Businesses become casualties of coronavirusThe pandemic has devastated small and medium firms, robbing thousands of livelihoods.
Well-known restaurant chain Bakery Cafe was forced to close down four of its 10 outlets in Kathmandu as it struggled to cut costs amid falling revenues during last year's lockdown.
Its restaurants in Maharajgunj, Bhatbhateni, Bauddha and Teku became casualties of the lockdown that was clamped from March 24 to July 21, 2020 after the country was hit by the first wave of the coronavirus pandemic.
“Over the last one year, we have also closed our outlet in Butwal, and now we are operating just five outlets,” said Anup Kashyapati, director of Bakery Cafe. “Now these outlets have also remained closed after the government enforced a lockdown to contain the second wave of the coronavirus.”
The second wave that engulfed the country from early May has proven to be deadlier and more infectious, leaving a greater number of infections and deaths in its wake than the first wave.
As of Monday, a total of 561,302 Nepalis had been infected with the virus with active cases numbering 106,470. The pandemic has so far killed 7,386 people.
Besides causing death and misery in the community, the killer virus outbreak has ruined businesses, particularly small and medium firms, robbing thousands of their livelihoods.
Bakery Cafe is one of the victims of the pandemic, which forced the restaurant chain to slash its operations by half. “As a result, around 130 employees lost their jobs,” Kashyapati said.
Hotels and restaurants are one of the sectors most affected by the pandemic. Following a reduction in Covid-19 caseloads late last year, restaurant businesses had been on the way to recovery.
“In fact, our businesses had resurged to 65 percent of pre-pandemic levels. We had been adding staff in line with the growing turnover, but the second wave hit our business hard once again,” said Kashyapati.
The restaurant has kept its current staff on paid leave at the moment, but Kashyapati is not sure whether his company can keep paying them without any cash flow if the closure of the restaurant prolongs. Before the latest setback, the hotel and restaurant sector had been recovering along with various other sectors of the economy.
According to a follow-up survey conducted by Nepal Rastra Bank in April, the transactions of the hotel and restaurant sector had recovered to 41 percent from 7 percent in June last year compared to the pre-pandemic era. In November, their transactions were 18 percent of pre-Covid levels.
According to the latest central bank survey, the transactions of micro, small and medium enterprises also recovered to 60-64 percent of pre-Covid levels, lower than that of large industries whose transactions reached 73 percent.
Most of the restaurants come under the Small and Medium Enterprises (SME) category. According to the Industrial Enterprise Act 2016, businesses with fixed assets of up to Rs100 million are classified as small enterprises while those with fixed assets of up to Rs250 million are classified as medium-scale enterprises.
SMEs have created 2.36 million jobs, according to a study report by Nepal Rastra Bank. As of the end of the fiscal year 2017-18, the country's 275,433 registered SMEs had contributed 22 percent of the gross domestic product.
Besides knocking down restaurant businesses, the ongoing restrictions imposed to break the chain of infection have caused chaos in the agriculture sector.
Binod Khadka has been running a poultry farm at Sanga Chowk, Sindhupalchok for the last five years. The 27-year-old entrepreneur suffered losses totalling Rs2 million last year because of the lockdown as he could not sell his broiler chickens in time.
The stay-home order was clamped just when he was ready to sell his chickens, and he had to wait for three weeks to send them to market. All this time he had to keep feeding his 7,000 birds which led to massive losses.
He currently has around 5,000 broiler chickens at his farm. They will be ready for sale in the next 12 days.
As local authorities in Kathmandu Valley, which is his largest market, have tightened lockdown restrictions, he is worried if he will be able to sell his chickens in time or have to suffer losses for a second straight year.
He is also having a hard time buying feed for his flock due to the strict restrictive measures enforced in Banepa where his suppliers are located. “In the last one week, I have had to take delivery of the shipments only at night,” he said.
Lately, chicken prices have gone down as demand slowed amid the closure of restaurants and shops. Many poultry farmers are worried whether they will be able to sell their poultry products in the market.
According to the Nepal Poultry Federation, the umbrella organisation of poultry entrepreneurs, there is an investment of Rs150 billion in the poultry sector.
The Covid-19 pandemic has been particularly harsh on the poultry industry including hatcheries after the tourism, hospitality and travel sector. Poultry businesses largely fall under the SME category.
The central bank’s study showed that SMEs were more affected by the pandemic than large enterprises and the recovery rate of SMEs was lower than that of large enterprises before the second wave happened.
SMEs employ the largest portion of the country's labour force and are major contributors to the economy, but they often fail to garner as much attention as large businesses in the policymaking discourse surrounding the economy.
Experts say that a failure to support SMEs would not only hit the country’s economy but also affect employment and the livelihoods of many people.
“SMEs continue to lubricate the economy. They create employment and they are important because they keep a large number of people engaged in self-employment,” said economist Keshav Acharya. “Damages to the SME sector would lead to increased poverty.”
With the government coming up with a new budget for the next fiscal year, economists say that support for SMEs should get priority alongside controlling the pandemic.
“In order to rescue SMEs, the government should provide tax exemptions and cash subsidies on the condition that they retain their employees,” said Acharya, who is also a former executive director of the central bank.
Former National Planning Commission vice-chairperson Shankar Sharma also stressed the need to provide support to industries at least up to the level that the government provided last year when the first wave of the coronavirus hit the country.
“The government should also prepare a strategy for speedy recovery of the economy once the number of Covid-19 cases starts to decline,” he added.