Based on a survey and inputs from trade experts and practitioners, policymakers, and corporates, and based on current trends, we will discuss six potential post-COVID-19 approaches that can drive change for women-led businesses. These are divided into two broad categories:
- Approaches for driving change in global value chains
- Approaches for driving change in the economic policy landscape
A: APPROACHES FOR DRIVING CHANGE IN GLOBAL VALUE CHAINS
- Approach 1: Changing consumer demand
- Approach 2: Digitalization
- Approach 3: Supply chain diversification
APPROACH 1: CHANGING CONSUMER DEMAND
The impact of COVID-19 on consumer demand is complex, changes over time, and varies by country and sector. The pandemic had an immediate impact on certain sectors, characterized by a surge in demand for essential goods such as medicines, groceries, and household supplies as well as home entertainment, and a plunge in demand for travel and transportation, clothing, outside entertainment, and other non-essentials.
Trends in consumer behavior amid the pandemic include price sensitivity, a shift to essential goods, changes in brand preferences, growth in e-commerce, and greater preferences for healthy and hygienic packaging.
Some of these changes are expected to revert to pre-pandemic patterns, but others are likely to remain as longer-term trends.
Supposition
The ability of businesses – buyers, suppliers, and service providers in the value chain – to adjust to changing consumer demand will be critical and may require different capabilities and various degrees of agility across sectors. Companies that successfully adapt will identify opportunities to replace physical with digital processes, diversify products and services, and gain consumer trust.
A business that has done a comprehensive situational analysis can be able to navigate this landscape and align its products / or services to meet the changing consumer demand landscape.
For example, women-led SME’s (agribusiness) that depend upon walk-in clients, might change their operating models and identify a domestic niche and seek to satisfy that niche by:
- Appropriately packaging for that market niche.
- Introduce door-to-door delivery services.
- Explore the use of social media to build clientele.
Potential challenges in post-pandemic value chains
- Access to information to understand shifting consumer demand.
- Access to resources to move/upgrade to different value chains and/or different functions within the value chain.
- Access to information and capital to acquire relevant certifications and comply with voluntary sustainability standards.
APPROACH 2: DIGITALIZATION
Technological innovation – such as cloud computing, artificial intelligence, data analytics, machine learning, automation and the Internet of Things – has major implications for global and regional value chains and, more broadly, for economic growth and employment. The adoption of digital technologies was already transforming value chain processes and the management of supplier networks before the pandemic.
It is generally acknowledged that restrictions designed to combat the COVID-19 outbreak has hastened the adoption of e-commerce in many economies and has led many businesses to rapidly migrate to digital technologies.
COVID-19 may permanently alter the working patterns of firms as employees embrace working from home and business travel remains reduced due to the cost and time advantages of remote meetings.
Digital technologies will now more than ever represent a tool for development and growth. Today, these technologies allow small firms to be ‘born global’ and access both international and domestic markets from the outset.
SMEs, however, are not identical. The impact of COVID-19 on their strategies and success will depend partly on the type of value chain in which they participate, their function within the value chain segment, and the intensity of technological adoption.
Potential challenges in post-pandemic value chains
- Access to skills and capital to move their businesses online
- Lack of digital literacy skills
- Access to capital to invest in automation and/or digital processes
- Access to affordable and reliable internet
APPROACH 3: SUPPLY CHAIN DIVERSIFICATION
The pandemic has highlighted the fragility of global value chains and the risks associated with an over-reliance on a limited number of manufacturing hubs (As was the recent case of India stopping the export of the AstraZeneca Vaccine to meet their local demand).
Policy Makers are ramping up their efforts to ‘reshore’ or encourage local firms to produce for their domestic markets e.g. The production of face masks by local firms in Kenya as opposed to the import of the masks from China and other countries in the past. Political pressures and regulatory incentives in several countries are encouraging this trend.
This re-engineering of value chains will benefit SMEs in countries and regions that are geographically near markets.
It is difficult to identify which value chains will be most affected by the turn towards reshoring and nearshoring but women-led SME’s need to be on the lookout for this trend.
Potential challenges in post-pandemic value chains
- Prompt access to market information to mitigate risks and adjust business models.
- Access to skills and capital required to adjust production lines and meet new sourcing criteria of lead firms.
- Access to formal and informal business networks with new buyers and suppliers.
B: APPROACHES FOR DRIVING CHANGE IN THE ECONOMIC POLICY LANDSCAPE
- Approach 4: Fragmentation of the trade and investment landscape
- Approach 5: Government support to small businesses
- Approach 6: Growing momentum to ‘build back better
APPROACH 4: FRAGMENTATION OF THE TRADE AND INVESTMENT LANDSCAPE
The rate of trade liberalization has declined and barriers to trade have increased in the last few years.
A report by the World Trade Organization (WTO) indicates that 80 countries have imposed export restrictions or prohibitions since the start of the pandemic.
ITC’s Market Access Map (2020) also tracks and monitors temporary COVID-19 restrictions and trade measures. While most of these restrictions have focused on medical supplies, some have targeted agricultural products.
