Malta Enterprise CEO warns businesses have to change to survive COVID-19

Businesses with no scope for survival beyond six months may have to face the prospect of losing government aid unless they change their model, Kurt Farrugia warned.

The stark warning from Malta Enterprise CEO came during a half-day conference organised by the Chamber of Small and Medium Enterprises and Business First.

“Politicians do not like asking this question but we have to ask ourselves whether we should shut off life support for businesses that cannot survive more than three, or six months,” Farrugia said.

He was reacting to the findings of a survey commissioned by the Chamber of SME’s among its members that showed how 7% could only survive in the current circumstances for another three months, while 18% could only survive for six months. Only a quarter of SMEs said they could survive beyond 12 months.

Farrugia said the wage support scheme introduced earlier this year when the pandemic hit helped businesses survive and retain employees. He said this was important because it ensured businesses remained alive.

But the challenge now, he added, was for businesses to diversify, change and adapt their model to ensure survival and growth over the longer term. Farrugia said Malta Enterprise had support schemes to enable businesses undergo change.

The wage support scheme in its current form was extended until the end of December and a revamped scheme would kick-in in January and be maintained until March, the government had announced in the budget.

Farrugia said the new wage support scheme would be announced shortly.

Asked for a forward projection, Farrugia said that in six months’ time businesses that would have adapted their operations will be able to move forward but those that do not change will lose out.

“Today’s Malta Enterprise schemes are not just life support but encouraging operators to change and adapt their operations to go beyond survival,” he said.
The coming of a COVID-19 vaccine in 2021 will be an important milestone but Farrugia cautioned that the situation will not return quickly back to normal.

“The vaccine is important but consumer fear will persist, which is why businesses have to adapt to the new reality,” he said.

Uncertainty biggest worry

Chamber CEO Abigail Mamo said the overwhelming feeling among businesses was one of uncertainty.

Giving an overview of the survey findings, she said that 71% of members flagged uncertainty as a concern, while 53% were worried about having a very low turnover. A third of SMEs were worried that government aid would stop, and 30% of SMEs said their principle concern was a ‘non-existent market’.

Rental costs, piling debt, difficulties to pay employees and increasing bank-related costs were other worrying factors, Mamo noted.

She hoped that in six months’ time a measure of stability would have kicked in.

The survey found that 55% of SMEs experienced a decrease in turnover of 30% and more throughout this year.

Another 16% saw their turnover decrease by 20%, while only 10% reported that turnover remained the same as last year.

Asked how long their business can survive in the current circumstances, 37% of SMEs were unsure. A quarter said they could survive for more than 12 months, while 13% could survive for up to one year.

At the lower end, 18% could survive for up to six months and 7% could only survive for up to three months.

Mamo said that when asked for a forecast in six months, 50% of SME owners expected their companies to ‘remain the same’, 18% expected a shift towards ‘selling and online marketing’, 18% expected to reduce employees and 13% expected to downsize their operation.

Business owner Gianni Zammit said his company, JugsMalta Ltd, experienced a complete shutdown in business back in March given the restrictions on conferences and events.

He acknowledged that the pandemic set his business back five years but it also opened up opportunities the company had never explored.

“The pandemic closed many doors but it also opened up many others. It set us back five years but gave us the opportunity to look at 2022 and condense the growth of five years in two years,” he said.