment of the economy. In order to ensure the wellbeing of society, this kind of support is as crucial as the cautious approach being taken to easing the lockdown.
The phased reopening of commercial activity will undoubtedly make some businesses happy. Food merchants will get to earn some income through curbside pick-up. Hardware stores have longer hours. And three companies, Witco, TCL and Nu Iron Unlimited, have been given permission to restart operations for exports so they don’t lose their market share.
Other businesses, though, are not as fortunate. While they have been advised to prepare for the possibility of a speedier progression through the phases outlined by the government, it’s not clear how many will be able to do so after suffering months of slashed revenue.
So Imbert’s announcement will undoubtedly answer the call of many who have been arguing that this has been a major oversight in the overall response. The minister said Government will subsidise all the interest on the proposed loans as well as part of the collateral. The transactions will run through state bank First Citizens, so the interest rate can be controlled.
Importantly, Imbert also said micro-enterprises will also be given additional support in terms of grants, as it is understood that they are less able to stand the shock He said the loans will be for payroll support and further details are forthcoming.
The government must be praised for its cautious, science-based approach to how we resume activity. Returning too quickly might satisfy critics who want to be able to make a quick buck and pay their bills. But it could also cost us dearly in the long run. A second wave would not only result in deaths, it could seriously damage the workforce, overwhelm healthcare facilities, and dim the chances of economic recovery.
At the same time, there’s going to be need for a more forceful intervention by the State in order to prevent a collapse among businesses, many of which have not had revenue for months, yet still have operational costs. Nobody wants a resurgence of the virus, but a stagnating economy will eventually drain savings. Strategic mitigating measures are needed, beyond food cards and salary grants and rent relief, though these are not insignificant.
The real cost of the entire covid19 situation will probably never be quantifiable. It is likely to be even more than Imbert’s $6 billion projection. Thanks to softer petrochemical revenues, the deficit is already expected to be huge this year and it is hardly ideal for us to worsen it.
However, while caution is advisable, the relative lack of testing of the population means we are making decisions in the dark. Notwithstanding, it is clear enough that the measures announced this week are badly needed.