INTERVIEW | Abigail Mamo: Moving forward with optimism

While welcoming the economic recovery package announced by the Prime Minister on Monday, the Chamber of SMEs acknowledged that there were still hard times ahead. What is the general feedback you are getting from businesses in terms of how they see their future?

They are definitely more optimistic. One must acknowledge that health-related projections about COVID-19 were much more negative than they are now. As more and more measures are lifted, improvements are being registered week on week and businesses are building up optimism about the future. Let’s also keep in mind that businesses had readied themselves for a worst-case scenario, adopting a “hope for the best but prepare for the worst” stance. Now, that fact that event the hardest hit, and least likely to restart industry – tourism – looks like it will get moving again when the airport reopens next month, instils courage. The number of new coronavirus cases is also remaining low, even though the bulk of restrictions have been relaxed, which is also positive. Obviously, businesses are realistic – they know they still have hurdles before them and won’t just bounce back to how they were in 2019, but compared to how things were in April, the picture is looking brighter.

In terms of whether customers are starting to build confidence, we noted that essential and close-to-essential services were the first for which business starting picking up first. For instance, hairdressers started doing well right after they were allowed to reopen.

In the case of other establishments, such as catering, when these started reopening around three weeks ago, customers were getting conflicting messages from the authorities. On one hand they were being told they could start going out, on the other that there was still a risk. Now the message is more aligned: people can go out, while obviously ensuring they obey all necessary prevention measures. The government’s measures this week also provide more of an incentive for people to go out socially. So, when restaurants reopened, things were slow to start off, but they’ve been picking up over the past week as well.

In retail, when shops first reopened their doors, changing rooms couldn’t be used to try clothes on, which put some customers off and kept they away. This sector is still lagging behind, but we hope that it too will start moving. Changing rooms are now available, and the fact restaurants have reopened means people have more of a reason to buy clothes to wear on social occasions.

Most of the recovery package’s measures are geared to last until September, while other schemes will remain in place longer. Does the Chamber envisage that the new measures will be enough to help most businesses recover and stand on their own two feet, or could they need more help further down the line?

I should underline that the government’s recovery plan was very positive, and reflected to a significant extent many of the proposals which we had put forward. This budget’s emphasis was on the next three months, although there are measures which go beyond this and are more geared for the long term. When it comes to the future, I think it’s a bit hard to look too far in these circumstances. The Chamber of SMEs is carrying out monthly surveys amongst its members, and it is evidence that things are changing month by month. I can’t exclude that businesses won’t need more help in the future, but, for the coming three months, I think the essential support which they need is now in place.

There are however two closely-related industries, however, which have been left in limbo: the events and weddings sectors. There is still a lot of uncertainty in this area, because it is dependent on mass groupings of people, and groups are currently limited to a maximum of 75. It is therefore important that the government draws up a plan in terms of when larger groups will be allowed. This will give events and wedding businesses a timeline, and will allow they to start preparing for when the time comes to reopen. The nature of their work means that they cannot restart overnight.

Although domestic demand is increasing, it cannot make up for the lack of tourists. In a reality where tourism is expected to remain relatively low for the next few years compared to 2019, do you envisage that this will lead to a change in Malta’s business landscape?

I do think there will be a change. Some businesses have already started taking decision to diversify, for instance. This is easier said than done, because many businesses have invested heavily in their product. Under one of the government’s measures, businesses will be aided in reinventing themselves by being offered support on how they can reengineer their services for a wider audience – although we’re not yet sure how this will work. The government is also looking into how to incentivize the creation of new niche markets as alternatives to sectors which are oversaturated. For instance, instead of investing in property, the government could incentivize investment in other high value-added sectors.

In truth, business owners who were struggling during this crisis and have decided to diversify are now breathing a breath of fresh air, because they’ve found a new purpose.

The Chamber was critical of the €2,500 rent subsidy offered, saying this fell short of being enough for many businesses. Finance Minister Edward Scicluna said, however, that there was a limit to how much aid the government could provide. What additional measures would you like to see the put in place to help with rent?

One of the issues with the maximum €2,500 subsidy is that while this might be enough to help a business which operates from a single outlet, it would not suffice for those which have more than one outlet. Many clothes stores for instance, have several outlets around Malta. And it’s not clear whether such businesses will be given a subsidy for each outlet.

Moreover, the Chamber feels that the model it had proposed is better than the one which has been announced. We looked at how various other countries were dealing with this issue and found that the most favourable model is one of burden sharing. Our proposal was for the government to offer incentives to landlords – such as tax credits – to encourage them to lower rents. The government could, on top of this, offer a percentage subsidy instead of a fixed sum. The rest of the cost would be paid by the tenant. In this way, there would be different sources through which rent burden on the tenant is reduced.

Looking forward, are there lessons which businesses can learn from the coronavirus crisis?

I think there is a lot we can learn, and, in reality we cannot afford not to. For instance, businesses have made large advances in the area of the digital economy in the past months, which would normally have taken years to happen. And I’m sure that they won’t let the substantial investments they made go to waste. They need to utilise this technology to get a return out of it.

In the area of teleworking, post-COVID this can lead to a hybrid system of working which involves a mixture both remote working and going to the workplace in person. Many businesses told us that they found they saved valuable travel time by carrying out meetings through virtual conferencing. At the same time, the face-to-face relationship with clients suffered. A hybrid system would take advantage of the best of both worlds.

On a national level, an important lesson is that we are now more aware of the role of local businesses in sustaining jobs and families. During the pandemic, there was uncertainty, for instance, about the supplies of agricultural products and medicine from abroad, due to potentially disrupted trading routes. This made people more appreciative of the goods and services which our own local industries are able to produce and provide. And we’d like to see such sectors get more investment. Let’s not go back to a situation where we are so reliant on what comes from abroad.