Article by Amrita Saha, Research Fellow at the Institute of Development Studies and Vandana Prakash Nair is Programme Officer at the International Trade Centre Geneva.
Consequences from Covid-19 are set to have a colossal economic strain. Insights from a recent business impact survey confirm that the crisis has already affected small businesses more severely. Micro, small and medium enterprises (MSMEs) in the Global South are especially vulnerable, facing challenges that include health concerns for staff, maintaining liquidity, quick adoption of new digital tools, adapting to new work cultures, and preparedness for the recovery period.
Innovative solutions at local, national and international levels that enable preparedness for recovery will be critical to ensure the viability of small businesses in the South. These solutions will need to link government-imposed ‘top-down’ measures, micro ‘bottom-up’ approaches, and international development support. This presents opportunities for more effective South-South cooperation and requires policymakers and practitioners to focus on the following vital areas:
Building a sustainable health infrastructure
Several countries in the Global South lack adequate diagnostic and health capacities needed to respond to a pandemic. For instance, many African countries import up to 90 percent of their generic drug needs. Governments are therefore focussed on preparedness, availability of personal protective equipment, as well as increasing the number of diagnostic tests. The recently concluded African Continental Free Trade Area agreement (AfCFTA) could spur African countries to develop regional value chains in pharmaceuticals. Furthermore, businesses in countries like India, the third largest producer of pharmaceutical drugs, could support MSMEs in establishing and strengthening manufacturing units for much needed medical supplies at affordable prices. South-South cooperation for trade in services for the health care industry can provide lessons – India, for example, has supported others in the Global South in managing HIV, tuberculosis, and malaria through the provision of low-cost, generic medicines. Trials for low-cost Covid-19 testing kits have also begun, which if successful, could help across the Global South.
Addressing food security and livelihood needs
Food supply chains are facing an unprecedented strain and immediate survival needs are a priority under policy responses. Governments will play an important role in implementing actions to minimise the disruptions and ensure that food prices do not rise exponentially. Yet, economic concerns powerfully influence response to disease risks. Hence, while governments announce social protection measures, national, local and international organizations will all have a complementary role in further supporting and re-assuring people – especially the more vulnerable such as MSMEs and the informal sector – about their livelihood security. A good example emerges from business support organisations that should aim to remain engaged, especially in their roles facilitating cooperation and coordination between policymakers, funders and small businesses.
Ensuring access to information at local, national and international levels
Up to date, reliable and timely information is essential, not just about health and protection measures, but also about the availability and access to credit support and social protection programmes. A good example is the case of Mauritius where the assistance scheme has provided coverage to MSMEs and self-employed individuals, as well as those in the informal sector during the pandemic. At the same time, MSMEs will also need rapid access to different types of information, especially, to compare recovery practices, learn from one another, benefit from local linkages with other entities, and in many cases explore building resilience by groups. Further, tools and platforms that can facilitate wider access to such lessons between Southern partners should be considered as medium-term development strategies.
Recognising differences across sectors
Policy responses need to reflect structural differences across sectors. For instance, the services sector, including travel and tourism, is among the most affected. Manufacturing sectors such as apparel, machinery and footwear are directly affected by shutdowns. According to International Trade Centre estimates, textile mill closures in Asia will reduce the imports of vital fabrics for the export-oriented apparel industry in sub-Saharan Africa by approximately $13 million. These sectors will require governments to re-think investments, collaborate with regional governments, and coordinate the distribution and delivery of key inputs. There will also be the additional challenge of reaching informal businesses to provide support and programme delivery. Development banks and agencies as well as impact funds have a role to play in quickly rolling out relief packages for MSMEs in the Global South.
Ensuring gender-sensitive responses
Many women entrepreneurs in the Global South run small businesses, especially in the fashion, tailoring, hospitality and food services sectors. Even prior to Covid-19, women shouldered the majority of unpaid domestic labour. Many small-scale fashion designers in East Africa are now facing additional challenges, with reduced orders, difficulty in procuring inputs and in meeting rental obligations. Some have turned to the production of cloth face masks and other personal protective equipment, leveraging existing networks. Generally, engaging women in decision-making at local, national and regional levels and ensuring that they are not left out of relief interventions will help incorporate a gender-sensitive lens to policy responses and relief measures. Further, South-South learning, such as that from India is applicable, where the Fashion Design Council established a fund to provide relief to small businesses and fashion designers.
Re-assessing risks and diversifying
According to the World Trade Organisation, global trade is set to decline by 13-32 per cent in 2020. Some countries have implemented short-term protectionist measures – restricting exports of critical medical supplies. This includes several key suppliers of health products to Africa, complicating access, at a time when maintaining steady trade flows of basic medical and food items is more important than ever. Governments should instead be stepping up trade facilitation measures. However, as a result of the uncertainty, MSMEs will be re-assessing the risks of being in concentrated supply chains. While globally, firms will look to diversify, technical competence and institutional preparedness will be a key determinant of the direction of diversification. To this end, the International Trade Centre has developed a tool that tracks monitor temporary trade measures. Resilience will be determined by the extent to which existing global linkages correspond with strong local and regional production networks.
Supporting digital competitiveness
Covid-19 is accelerating the move towards digitalisation globally. This requires greater support for skills development initiatives in the Global South and an urgent need to invest in MSME capacities for sustained learning. Governments will need to invest in re-skilling programmes, while the businesses roll out up-skilling initiatives for workers. South-South trade and investment can be a key tool for the transfer of affordable and adaptable digital and creative solutions. For instance, tech start-ups across the Global South are developing solutions, providing information on the pandemic, reporting symptoms through mobile apps, and mapping cases. Both government support and development cooperation will play a role in meeting gaps in the Global South. At the same time, business-to-business exchange in adapting – locally, regionally and globally, will help ensure going beyond business as usual in creating impact for good.
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