Covid-19: SMEs’ Grouses and Possible Solutions

The SME Association together with Bizsphere Brand & Marketing Group (“Bizsphere”) launched a survey on 29 March entitled “Business Sustainability of SMEs during the Covid-19 crisis and impact of MCO”. Over 15,000 responses were received in less than 18 hours.

                                                           Source: SME Corp Malaysia

Most of the SMEs (53.3%) have less than 75 employees. More than half are projecting to experience RM0.5m losses within six months – March to September 2020. The biggest challenge is cashflow. There is no cashflow anticipated for at least 3 months due to MCO. Yet they need to pay full salaries, rent and statutory payments. Only one-third have cashflow for March while another 38% can sustain up to April. Only 26% of SMEs can avail to Government’s Prihatin Package. The latest package announced yesterday looks promising with higher wage subsidies for the smaller ones while micro enterprises can avail to further grants and interest free loans. Rental subsidies by way of landlords reducing rent because of tax deductions for them is another plus point in the short term.

In managing employees, according to Bizsphere survey, 44% said they will persuade employees to utilise annual leave on voluntary basis. About a quarter will initiate retrenchment. This may translate to 2.56 million people out of a job.

At best, “business as usual” will only be back after 6 months (about 29% said) and over 61% believe it will need 9 months for businesses to stabilise. Over 82% predict that this year will be a loss for them.

Why can’t the Government look at other countries?

In Germany, half million employees are likely to be on short-term work schemes – “Kurzarbeit” – to trim their payroll costs. Essentially, workers get 2/3 of their pay even if they didn’t work. And the company is not burdened by staff costs in these challenging times. It has been proven useful for Germany in the last crisis (2008/2009).

This time around not only industrial companies will use it but small service companies, restaurants, consultants and the like.

This is not the only way, there are schemes in place (or to be in place) in the U.K. and Singapore. Protecting the business, will ensure employment and a faster recovery. Otherwise, it will be like the U.S., retrenchments and unemployment benefits for the jobless while businesses flounder and fold.

The latest scheme by the present Government is an improvement from the previous stimulus. Hopefully, the Government will hear the plight of SMEs in three to six months when these measures wear out.

Reference:

1.     1/3 of SMEs only have enough cashflow for expenses March 2020, SME Association of Malaysia

2.     Annette Weisbach, Germany is using a familiar weapon to prevent massive layoffs, 3 April 2020, CNBC