Pacific business teeters on collapse
Nearly half of businesses in the Pacific, including Samoa, have shut down, or soon expect to close their doors due to the COVID-19 led downturn across the region, new research has found.
Of the small-to-medium businesses surveyed, 45 per cent said they had already shut down or expected to permanently shut down in the future because of the pandemic.
According to research published by Business Link Pacific (B.L.P.) last week, businesses across the region are desperate for help but are finding it in short supply.
The New Zealand-Government backed research found business owners are turning to unlikely sources such as personal loans from peers; seeking new investors and, in some cases, getting help from non-Government organisations.
B.L.P. found businesses overwhelmingly reported needing and taking financial assistance from banks or financial institutions.
Around half have taken Government financial assistance, and 62 per cent have accepted a wage subsidy scheme of some kind.
Interest rate reductions, interest-only payments and mortgage holidays are among the financial tools accessed by these businesses.
Nearly 64 per cent of businesses have gone for help outside of the traditional places like their families and friends (32 per cent), or landlords for rent reductions (20 per cent).
“The vast majority (78 per cent) of SMEs surveyed are now seeking financial support,” B.L.P. reports.
“This is a statistically significant increase from the previous year, where only 37 per cent reported seeking finance.”
For the most part, these businesses do not appear to be looking to grow their profile but just survive the crisis, with low rates of cash flow and poor security leading to a high rejection rate for traditional finance from banks.
Of the 57 per cent of businesses who reported trying to get a loan, a third failed because they had insufficient income or insufficient security.
Asked what kind of financial product would help them cope with the pandemic, nearly 40 per cent said low-interest loans would be most helpful, with another 19 per cent saying online sales and payment systems would help as they move to market online instead of in-person.
The survey found social media has been a source of hope for businesses, with 44 per cent reporting that they have either started using or increasing their use of social media because of COVID-19.
Another 25 per cent have moved to use online banking since the pandemic began, and 16 per cent have increased using online sales systems.
Altogether three-quarters of respondents have used some kind of technology to improve their work since the pandemic struck.
“The results of the survey confirm a deeply impacted sector; however, SMEs are seeing pockets of opportunity and are committed to recovery by staying connected in innovative ways to their markets,” B.L.P. states.
“From increased usage of social media to full digital transformations, the business community in the Pacific Islands is focusing on maintaining cash flows, keeping staff employed and pivoting their offer to new and old markets.”
Business Link Pacific is a business advisory platform funded by the New Zealand Aid Programme, which connects businesses with general advice or with a specific advisor to guide them. Its headquarters are based in Auckland.
It operates in Samoa, Fiji, Vanuatu, Papua New Guinea, Solomon Islands and the Cook Islands, and focuses on small and medium-sized businesses.
B.L.P. surveyed 361 business owners in the region in June.
Survey respondents were from Fiji, Papua New Guinea, Vanuatu, Samoa, Solomon Islands, Kiribati, Cook Islands, Palau and Timor-Leste.