Global value chains amplify the costs caused by tariffs and barriers to trade – inputs into production processes often cross borders multiple times and, as a result, are subject to accumulating costs of protection. In an interdependent global economy, such distortions are transmitted throughout the system. It remains to be seen whether trade barriers abate after the pandemic.
A combination of key services involved in the logistics sector – including transportation, delivery, and freight forwarding – promote efficiency in the supply chain and rely on predictable forecasting. In response to the crisis, many governments designated logistics-related services as ‘essential,’ thereby exempting them from lockdown measures.
However, some pandemic-induced operational constraints have led to delivery delays, congestion, and higher freight rates – to which can be added policy reactions that have negatively affected the ability of carriers to support traders.
In an effort to minimize disruption to cross-border trade in goods, the World Customs Organization and the WTO have urged their members to ‘ensure that any new border action is targeted, proportionate, transparent and non-discriminatory, and rescind them once they are no longer needed.
- Some countries have tightened rules around foreign direct investment in strategic sectors including healthcare and technology
- Other countries have initiated measures designed to promote and facilitate foreign investment.
- Certain countries have expanded their screening regimes by broadening disclosure requirements, increasing the scope of sectors subject to review, and lengthening timeframes for review.
The approach of global foreign direct investment flows post-COVID-19 will ultimately be influenced by the nature of measures implemented by governments and whether value chains do in fact undergo a process of reshoring and nearshoring.
APPROACH 5: GOVERNMENT SUPPORT TO SMALL BUSINESSES
Countries around the world have put in place unprecedented measures to stabilize their economies and support businesses and individuals. Conservative estimates of the size of fiscal stimulus measures suggest that government spending related to COVID-19 will exceed 2% of global GDP, which dwarfs the size of government responses to the 2008 global financial crisis.
While the full magnitude of state interventions in national economies remains unknown, it is clear that the equilibrium of the state-market relationship has been altered in many nations. The jury is still out as to whether this is temporary or if it marks an evolutionary shift in the nature of capitalism and the models governing economic policymaking.
The impacts of COVID-19 have been severe for firms of all sizes. However, SMEs have been particularly hard hit by the downturn in supply and demand, due to their lower capacity to absorb shocks relative to their larger counterparts.
Data from the Organisation for Economic Co-operation and Development indicate that income and tax referrals, loan guarantees, direct lending, and wage subsidies have been the most commonly used support measures for SMEs. There are additional policy tools, such as grants and debt moratoria.
In Kenya, The Federation of Kenya Employers has worked closely with the Government of Kenya to identify and implement measures for cushioning enterprises and those who have lost livelihoods. FKE is part of the Government’s Rapid Response team and Multi-Agency taskforce under the Ministry of Labour and Social Protection to advocate for these measures on behalf of employers. In April 2019, the Federation conducted a survey on the Impact Assessment of Covid-19 on Businesses and the findings have informed our recommendations and services provided to members to cushion enterprises and the economy from collapse.
As part of its advocacy initiatives, FKE engaged the government on several issues to help companies and workers deal with this unfortunate situation. Key among them was the revision of tax measures. The Federation proposed zero-rating of the PAYE tax, and VAT on manufacturing companies as well as the 2% Tourism Levy on the gross revenue and a rebate to those who had already paid the said levy. Following this, the government introduced tax incentive measures to cushion the country against the economic effects of the Covid -19. These include the reduction of VAT from 16 percent to 14 percent, corporate tax from 30 percent to 20 percent, turnover tax from 3 percent to 1 percent, and a total tax exemption for workers earning Kshs.24, 000 and less plus revised Pay As You Earn (PAYE) tax brackets which will greatly improve liquidity.
APPROACH 6: GROWING MOMENTUM TO ‘BUILD BACK BETTER
Many global stakeholders – from multilateral institutions and governments to the corporate sector – are joining the call to take a ‘build back better’ approach to the recovery. Indeed, the COVID-19 pandemic has laid bare the interdependence of economic policy, public health, and nature.
Economic development relies on a healthy environment, while the state of the natural environment has an impact on health outcomes. The easing of shutdowns and the resumption of economic activity represents a chance to course-correct and design and implement policies that bring the world on a trajectory to sustainable development.
At the multilateral level, the International Monetary Fund and the United Nations have called on countries to use their stimulus measures to invest in green technologies and jobs. The F20 – a network of foundations that work for the implementation of the Sustainable Development Goals and compliance with the Paris climate agreement – urged the Group of 20 (G20) to acknowledge the imperative to build back better, including by addressing the interlinked global challenges of public health, climate change, and biodiversity loss (F20, 2020).
As another example, a coalition of more than 1,200 global companies has appealed to governments to pair recovery action with climate action (We Mean Business, 2020).
While many of these initiatives focus on environmental concerns, ‘build back better’ clearly encompasses issues of inequality and social justice. This includes the achievement of gender equality and the imperative of an inclusive agenda for excluded and vulnerable groups. Only a deliberate and strategic focus on women-led businesses will ensure that the approach succeeds.