Covid-19 restrictions affecting SMEs, start-ups

The National Business

SMALL-to-medium enterprises (SMEs) and start-ups suffer more during Covid-19 isolations and lockdowns, PricewaterhouseCoopers (PwC) PNG director Michael Collins says.
In a business update Collins said in times of crisis, SMEs were affected more compared to larger established businesses.
The reasons include:

  • LOWER levels of capital reserves and liquidity before the downturn;
  • MORE difficult access to additional financial support from the commercial banks and other financial institutions;
  • GREATER reliance as suppliers or contractors to public sector entities and infrastructure works where spending has dried up, which in turns slows down payments to their suppliers;
  • DIFFICULTY in paying suppliers; there is also an impact on employees and therefore more difficulty in retaining and recruiting skilled employees; and,
  • START-UPS and SMEs typically operate on lower profit margins and have less ability to cut costs and restructure operations in response to operational and financial difficulties.

“The general slowing down of the economy and restrictions on business activities that began with the Covid-19 state of emergency in March 2020 and which have continued to date have had a significant impact on all businesses in PNG,” he said.
“However, start-ups and SMEs have probably been affected more than larger established businesses.
“While there were some initial signs of recovery in the second half of 2020, indications are that the deteriorating health situation in the past two months that has seen the imposition of an isolation policy, combined with heightened pressure on Government finances, has further reduced economic activity and increased business uncertainty, which will make things increasingly difficult for the start-up and SME sector.”