Agility amid fragility: How IFC’s clients in MENA are adapting to the new COVID-19 normal
By Beatrice Maser
Earlier this month, we hosted a virtual meeting with key IFC clients from the Middle East and North Africa to understand firsthand the impact of the Covid-19 crisis on their companies. They painted a sobering picture. While governments across the region have generally reacted quickly, putting in place vital measures to try and slow the rate of infections, the crisis continues to damage businesses and wreak havoc on balance sheets.
Though the full impact won’t be evident until much later, a few things are already clear: The pandemic has led to the deterioration of public health, falling global demand for the region’s goods and services and declines in MENA’s domestic supply and demand because of social distancing measures. Oil prices have recently recovered, but are still down sharply since the pandemic began.
Supply chains between producers, distributors and buyers are being negatively affected and, in some industries, severely disrupted. Logistics are getting more expensive. Some countries and some sectors — including tourism, hospitality and retail — are being especially hard-hit, while others — such as pharma, healthcare and hygiene products — are experiencing increased demand.
A decrease in the mobility of workers — many workers have been forced to work from home — and the shift in consumer spending mean that for many companies it now takes longer to produce and sell products and earn money. On one hand, operating and purchasing costs are increasing; on the other, earnings are being delayed, delaying companies’ ability to cover their debts as a result. The result is an urgent need for cash and more liquidity, so businesses can access the capital they need when they need it. And this is where IFC and other multilateral development banks have a key role to play.
The need to manage costs has also increased the impetus on companies to become more efficient and diversify their income sources. As one client put it, ‘with fragility comes agility and the ability to adapt’. Equally important is the need to protect employees. All our clients shared the measures they were taking to ensure staff safety — from buying protective gear and introducing social distancing measures, to coordinating with relevant government bodies to continuously monitoring the latest pandemic data.
One thing is abundantly clear: The future will not look like the past. We are evolving into a new normal. While this will mean some uncertainty, it also means new opportunities — in technology and digital economy, especially. The labor market will change, as well as the nature of jobs, with more automatization, and remote and digital work. Companies in some sectors in the digital space especially, such as e-commerce and telemedicine, will still be able to grow and that will increase the need to focus on re-skilling workers and students in order to prepare the region’s youth for new types of jobs and address the high unemployment rates.
To help mitigate the impact of the pandemic, IFC is working with partners to help the private sector navigate the pandemic and recover from the economic and financial impact of the crisis. This includes mobilizing IFC’s global $8 billion fast track facility to initially support existing clients in the region affected by the outbreak, further financial support to the broader private sector and collaboration with the World Bank to support countries to respond to the crisis.
Through this fast track facility, we are currently working with clients across sectors in MENA, from pharmaceuticals to construction, agribusiness and healthcare sectors. We are supporting financial institutions through trade finance and working capital facilities to provide liquidity to companies. And, through our advisory support, we are progressing the discussion and implementation of critical reforms to promote public-private partnerships (PPPs) and enhance the business environment.
This is only the beginning and we are committed to expanding our support to help minimize the impact of the crisis and expedite the progress to recovery. But this is also an opportunity for governments to further leverage private sector capabilities by implementing strategic growth plans and initiatives. Together, we can help provide the robust measures and solid recovery that is needed to help MENA emerge from this crisis.
Beatrice Maser is IFC’s regional director for the Middle East and North Africa.