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Franka Costelloe

The local business community is bracing for the impact of the coronavirus, from the implementation of continuity plans to locating alternate suppliers to adjusting business models; local players are working vehemently to ensure their survival as international experts warn “the worst is yet to come.”

The ominous prediction was made in an article published in Harvard Business Review earlier this month, documenting the deleterious impact of Covid-19 on global supply chains.

The article predicted that the peak of the impact of Covid-19 on global supply chains will occur in mid-March.

In its analysis, HRB foresees thousands of companies throttling down or temporarily shut assembly and manufacturing plants globally.

China represents about 16% of the world GDP, an almost four-fold increase since the SARS pandemic, 18 years ago.

The government of China has closed several borders to contain the spread of the virus; this action has resulted in almost one half of its 1.3 billion population being quarantined.

The move has compounded the negative impact on the country’s transportation and manufacturing activities creating a ripple effect globally.

Analysts have concluded that the impact of Covid-19 on Chinese manufacturing is at least an order of` magnitude larger than that of SARS.

The most vulnerable nations and companies are those which rely heavily or solely on factories in China for parts and materials.

The virus has now reached the Caribbean shores; the confirmed cases in the Dominican Republic and the French Islands promoted an emergency CARICOM meeting over the weekend.

With new regional travel protocols expected to be introduced soon, uncertainty is rising.

It is now a race against time for the local business community to adapt and adjust to the shrinking trading space.

TTMA responds

TTMA President Franka Costelloe predicts that the impact on the local economy will be felt within the next 4 to 6 weeks and her members are finding creative ways to ensure business continuity and survival.

“Over the last decade China has doubled its share of trade with the world and given T&T’s close trade relationship with China, we are likely to feel the impact. A considerable portion of T&T’s manufacturers procure raw materials from China, either directly or indirectly. The impact is expected to be felt within the next 4 to 6 weeks where the supply of raw materials will either be halted or slowed.”

She stated that there is “Mounting pressures for companies to find creative ways to reduce the cost of doing business in T&T has resulted in methods that reduce supply chain costs through means of lean inventory management, outsourcing and/or offshoring.”

But with the new challenges posed by the Coronavirus on the global supply chain, can the manufacturing sector withstand the uncertainty?

Costelloe said her members are strategising, “ To mitigate the risk of depleted inventory, T&T manufacturers are forced to strategize new supply chain management systems, that are not cost-effective, but allow for meeting demand through; Increasing inventory procurement which reduces cash flow and increases demand on foreign exchange; Using alternative suppliers at higher rates; New tooling methods.”

She admits that that travel ban may see a delay on projects, “T&T Manufacturers and contractors that rely on materials procured from China should be prepared for how this disease can affect the contractual relationship and if it constitutes as force majeure. Business continuity is a concern for completing project with materials on order from China but are inevitably delayed”.

The TTMA President added that companies are taking proactive steps to protect their workforces and workspaces. She said T&T Manufacturers are implementing methods in the workplace to reduce the spread of the coronavirus by creating safe work environments. Companies are encouraging sanitization and cleanliness through repeated hand washing, and hand sanitizing. In and outgoing travel plans to affected areas are being delayed or cancelled.

AMCHAM

AMCHAM CEO, Nirad Tewarie revealed that his members are monitoring the progress and spread of the virus and the global business reaction.

Members he explained are looking at the potential impact of coronavirus, not just on the supply of goods, but on travel and potential spread to TT.

He explained that the supply chain would be affected and AMCHAM’s members are watching it daily. Like his colleagues in the TTMA, the membership is bracing for the potential impact in the next 6 to 8 weeks.

“Businesses are planning for disruption, we believe in 2 months, you will see an impact.” Tewarie said

He argued that the matter isn’t limited to goods and services and the business community is also looking at the impact on markets. What it means for Capital, the Heritage and Stabilization Fund; individual company holdings and what would be the impact?

“What would be the impact on the stock market? Stock markets around the world will be impacted, we are not immune.” Tewarie noted.

He said the trade and travel restrictions will hinder business relationships.

“The virus is in the Caribbean, these are countries are frequented by our national carrier,if it will come to TT, I don’t know but with the virus being detected in Florida what does that mean? “

Government Projects

On Monday, Minister of Work and Transport Rohan Sinanan stated that several projects under his ministry will have to be reviewed.

“The Curepe interchange has been delivered on time, but we are assessing the impact of the Coronavirus on the other upcoming projects, there may be delays.”

The assessment is not limited to the Works Ministry. Several projects earmarked under the Health Ministry have been aligned to Chinese Firms including the new central block at the Port of Spain General.

The Health Minister stated that assessments are taking place, he also revealed that they are meeting with stakeholders to determine the impact that a stalling of the global supply chain will have on shipment and supply of pharmaceuticals to the country.

“There is a meeting that will take place involving Nipdec, private sector suppliers as well as ministry officials to access how and if there will be any hiccups in the pharmaceuticals drug supply.”

Construction

President of the Contractors Association Glen Mahabirsingh revealed that his members are bracing for the impact and some are actively looking for new markets.

“The Coronavirus is impacting global trade, we anticipate delays and availability and some level of materials.”

He revealed that contractors are looking to alternative markets to fill potential gaps, “A lot of things are manufactured in China and we already identified that there may be an issue, members are now trying to secure them in other markets.”

Mahabirsingh says China’s supplies not just big-ticket items to the sector, but basic items fundamental to the industry

“ Simple things like wheelbarrows, tools, saws, tiles other building products most of these items are manufactured in China, if not directly parts for many pieces of equipment are assembled in China.”

How are companies preparing?

ANSA McAL, one of the Caribbean’s largest Conglomerate, reveals that they are preparing for the ripple effect.

Group Corporate Communications Manager, Sharon Balroop stated that China’s influence is so wide-ranging that there will inevitably be consequences and we must prepare.

She added, “Currently, within our Group, we are reviewing our supply chain mechanisms and activating internal protocols in response to COVID-19. Sector Heads are meeting with our HSE Teams, as well as Managing Directors and General Managers, to identify the scale of the virus and to come up with mitigation measures that need to be taken, and plans that will allow minimal disruptions to our businesses.”

Balroop maintains employees remain a primary focus of policy.

“Within the ANSA McAL Group, we are also focusing on the welfare of our employees as they are a critical resource. As such, we are establishing a Coronavirus Protocol for employees as well as our customers and service providers”.

Trade Minister Paula Goopee Scoon said she was satisfied with government’s overall preparation and communication and remain cautiously optimistic of the situation being contained.

She said countries and businesses have had to endure several global challenges over the last two decades, with the latest being COVID-19 and as regards to health matters somewhat similar to the H1N1 influenza scenario of 2009. She said the major difference however is that it surrounds primarily the world’s largest manufacturing economy China, being the epicentre.

According to the Minister there is expected to be supply chain disruptions and manufacturers and distributors are likely to be affected.

“This may call for some recalibration and perhaps the need to source products, raw materials, machinery parts and equipment from alternative locations.” Goopee Scoon told BG.