Monday, April 15, 2024
BusinessDominos falling: Covid-19 claiming its victims

Dominos falling: Covid-19 claiming its victims

It is amazing how a seemingly innocuous influenza-like infection first detected in a regular wet market in Wuhan, China, last December has come so far as to having a profound impact on the global community; in less than 6 months, nonetheless. The world’s most affluent, influential and stable societies have come to see their glories dissipate in the face of this global pandemic. Those long-believed to be in unshakable political and economic positions were forced to see their fundamentals unravel as a result of this cruel virus.

Those countries, erstwhile the envy of the world because of their free and civil societies, modern economies and technological advancements, were forced to swallow the destruction of their economies, the suffering and death of their citizens, and the challenge to their values. Sadly, foremost free societies around the world are the ones confronted by the worst of this public health crisis: namely the US, UK, Italy, France and Spain, all sustaining human cost ranging from 27,000 to 86,000.

With war-time death toll in all these nations, the Covid-19 crisis has really put these exemplary democratic nations to the test; and the outcome is not pretty. Covid-19 has shown the world that in time of destress and crisis humans are just humans; and when push comes to shove systems are not invincible, that they can be undone overnight. Depending on one’s perspective, this better realization of inherent fragilities could be both good and bad.

This week, the world’s economic power, the US, with 86,000 deaths so far, anxiously moves towards the reopening of its hard hit economy; nevertheless, its populous is yet to recover from the shock of seeing 26 million fellow US citizens finding themselves out of jobs just few weeks into the crisis. The image of citizens of the richest country in the face of the earth clamoring for unemployment registration forms or trying to get ahead in crowded food dispensaries; or fearing the worst, lining up outside firearm stores to acquire personal protection is still a fresh memory.

On the contrary, defying most expectation, the world’s poorest nations in Africa are not yet affected by this crisis as their counterparts in the Norther Hemisphere. With both death and confirmed cases, 2,475 and 73,000, respectively, well below the global figures, Africa’s biggest concern at this point in time seems to be the economic cost.

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Much closer to home, since the announcement of its first case in March 13, 2020, Ethiopia has seen mild increases in its confirmed cases to 287 and 4 COVID-19 related deaths. Given the experience elsewhere, the rate of infection in Africa and Ethiopia is largely progressing in contained manner. Experts, nevertheless, caution that the story might not yet be over for COVID-19 and Africa.

However, one thing that can be said of the Coronavirus pandemic in both Ethiopia and Africa is that this devastating infection is already claiming its victims in this poor continent; yes they are economic victims. In Ethiopia, COVID struck at the heart of the aviation and airline industry first, even before the first case was detected in the country. This trend continued with the fall of another important urban employer, the hotel and tourism sector. At this time, almost 90 percent of the brand or off-brand hotels, restaurant and Bars in Addis Ababa have decided to close their doors.

Let alone the ripple effect of these shutdowns on the other business, the direct cost in terms of job losses and salary reductions is becoming visible in recent weeks.

Meet Samuel Hagos, a young journalist and anchorman at the now off-air JTV, one of the youngest TV broadcasters in Ethiopia. Since May 04, 2020, Samuel was also a young journalist, full of hopes and dreams and a promising career ahead of him. Well, at least he was sure that he had a job to go to in the morning, where he is working as an enterprising newsman/reporter.

In his short career, Samuel, 27, has already worked as an anchorman, news reporter and even in sports at JTV, which he says is the first company he has joined as fresh college graduate.   Now, he is starting over with another medium, radio; thanks to a collective effort by his friends who have decided to give it a go as producers of an independent radio program in one of the local FM stations.

Starting off with a new project with nothing but your meager severance check in your pocket is scary, according to Samuel; if not downright nightmarish. “No media institution is hiring right now; in fact, I hear of a number of outlets, sending their workers home on leave or letting them go altogether,” Samuel told The Reporter via a phone interview. And, “they all say the same,” he explains, “We can no longer afford to pay you, or we are not in service anymore”.

