The effects of COVID-19 on individual manufacturers

Jul 14, 2020

Although we have decided to keep all our workforce, we are being burdened because revenue streams have been severely constrained.

HEALTH   BUSINESS   COVID-19

Hariss International is a leading Ugandan beverages manufacturer, producing a range of soft drinks and confectionery products. Since the outbreak of the global COVID -19 pandemic, the beverages sector has been one of the most affected, with production estimated to have fallen by close to 40%. 

New Vision's Edward Kayiwa spoke to Yasser Ahmed, the proprietor of Hariss International about the effects of the virus outbreak on his business.

Q: For close to four months now, the country has been adversely affected by the effects of COVID-19. The food and beverage industry is one of the most affected since the outbreak. How has your business faired in this time?

We have been severely affected by the lockdown as much as everyone else, especially between April and May, because our revenues declined 35%, while production fell by 50%. 

And although we have decided to keep all our workforce, we are being burdened because revenue streams have been severely constrained. Slightly before the lockdown, we had imported raw materials in anticipation of a normal season, but now some of them are still idle in stores because production is minimal. Secondly, we had planned to expand our confectionery line in Tula, Kawempe, with an $80m (sh297.5b) investment, and we had already received the equipment before the lockdown. The equipment is state of the art and the first of its kind in Africa. 

However, we are now stark with it because we have to get technicians from Europe to fix the plant, yet the whole world is under lockdown. For us, it's a tricky position we are in because we obtained a big loan to purchase some of that equipment, and the more we delay to install and start production, the more the loan will be costly on us.

That said, electricity and water bills have become another burden to us because every month we pay almost sh800m in power bills and sh80m in water. In such a time, this is too much money to spend in costs, yet there are no alternatives. We have been hearing the government talk about relieving us of this burden for some months but it doesn't seem to be forthcoming. Otherwise, this would be a welcome move, because it would reduce costs for us.

Q: what do you think could be the Potential short to long-term impact of this pandemic on production, the market, investment and jobs for companies, including yours?

The short-term impact for us is mainly on liquidity and profit margins. We have managed to maintain all workers because at least we are not making loses. However, for other businesses, if the situation persists, in my opinion, we might see many companies laying off their workers, and this will constrain production. Investment in such a situation has higher risk than usual but we continue to believe in the Ugandan economy and its ability to recover. In the market, we have been making extra efforts to support and preserve our distribution channels in these difficult times to overcome the daily challenges. We believe this will have a positive impact on the brand in the long run.

Q: How are you guaranteeing your business continuity, especially your supply chain, costs and market disruptions arising from the COVID pandemic?

The supply chain has not witnessed any interruptions since both road and air freight remained active. However, stocks are piling and dues are accumulating. We are pursuing more facilities from banks and our suppliers, but things are difficult for everyone. We are currently cutting on marketing and advertising expenses to provide for the most essential operational costs. We have also resorted to employing information technology in some areas, and this will not only regulate costs but make business more effective and efficient.

Q: How do you think the financial services sector; including banks and financial institutions, economists and policymakers should facilitate business recovery after COVID-19?

Normally, the financial sector would be affected as much by the close of any business as all other stakeholders. This is the time for banks to stand by businesses through rescheduling loan repayments dates and granting facilities with grace periods. Policymakers are also expected to lay out incentives to stimulate the economy. It's not the time to pay taxes, but rather for us to utilise every cent to import the necessary materials for production and industries, creating jobs and reviving the economic cycle.

Government should also remember that they promised us excise duty reduction of 1% every year for three years, but this was done only once. This, in my opinion, is the time to give us that much-needed relief, because we have to facilitate economic recovery, and not think of how much taxes we can collect.

We also expect some support like tax breaks and the like. Since we opened the factory fifteen years ago, we have not received any tax breaks, yet we are large scale manufactures. We need these tax breaks now, to partly facilitate our recovery.

Q: What lessons have you learnt from the COVID-19 pandemic?

When this virus broke, no one had ever thought that such a thing could happen and close down the entire world. We had planned for a normal year because we normally plan for the current year and a few others ahead. Now, we have learnt that all we can do is plan and leave the rest in the hands of God because He is sovereign.

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