Bereng Mpaki
THE government must cushion businesses against economic shocks caused by the raging Coronavirus (Covid-19) that has brought businesses to a standstill by paying its suppliers, analysts say.
The government currently owes suppliers close to M2 billion from as far back as the 2018/19 financial year and the analysts say businesses that are owed for goods and services offered to the government will be the worst hit.
This after the country this week went into lockdown to keep the Coronavirus at bay.
Although Lesotho is yet to record any cases, Prime Minister Thomas Thabane recently announced a national lockdown starting Monday until 21 April 2020.
Only businesses that are classified as essential services will continue operating. Among them are grocery stores; health and pharmaceuticals; banks; water and energy; selected government departments; animal food; media; agriculture; mortuary and petroleum services.
An economist from the Lesotho Chamber of Commerce and Industry (LCCI) who preferred anonymity said businesses owed by the government were going to be worst hit by the lockdown.
“The government should pay the suppliers it owes to cushion them against the negative impact of the lockdown,” the economist said.
He said this would be worsened by the fact that the government lacks the capacity to set up a relief fund to support affected business. In fact, he said it was “wishful thinking” to expect the government to set up a relief fund.
Instead, he sees the government approaching its international partners to intervene.
Another LCCI economist said the government can also assist the private sector by offering a degree of amnesty on obligations like taxes and bills like water and electricity.
“For instance, the government can give the private sector a tax holiday until they have recovered,” she said.
She also said despite its financial challenges, some active private sector players can still chip in by providing relief to consumers who are also feeling the pinch.
“Some companies may want to reduce some of their service charges just as a few have already started.”
Meanwhile, LCCI secretary general Fako Hakane said they were open to assisting small and informal businesses to survive through the national lockdown.
“The rest of the economy is going to take a knock due to the lockdown, but the informal sector is more vulnerable as no business can be done when people are at home,” Mr Hakane said.
He said the net effect of the inability of informal traders to do any business means their families will not have any food during the 21 day lockdown.
“We are willing to assist informal traders by setting up a fund to support those who are struggling in the prevailing environment. We want to do this in collaboration with the government.
“We can obtain their statistics from their associations such as Khathang Tema Baitšokoli which we can use to estimate how much each would need on a daily basis to survive during the lockdown.
“While we appreciate the negative impact the lockdown is likely to have on the economy, taking measures to save people from COVID-19 is a noble gesture by the government. Businesses can always recover after the pandemic but if we lose lives, we cannot recover,” Mr Hakane said.
For his part, economic commentator Majakathata Mokuena Thakhisi said the government may have to assist people who may lose income as a result of the lockdown.
“In 2018 parliament deliberated on a motion for the establishment of an unemployment insurance fund (UIF) and approved it. If the bill had been ready, then such a fund would be handy during times like this,” Mr Mokuena Thakhisi said.
The November 2018 motion, which was moved by Mosalemane legislator Sam Rapapa, is now awaiting the drafting of a bill.
Mr Mokuena Thakhisi also said the Central Bank of Lesotho’s (CBL) decision to reduce the CBL rate by one percent was not enough to mitigate the economic impact of COVID-19.
“The CBL’s response does not make a difference as it is similar to that effected in South Africa. This decision was made in line with being within the same common monetary area CMA with South Africa and not necessarily to cushion against the negative impacts of COVID -19 on the economy,” Mr Mokuena Thakhisi said.