As matter of fact, the circumstances that led to the closure of JTV were also a bit unusual, according to Samuel. As he remembers it, the whole thing unfolded on a Monday morning, where uncharacteristically the front gate of JTV, located off Ras Biru Street, stayed firmly closed and employees of the company seen gather up near the compound. According to those present at the scene, a simple message that, “the company is no longer in business” was transmitted to employees outside, and that was it.

Apparently, management of the company, under Yosef Gebre, a singer cum TV personality, felt that it was time to call it quits owing to the heavy fall in advertisement revenue due to the COVID-19 crisis. Rather comically they have closed-shut their doors and switched off their phones, accentuating the sudden break-up like separation with their staff. “I think it is the pandemic, everybody is going crazy these days,” Samuel opines.

Both Samuel and JTV is just the tip of iceberg that is the media industry, which seems to be the next worst hit sector by the COVID-19 crisis in Ethiopia. Just like dominos, the all-round decline in business activities in the country has started to decimate the media sector via dip in the advertisement market which is being felt across the industry.

According to industry estimates, since the start of the crisis, the print industry has lost just about 6o percent of its advertisement revenue taking toll on the already anemic sector due to shifting media business model at the global stage. Meanwhile, the loss in broadcast media seems to be much more pronounced with an estimated 90 percent decline in advertisement spots.

According to local media, Addis Maleda, the 13 or so broadcast companies has sustained close to 152 million birr loss in advertisement revenue over the course of a month and half since the first case of the COVID-19 was announced in the country. Handful of print media outlets are also among the list of companies that are gasping for air in this suffocating COVID-19 business environment.

If a recent report by the International Monetary Fund (IMF) is something to go by, Ethiopia’s economy is also on life-support. Justifying the Fund’s recent decision to loan the country some USD 411 million, under the Rapid Financing Instrument (RFI), IMF attested to the precarious Balance of Payment (BoP) situation that Ethiopia is grappling with in recent weeks.

Unlike previous times, however, the BoP problem this time around, does not stem from Ethiopia’s traditionally weak export receipts and hence current account balance. To the contrary, the Fund’s analysis shows a big drop in import demand domestically largely offsetting the successive decline in export receipt, caused by unprecedented slip in service export (air transport), and sharp fall in both public and private transfers, resulting in the overall strengthening of the current accounts.

Eventually, significant short fall in the capital account, induced by near-absent Foreign Direct Investment (FDI), was strong enough to weaken the BoP, report indicated. Based on this, the Fund agrees with Ethiopian authorities about a projected USD 1.7 billion financing gap that the country has to manage in the current fiscal year. This gap goes down to US 700 million in 2020/21 budget year, on the back of an anticipated recovery of aviation business, remittance and expected privatization revenues, the Fund said.

Accordingly, the IMF has moved to downgrade GDP projection for both years nearly by half to 3.2 to 3.7 percent. While maintaining overwhelming optimism for economic and political reform process in Ethiopia, IMF is yet again prepared to work with authorities to find more wiggle room to extend financing to Ethiopia through rephrasing the disbursement of existing facilities and by pursuing more debt cancelation and forgiveness towards improving the tight macroeconomic conditions.

On top of that, the Fund is of the view that authorities in Ethiopia should relax their tight fiscal stance, a position atypical to the IMF, on the account of finding more financing room to cover shortfalls resulting from COVID-19 spending needs. This is with the underlying expectation that authorities would revert back to tightening fiscal and monetary levers immediately after the crisis to attain its single-digit inflation target set for the reform period.          

From the report, one can discern never-before-seen support that the IMF has for the policy measures taken by Arat Kilo, these days. The Fund generally praised the swift steps taken by Ethiopia to combat the adverse impact of the COVID-19 crisis: namely the 300-million package to bolster healthcare in early March and its subsequent augmentation to 5 billion at end of the month targeting mainly the food security of some 15 million people on top of more than 7 million under the safety net programs. Furthermore, the Fund appreciated the 15 billion funds released to private banks, through the redeeming of NBE bills, and additional 16 billion channeled to Commercial Bank of Ethiopia.

In spite of all these moves, COVID-19 is still claiming its victims in the economic arena. Samuel and his colleagues are not the first and certainly will not be the last to loss their livelihoods in the face of one of the worst healthcare crises in recent memory. 

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Video from Enat Bank Youtube Channel.


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