Second COVID vouchers scheme divides businesses

It is as yet unclear which sectors of business will be able to benefit from the government’s second tranche of vouchers, aimed at mitigating the economic damage caused by COVID-19.

The vouchers were scheduled to be distributed at the end of January but the distribution was postponed indefintely following a recent spike in daily COVID-19 cases recorded. Economy Minister Silvio Schembri said that the ministry was in talks with the Health Department and other stakeholders to ensure that the vouchers be distributed at a time that would be in everyone’s interest.

The minister has thus far refused to explain which businesses will benefit from this second scheme.

The first round of vouchers included €80 that covered dining and accomodation. Another €20 could be spent in retail outlets that did not sell so-called essential services or goods, and were therefore forced to shut down for many weeks as part of the measures introduced to between March and June 2020 to combat the spread of coronavirus.

The second round of vouchers will now only include €60 to spend on accomodation and dining. Many had argued that the sum allocated to retail should be increased. In fact people will now receive €40 vouchers to spend on retail, but it is as yet unclear which sectors will be identified as possible benficiaries in the second scheme.

A spokesperson for the economy ministry would not give details and only said that the vouchers would be distributed “at a better time, when it would also be possible for bars, clubs and kazini to benefit”.

These outlets have been forced to shut down since the beginning of November, as a means to enforce social distancing measures.

MHRA wants vouchers by mid-February

The Malta Hotels and Restaurants Association agreed with this redistribution of the voucher allocation, albeit reluctantly.

“Of course, we would have preferred if those €80 were still destined for hotels and restaurants, but we also recognised the need to offer greater assistance to the retail sector which is also suffering amid the pandemic,” MHRA president Tony Zahra told BusinessToday. “At the end of the day, this is not the end of the world for our members.”

But wheras the MHRA might have acquiesced to a reallocation of the voucher money, it has definitely painted a target on itself by insisting that the vouchers need to be distributed as early as possible, definitely mid-February.

“We understand the concerns of people and other stakeholders who insist now is not the right time for the vouchers to be distributed, with the number of daily cases spiking in the past few day,” Zahra said. “However, once this wave related to the holidays is over and we reassess the situation, we believe we will once again be seeing a decline in the number of daily cases.”

He said if daily cases recorded return to pre-holiday levels, there should be no reason not to distribute the vouchers.

“The vouchers could make a huge difference to the cash flow of many restaurants and operators in the hospitality industry,” Zahra said. “The money currently going through the tills of many businesses at the moment is too little to sustain by businesses who have seen so little income since March.”

The MHRA’s position is at loggerheads with that of other stakeholders, mainly the Chamber of Commerce and the Association of Catering Establishments, which insist now is not the time to distribute the vouchers and that the government was correct to postpone their distribution.

Holiday fallout

Philip Fenech, deputy president of the Malta Chamber of SMEs, said these coming 10 days will be crucial in determining the full extent of the damage caused during the Christmas and New Year festivities as people got together, possibly ignoring social distancing rules.

He said that the current spike in daily COVID-19 cases could be attributed to the holidays.

“If the number of cases drops in the coming days, we could well be over the surge expected as fallout from the holidays,” he said. “Once certain we are over this fallout, then we need to examine the situation again and decide how to proceed.”

Fenech said it definitely does not make sense to distribute the vouchers at a time when the number of cases has risen to over 200 daily. Most people will still be wary of going out to enjoy themselves at a time like the present, he said.

It is also imperative, he said, that the distribution of the vouchers be timed in such a way so as to assist as broad a spectrum of business sectors as possible.

“It would be highly unjust of the vouchers were distributed at a time when clubs, discos and nightclubs, bars and kazini are closed,” Fenech said. “Everyone needs to be in a position to benefit from the scheme.”

A double-edged sword | Dr Stephanie Fabri

COVID-19 has brought about increasing challenges on both Government and the private sector, with some industries having more pronounced implications, compared to others. Two of the badly impacted industries included tourism, wholesale and retail.

The voucher scheme, an extremely successful scheme among consumers, has given the opportunity to various sectors to overcome the challenges of the pandemic in the short-term. Government intervention, including the voucher scheme, has helped in mitigating the economic impact and in lifting the sentiment of consumers and producers. This was done through direct interventions that limited the borrowing costs, enhanced liquidity, and prevented a surge in unemployment.

The present voucher situation is a situation whereby both parties have justifiable reasons with regards to the opinions they are sharing. It is totally understandable that the unions and associations are encouraging government to issue the next batch of vouchers at its earliest. Their members are facing economic and financial challenges which no one was ever prepared for. It is also understandable on the other hand that Government is cautious in trying to prevent additional pressures on the health system while at the same time achieve a balance between health and well-being and the economy. This is especially the case due to the increased number of cases after the holidays.

It is truly a case of a double-edged sword. Encouraging people to go out and spend more would surely help the economy, however, if the cases had to increase, this would restrain the economy once again. Abstaining from issuing the vouchers could imply that a number of businesses in the retail and tourism industry, in particular those which were struggling even prior to the pandemic, to shut-down. This is especially so after considering the toll COVID-19 took on retail outlets, restaurants and so on.

This is a situation where the power of compromise should prevail. A compromise that finds a balance between the impact on health and the economy. One option could be to have a gradual launch of the vouchers.

Having said this, it is also important to look at the situation from a bird’s-eye view. The role of the vouchers has to be analyzed within the grand scheme of things, that is, within the economic eco-system. While the voucher scheme had positive implications on the economy, economic recovery requires businesses to establish plans for both the short-term and the period when the effects of COVID start diminishing. Business should be encouraged to re-engineer their processes and operations in a way that they become more resilient, agile, and adaptable to different economic situations.

On a final note, something else that one needs to take into consideration is that it is not only businesses that are experiencing financial difficulties and increasing uncertainties. Government is also facing such turbulent time, the fiscal situation is expected to deteriorate for a while, which puts Government in a more difficult position when it comes to designing and implementing measures.  

That is why we should stress on cooperation between the private sector and Government. Ultimately, the final goal is a common one, that of having an even better economy than the one we had pre-COVID.

Dr Stephanie Fabri is an economist and lecturer at the University of Malta