Covid-19 hits businesses hard

The 2020 financial year has been challenging for businesses with the onset of the Covid-19 pandemic affecting the world. Businesses saw a decrease in profit and dividends. Business reporter DALE LUMA writes

Businesses in Papua New Guinea are no exception when people describe 2020 as a year of uncertainty.
Businesses had to readjust their operations and adapt to the new normal following restrictions placed by the government.
This meant scaling back operating hours, identifying essential and non-essential, cutting and rotating staff, enforcing the Covid-19 preventive measures and many more.
However, most businesses in the various sectors said they had adapted to the situation (new normal) and operated throughout the year.
Following are some of the happenings this year:

(January) Prime Minister James Marape announces the appointment of Sam Koim as IRC commissioner-general following a Cabinet decision;
(January) A total of 4,724 companies removed from the Investment Promotion Authority’s (IPA) registry for failing to comply with regulations;
(February) Keiran Wulff replaces Peter Botten as managing director of Oil Search. The company said in a statement that Botten had stepped down from the board as well. ;
(February) Vision City Mega Mall celebrates its 10th anniversary;
(February) Kumul submarine cable network launches the cable laying for system 1 of the KSCN which was named “Pukpuk 1”, in Vanimo, West Sepik;
(March) Kina Asset Management Ltd records an investment return of 24.1 per cent for the year ending Dec 31, 2019. According to the investment company, total value of the fund increased by K13.2 million, after payment of the 2019 half-year dividends of K1.0 million;
(March) The people of Mumeng local level government in Bulolo, Morobe, acquire a vanilla export licence and can export their vanilla overseas;
(March) Nambawan super announces a crediting interest of 7 per cent to the accounts of its 200,000 members. Chairman Anthony Smare said the fund had made a record K504 million net profit for its members, an increase from K270 million in 2018. Smare said the fund had grown from K6.8 billion to K8 billion with net assets valued at K7.7 billion with a total income of K705 million earned from investments;
(April) Nasfund (National Superannuation Fund) credits a 6.7 per cent interest into the accounts of its 500,00-plus members – a reflection of a strong positive growth in business;
(April) Oil Search announces an equity raising offer of US$700 million (K2.35bil) which was open to eligible PNG shareholders;
(April) Comrade Trustee Services Ltd declares 6.5 per cent interest to its members. ;
(April) The Government signs a K3 million agreement to provide relief and revitalise the fresh produce and vegetable trade in the Highlands, Madang and Morobe;
(May) The global crude palm oil price has dropped from US$834 (K2,823) per tonne cif Rotterdam in January to US$538 (K1,814) per tonne due to the Covid-19 impacting New Britain Palm Oil Ltd;
(May) The Teachers’ Savings and Loans Society announces a 7 per cent interest credit for its members;
(May) Nasfund launches its new brand logo which signifies progress and change;
(June) The Eastern Highlands government signs a memorandum of agreement with investor, Mckinley Asia – PNG Ltd, for a US$2.12 billion (K7.6bil) smart agriculture and livestock project plus major road rehabilitation and construction in the province;
(June) Credit Corporation (PNG) Ltd announces a 2019 final dividend on ordinary shares of 12 toea per share, a one toea decrease from the 2018 final dividend of 13 toea per share;
(July) Ok Tedi mine villages in Western receive K7.2 million in dividends from their trust company, Mineral Resources Star Mountains Ltd;
(July) Gulf takes a positive step in bringing in a much needed foreign direct investment which paves the way for development in the province and the country with the signing of two memorandum of understandings with Kumul Consolidated Holdings;
(August) The Stanley Hotel and Suites in Port Moresby win the 2020 travellers’ choice award from Tripadvisor according to general manager Geoff Haigh;
(August) The Port Moresby Chamber of Commerce and Industry notes that most businesses have seen their sales revenue fall by as much as 50 per cent;
(September) Nasfund appointed two Papua New Guineans as joint chief investment officer;
(September) The Asian Development Bank approves a US$25 million (K85.82mil) investment in a Fiji Telco to finance a greenfield 4G mobile telecommunications network in PNG;
(September) Ok Tedi reopens after a six-week closure due to the Covid-19 transmission in its area of operation in Western;
(September) The Governnment grants new Porgera special mining lease to Kumul Mineral Holdings Ltd;
(October) Bank South Pacific receives K100 million from the K200 million small-to-medium enterprise funding to rollout soft lending for small to medium enterprises (SMEs);
(November) The National Development Bank receives K80 million from the governments K200 million SME funding to rollout soft lending for SMEs;
(December) The Credit Corporation PNG board decides not to pay an interim dividend for the 2020 financial year given the economic uncertainty caused by the Covid-19; and,
(December) Kina Bank says it is now in the process buying Westpac Group’s Pacific business operations in PNG and Fiji. The bank said it had entered into sale and purchase agreements (definitive agreements) to acquire 89.91 per cent of the banking operations in PNG and 100 per cent of Fiji scheduled to be completed by Sept 30, 2021, at a cost of up to AU$420 million (K1.03bil).

