UNIDO recommends swift action against COVID-19 impact on businesses

Governments must walk a fine line between acting to save existing industrial firms and putting in place longer-term measures that build back better with more resilient industries, more able to resist shocks such as pandemics.

This was part of the recommendations of the United Nations Industrial Development Organisation (UNIDO), while calling on Nigeria and other African countries to address the impact of the pandemic on small businesses.

UNIDO noted that for countries in fragile and conflict-affected situations like Nigeria, the compounded impact of demand crises, disruptions to transportation and value chains, and limited availability of credit have been forcing micro, small, and medium enterprises (MSMEs) to cease operations, which increases the number of non-performing bank loans and threatens the stability of the financial systems in these nations.

Key policies that could drive the inclusive and sustainable industrial development necessary to achieve greater resilience, according to the UN agency include, using already existing registries and platforms to channel aid to businesses on the verge of collapse, improving access to finance for small firms and – even more difficult – those in the informal sector to help them maintain economic activities, retain jobs and maintain links to local and global supply chains.

UNIDO also recommended refocusing policies on helping businesses to develop higher value, and more sustainably produced goods that can be marketed with fewer risks to less volatile nearby markets, adding that this calls for a renewed push towards diversification, using reshoring and nearshoring to shorten supply chains and moving towards greater regionalization.

“Governments need to create more structured business linkages to domestic, regional and global suppliers to allow for more reliable sourcing of products, invest in digital infrastructure to enable small and informal businesses to access information and services as well as increase spending on science, technology and innovation capabilities to boost productivity and competitiveness”, it added.

It urged the private sector to adapt to the new post-COVID reality, by finding new markets and developing higher-value products.

“But this should be underpinned by strategic support from the government, directing finance to develop technology and encourage business development.

“Given the perilous financial situation in most LDCs, this will require action from both national governments and the international community to ensure that industrial policies form part of national and regional recovery plans, perhaps through devising a common framework for the transformation and diversification of LDC economies.

“Widespread indications that the vital SME sector has been hit hardest by the pandemic – and in some cases may be unable to recover – will add to the broader impacts of the crisis. A sharp fall in external demand, sinking commodity prices, a dramatic fall in tourism, rising debt, lower remittances and a severe cut in foreign direct investment have caused the worst recession in 30 years in LDCs, leaving governments more indebted and fiscally weaker”, UNIDO added.