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How coronavirus is infecting business globally

Sunday February 23 2020

coronavirus

Tourists are screened for coronavirus at the Port of Mombasa, Kenya, on February 13, 2020. PHOTO | FILE | NATION MEDIA GROUP 

ADEMA SANGALE
By ADEMA SANGALE
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We have all had coronavirus, given that the term refers to a sub-set of pathogens that includes the common cold.

According to the Center for Disease Control (CDC), in the US alone, fatalities from the age-old flu vary between 12,000 and 61,000 annually. Deaths from the novel virus Covid-19 currently stand at over 2,000.

This teen Corona is no less frightening despite the fact that most casualties have occurred in the Hubei province of China, which has been effectively shut down since the latter part of December.

In the year 2020, we are learning that when China sneezes, Asia, Europe, Africa, Latin America and even the US all get a cold.

According to Bloomberg Economics, GDP growth in the world’s second largest economy will slow to 4.5 per cent, down from an average of six per cent.

Local firms are already announcing that they will cut wages, delay paychecks or lay off staff.

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And the government is thinking of a bailout for players such as HNA Group, the majority shareholder of Hilton Worldwide Holdings and Deutsche Bank AG.

CORPORATE SUFFERERS

Oh, and given that South Korea, Brazil and Australia are among China’s largest trading partners, you may be unable to find your preferred Samsung model.

Factories have been shut down, the volume of one of Australia’s main exports to China – iron ore – has already dropped by 11 per cent.

And what on earth will happen to Brazil’s soybean farmers if they cannot sell their crop to the People’s Republic?

Apple, one of the world’s most valuable companies, has already stated that it will miss its quarterly revenue projections given that its supply chain is rooted in China.

Burberry, Nike, Nissan and GM are also among the corporate sufferers. Citizens of the world, this is not our first global pandemic.

Some 18 years ago, in the instance of the infamous SARS, global markets registered minimal disruption. And who even remembers Zika, Swine-flu, MERS… sort of? This time may not be the same.

The Chinese economy is now six times bigger than it was during the 2003 SARS epidemic and in 2019 accounted for 39 per cent of global economic expansion (Source:IMF).

BUSINESS OPPORTUNITIES

The population is vastly more mobile, with over 170 million passports issued, and today China is heavily integrated into global supply chains, which is why we all breathed a sigh of relief with the recent détente in the US-China trade war.

Goldman Sach’s chief global equity strategist Peter Oppenheimer says “the impact of the coronavirus on earnings may well be under-estimated in current stock prices, suggesting that the risks of correction are high”.

You say sometimes these things happen. Force majeure. Was my risk register expected to include coronavirus risk and plans to stockpile hand sanitizer, a video-conferencing system so that people could work from home and should I have qualified a plan B supplier from a place very far from Asia?

FIRMS WITH EDGE

And of course in these scenarios there are winners as well. If you are the owner of the laboratory in Singapore that produces the rapid diagnostic kits for Covid-19, you must be, as they say, rolling in the Benjamins.

And if you have never visited Japan or been to the Olympics, Tokyo 2020 tickets may soon be going for a song.

Nitin Nohria, dean of Harvard business school, says businesses that survive a sustained and evolving crisis are less hierarchical, typically set-up to be more decentralised, with lots of people empowered to make decisions.

They are policy-driven and more guided by principles that enable agility. Ah-choo! This goes beyond asking for a Kleenex; we need a giant handkerchief for what this ‘flu’ will do to our pockets and businesses.

The writer is the Managing Partner of C.Suite Africa, a management consultancy firm [email protected]

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