Lae Chamber of Commerce and Industry (LCCI) president John Byrne, when describing the year for Lae businesses, told The National that: “While every year creates opportunities and challenges, this year has been a testing one indeed.
“A year like no other with Covid threats and concerns, political challenges, a mine closure and deferred decisions on other major projects have had an impact on the lives of our people.
“It was felt throughout the communities, settlements and business houses in Lae.
“The highway from Porgera to Lae has been impacted with less business and more pressure on our people as the Porgera stalemate progressed.
“Eighty-five per cent of the population, businesses and communities, exist outside of Port Moresby and this structure recognises the need for a continued rational, professional and competent conversation with our National Government.
“Next year, the LCCI will look for political stability and a stronger relationship with the national and provincial government, and through PNGCCI based in Port Moresby, to work on the issues which have impact to our businesses and people.
“Without people, we have no businesses.
“Likewise, without a solid platform for business, we have less employment.
“A result to Porgera, where the site operates again with positive news on Wafi-Golpu project, a Harmony extension will ignite the business world, leading to more employment and a focus on education and infrastructure.
“Both are vital for the people and business.
“GrowPNG’s great work in planning, preparing and scoping the agricultural/small and medium sectors of Markham Valley, Morobe, and beyond can provide great opportunities when coupled with training and development programmes.
“We hope to see positive utilisation of the K200 million SME loan support.
“We have great micro, small and medium enterprises (MSMEs) and SME success stories throughout PNG.
“MSME and SME still struggle to comprehend and meet the terms and requirements of this facility and training is required.
“In Lae, several business houses and manufacturers are expanding or rebuilding their operations, showing confidence in a better future and we eagerly await three major projects, as the Angau Hospital redevelopment progresses and will provide a solution not only in Lae but across the districts and province.
“The overdue plans to rebuilt Nadzab Airport will complement the Eastern Highlands and Western Highlands airports as we near the opportunity for direct international flights at Nadzab plus the much needed Highlands Highway upgrade, 9-Mile to Yalu and beyond.
“The reignited SME Corporation has completed a study and information roadshow and we are confident we will see stronger relationships, development and impactful MSME and SME from the Marape-led Government SME initiatives
“I believe 2021 will be another challenging year.
“We cannot rest and think that the Covid-19 risk is over, as we see across the world it is not.
“We need political stability and a united focus from the Government, Opposition, business and community groups to capitalise on the opportunities which will improve the lives of people.
“We need to focus to improve services in areas such as health, education, infrastructure, roads and electricity supply.
“LCCI and PNGCCI are committed to work with all levels of government to make these improvements.”
Port Moresby Chamber of Commerce and Industry president Rio Fiocco said, in regards to the new normal of doing business, most businesses had adapted to continue despite the Covid-19 situation.
“Businesses have adapted and are carrying on using the Covid-19 protocols,” he said.
“Businesses are picking up from the first half of the year.”
According to PriceWaterhouseCoopers, the stories about 2020 that were embedded in the 2021 Budget were remarkable on any measure.
It stated in a report that at this time last year, no one could have predicted that PNG would be rocked by:

A global oil price war, with a 65 per cent quarterly fall in the price of oil in the March quarter; and,
A decline in global economic activity as the Covid-19 rolled around the globe.

This was reflected in a progressive global slowdown of economic activity that put pressure on PNG’s export opportunities and domestic restrictions on activity to suppress the Covid-19.
It said, while the number of confirmed Covid-19 cases in PNG remained low until July, economic activity was dulled by social distancing obligations and restrictions on movement imposed in Port Moresby as cases increased.