In the meantime, the Damocles sword has sadly fallen on China. Clients of the Chinese export companies are gone, which is confirmed by many Western companies, as they report a lot of cancelled orders.
Comments about the Sars-Cov 2 virus have now become mainstream and there is very little one can add to the stark fact that Mother nature seems to chastise us (once every 100 years) with a global pandemic.
Obviously, for a tiny island which – during the past seven years was savouring the fruits of a balanced budget with a surplus and low unemployment – there were never any fears that a calamity was on the horizon. We have been constantly assured that Malta was basking in the glow of a cloud with an enormous silver lining led by a team of hardworking politicians in Castille.
We were reminded, every day of the dwindling number of unemployed and the generosity of the latest budget which sprayed pennies from the Castille chest to increase welfare benefits, top-up the minimum wage and reduce the number of families which annually fall in the poverty trap. It was “l-Aqwa Zmien” for all.
On the seventh of March, the sad news about the epidemic started to hit the local headlines, albeit people in China and South Korean started feeling the pain much earlier. The penny dropped as this never-ending nightmare started to intrude upon reality: there a great possibility for a huge loss of lives.
With alacrity came the message that the global economy was grinding to a halt.
Humanity is faced with a worldwide business lockdown and possible recession. Politicians across Europe have reacted compellingly to put money on the table so as to help the unemployed and shore up businesses – particularly those of public interest.
The seriousness of the matter can be gauged by reading circulars from accountancy bodies urging their members to consider the friability of clients when eventually reporting for the 2019 financial results. Directors now have to ascertain if there is a risk that the respective entity will be facing a complete showdown of its activities.
Accountants and auditors are expected to be diligent when signing 2019 financial statements to comment on the appropriateness of the going concern assumption for the twelve months following the period end – ie end of 2020. Based on this risk assessment, auditors are to weigh the probabilities of their client surviving the pandemic and or otherwise in a worst-case scenario, to either qualify the audit report or place an emphasis on matter, plus the inclusion of a key audit matter.
Let us for a moment, examine the plight of the hotel and entertainment sector in Malta. Both have a huge workforce and saving jobs would also be critical from a socio-economic point of view. The mini-budget is offering a monthly subsidy of €800 for a select group of firms that retain workers. This is pennies from heaven but given that the average pay of workers is €1,650, this means that employers have to meet the balance from their resources – not easy when rooms and bars are empty.
These conditions are further impacted by debt which the hospitality sector has on books for building and upgrading the hotels. Malta stands to lose out on an estimated €3 billion in tourist expenditure due to the outbreak, which would send shockwaves through the entire economy since the loss of multiplier is enormous.
Experts contend that as an optimistic forecast, the islands will not see tourist arrivals beginning to recover until December. Pessimists forecast the tourism drought will stretch till the summer of 2021. Both the hotel, restaurants, and the manufacturing sectors are fearful that if not enough support is brought in quickly by the state they could find it difficult to sustain a comeback.
As a gesture of goodwill, some hotels have started giving rooms to the administration. This scheme is at a fixed cost for hundreds of persons who have been asked to be in self-quarantine by the administration for two weeks. Equally egalitarian, is a call to property owners from the Ministry for Health to offer accommodation to healthcare professionals free of charge’ or at a reduced cost.
Ideally, such accommodation will be temporarily used by professionals who opt not to return to their family home after work due to being exposed to Covid-19, so as not to put their families at risk. Be that as it may, the entire island is being cautioned to observe social distancing and only venture out for work or urgent visits to hospitals, buying of essentials, and to avoid crowds.
With everyone stuck at home and behind their video devices, there’s been an opening of the aperture for the digital content particularly for the thousand-odd teachers/lecturers who are busy designing online papers for students cocooned at home. This is a new social phenomenon that shows the extent that teaching practice has changed and teachers must now quickly convert to using the digital media, something which came as a sudden obligation.
Thousands of people/clients are staying connected, spreading both information and positivity through live, short, and long-form content, and it’s been inspiring to see how the island has managed to cope. But the same cannot be said about the film industry.
While more traditional mediums are feeling the acute impact of social distancing – film and TV productions are being shut down and they do not qualify for the €800 monthly subsidy. In this time of struggle, there are leadership lessons to be learned from bad situations, and strong leaders know that opportunity and innovation lie at the heart of any disruption or dramatic change.
When this crisis is over, many of the above-mentioned lessons might become standard business practices, so it’s worth taking notes on the many insights about how the pandemic has forced us to amend our lives. What was previously unthinkable in the workplace such as working from home, is now possible, and has highlighted the resilience of the human spirit.
The silver lining is China. There, people are back at work and nostalgically their daily life routines have returned as well. Even the travel ban in the Hubei province has been partially lifted. To conclude, the rosy picture is fine to kick-off with, as it proves that Covid-19 can be beaten, at least on the surface. For many individuals around the world, including investors in the financial markets, it might be significant to view China as “cured”, because it will initiate some hope about life in the future on the other side of the virus outbreak.
This alone can restore certain confidence among consumers, investors, etc. In the meantime, the Damocles sword has sadly fallen on China. Clients of the Chinese export companies are gone, which is confirmed by many Western companies, as they report a lot of cancelled orders.
Concurrently, the economies in Europe and the US face a slowdown and some businesses might never open again.