1. Africa seems to be suppressing the curve so far. It looks like it might escape the worst of the pandemic, but will have to be cautious about it.
2. Possibility of W Curve – i.e. There is a good chance of re-occurrence of the virus, which could see a possibility of regular lockdowns. Businesses need to plan accordingly.
3. Capital will look for countries that are less battered. Western economies are badly battered while countries in Africa, etc are not so battered. Global Capital could flow there, if we can act efficiently to pull it.
4. Emotional and Economic backlash against China is expected. Already, countries and companies are working on strategy to pivot away from China as part of their supply chains. Japan Govt has announced packages for it’s companies bringing back manufacturing home. Businesses need to keep this in mind and work accordingly.

Discretionary Spending.:-

1. For individuals, health and safety will become No.1 on their agenda from the 3rd of 4th place. There will be more spending on this area and reduction in other discretionary spends.
2. The ticket size of spending will drop for a while. People will spend on cheaper goods than on expensive goods, or delay spending for a while.
3. Extreme acceleration in the digital economy. I.e. Home education, home entertainment, home fitness, etc
4. Loyalty shock. People will be less loyal towards brands as other aspects will take over. People will switch brands faster due to various other concerns like safety, etc.
5. General Trust deficit. There will be trust deficit amongst stakeholders like vendors, customers, employees, borrowers, banks, etc. Banks will have trust deficit with borrowers, companies will have trust deficit with suppliers, etc.

Liquidity and P&L:-

1. Segregate Good Costs and Bad Costs
a. Good costs (Eg. Digitization, tech costs, digital marketing, best employees, etc) need to be insulated and protected
b. Bad Costs (Eg. Fancy office, unnecessary spending, bad performers, traditional working methods) need to be ruthlessly eliminated. Don’t be emotional about non-core businesses. Concentrate on core business.
2. Be Frugal – Not necessary to have a fancy office, fancy cars, excess employee strength, etc. Remove all the flab and be lean.
3. Maintain Good behaviour – have a frank and open conversation with all stakeholders like suppliers, employees, etc and try to find the middle ground, so that the burden can be shared justly.
4. Be Future Ready – In this crisis, there will be winners and there will be losers. Those who re-orient their strategy will be winners.

Govt Stimulus.:-

1. The economy was in poor shape even before COVID. The govt has little leeway to provide large stimulus.
2. Govt earns a lot from taxes, with losses experiences how will this be pushed up?
3. Inequality has already sharpened. The gap between rich and poor has further increased. Govt needs to concentrate on mass health and mass welfare. If not, 40 million people could sink into poverty.
4. Govt must explore printing currency (Quantitative easing), but there are limitations here. It has side effects like inflation, etc. Rich countries have more leeway for such quantitative easing.
5. Govt must concentrate on grabbing more capital from outside and do reforms to enable that.

Result of backlash against China:-

1. Internationally, there could be an emotional and economic backlash against China.
2. Businesses with supply chains passing through China will need to keep this in mind and insulate themselves and build alternatives.
3. Africa and african businesses need to try to become the contract manufacturer of the world, just like China is. They need to make use of this opportunity smartly.
4. All big wealth funds and soverign funds will be awash with Liquidity. This liquidity needs to be attracted.
5. In every sector, there are good and bad companies. Management has to invest correctly in manufacturing and modern tech, be honest and fair to all stakeholders, etc., Those companies with good management and displaying good behaviour will come out victorious.

Export Business:-

1. African exporters need to build trust. They need to live up to promises made. They need to deliver on time and deliver the promised quality. They shouldn’t make incorrect promises just to get more business.
2. Asian export business has built trust and a good reputation. Despite a chequered past (low quality, human rights issues, etc) they have managed to overcome and are winning.

Wholesale, Retail, etc.:-

1. More people will prefer to buy from retail stores where there is a perception of safety (Eg. Sanitation, cleanliness, crowds, etc). They will move more towards malls away from markets. Many will move towards online stores. Wholesale suppliers also need to concentrate on such retailers.
2. Customers also need to be ringfenced:
a. High-end restaurants need to give a high percentage of bill value as gift coupons to be used anytime up to December 2020.
b. Car companies and mortgages should give buyback offers, in case the customer loses his job in the next year.
3. Pricing needs to be re-approached. People are looking for cheaper prices or cheaper goods.

Brick & Mortar in Discretionary Spends.:-

1. Private academies could take a big hit in the near future. Entertainment could move home.
2. Because of this, cafes and restaurants might see some increase in business. Many chains are implementing measures like social distancing like lesser furniture, etc, to build confidence to consumers.
3. Smaller retailers need to send a message of safety. Eg: Have sanitisers, put up a notice of no COVID positive employee found in the store, maintain social distancing, etc.
4. Since travel and tourism will take a big hit, connected purchases will also shift. Purchases that happened abroad will happen at home. (Eg. Electronics, Luxury goods and apparel, etc.,). But travel-related purchases will drop.

Financial Markets:-

1. There will be value destruction and value creation in different companies in the same sector.
2. High Debt low margin companies will find it difficult. (indicates risky or unscrupulous management)
3. High Debt high margin companies could be rewarded, but caution needs to be exercised. (may indicate sharp or dynamic management)
4. No debt high margin companies are best rewarded now.
5. Know more about the CEO and management and their actions and activities.
6. New tech unicorns will be born. Those involved in cybersecurity, cloud services, online education services, etc.

Forex Markets:-

1. No doomsday scenario (i.e. Dollar will keep on going up etc). Such scenarios don’t seem realistic
2. Govt should be buying as much oil as possible, as such prices may never be seen in the future of oil.
3. As the western economies are more battered and local economy is less battered so far, there is more liquidity coming in. That’s why there is a rally in the market. This scenario could change depending on the spread of the disease.
4. Watch out for sharp spikes in the market. Better to avoid the spikes.

Outlook for near future.:-

A. Large Companies
a. Huge concern is seen for employees. Companies are paying the employees even when closed.
b. Right-sizing will happen
c. Safety of employees and customers is becoming a major point of focus.
d. This is possible because they have reserves of funds, etc that have been built up over the years.

B. Medium and Small businesses.:-

a. They have to work with thin capital reserves. Excess capital is taken out of the business and applied into personal assets.
b. Small businesses take out the surplus and purchase personal assets instead of re-investing in the business. There are various factors and motivations here.
c. Because of this, they are unable to meet the cash expenses of even the next month.
e. Medium and Small business need to have a look at how they can build some business reserves to endure such disruptions.

“Force Majeure” in Contracts:-

1. Should force majeure clauses be triggered in various contracts like rent, supply, etc? It will lead to litigation, but there is no point in getting into litigation now.
2. All parties have been affected by the crisis. The tenants, the landlords, the lenders/financiers, etc.
3. Parties need to sit across the table and find a common ground and mutually decide upon the costs, rentals, etc. A burden has to be shared.

Work From Home Scenario.:-

1. It is possible for lot of employees to not visit the office and still be productive.
2. Telecoms and ISP will be singing Halleluyia to the banks
3. Parents can take care of children more effectively. There can be dark hours when no calls will be made, etc.,


As per a McKinsey survey of entrepreneurs released a few days ago, 67% of African entrepreneurs are optimistic, 53%, while only 37% of Asian entrepreneurs are optimistic.
It seems to be a mild U-curve for some African economies. But the descent has not stopped yet.

Thank you.

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