Malaysian food SMEs staring at the brink without government support amid COVID-19 lockdown

As prime minister Muhyiddin Yassin announced movement measures to curb the spread of the COVID-19 coronavirus in Malaysia, Amir Malik knew immediately it would mean nearly half a million ringgit in lost bookings.

Digesting the news that gatherings like weddings and corporate functions had been banned until at least March 31, the general manager of D’Tandoor, a family Indian restaurant chain and outside catering supplier, is now fighting to keep his business afloat in the face of dwindling cashflow.

“Obviously we know this is the best thing for the people and the country, but from a business sense we were really shocked,” he told Salaam Gateway two days after the March 16 movement control order was announced during a televised address by the prime minister.

“Our first consideration was how do we pay our 70 staff.”

As well as banning public gatherings and all religious, sporting, social and cultural events, the order has shuttered schools, universities and most businesses, except for essential services.

Though they are in this latter group, alongside supermarkets, banks and pharmacies, and can continue to operate during this two-week period of effective lockdown, many small food businesses like D’Tandoor face an existential threat.

Manufacturers that market to consumers have immediately been the hardest hit since their consumer base has largely been confined to quarters, even though Malaysia’s policy is not as draconian as some of those seen implemented in Europe.

Malaysians who do not work in essential industries and are confined to home are still allowed to move around local areas.

“It is devastating because we didn’t know how to react, and we have so many employees,” said Amir.

“We told them that we had the good times together, but now these are bad times and we have to go through it all together. We have grown together and without them we would be a nobody.”

The core of D’Tandoor’s work is business-to-consumer, providing  event catering to families and companies.

“Most of our business scope is doing events, roadshows, exhibitions, dinners and weddings. It’s March now, and March is the school holidays and we have had cancellations of up to 500,000 ringgit, for weddings mostly,” said Amir.

“We need the government to acknowledge that SMEs are Malaysia’s lifeblood and give us the support we need.”

CASHFLOWS HIT

Aside from cashflow, uncertainty is just as disquieting for food companies.

At the moment, direct distributors selling Tisha’s baked goods to households in Kuala Lumpur are still allowed to do so. But this might change if the government’s public health controls are tightened.

“We have around 250 agents who sell our products directly to the community. If the government said we couldn’t conduct our business face to face, that would be an end to our business,” Shamsul Shah Sulaiman, chief executive of the roti paratha manufacturer, told Salaam Gateway.

“So far our sales agents are allowed to go from house to house, but we have to wait day by day to hear government advice.”

Though retail sales account for half of Tisha’s business, the other half comes from direct distribution to customers. It gives the small business liquidity as transactions are made in cash, rather than handled through credit terms. Without these sales, Shamsul could not continue to operate the business.

On hearing the prime minister’s message, his first concern was whether the raw materials the business uses were still available.

Needing mostly flour, which is in plentiful supply, and locally produced margarine, Shamsul is now assured his factory can maintain production.

His staff have been briefed on hygiene and social isolation outside the workplace, and their temperatures are tested before clocking in. Being a MeSTI-certified facility, pointing to a good level of food safety, staff wear face masks and sanitise themselves and their workstations regularly.

Plastic films might be an issue, though, since packaging materials have not been classified as an essential business category—though they are vital for food manufacturing.

Tisha’s is currently waiting to hear from its packaging suppliers if they can continue to produce them.

“We don’t know what is the policy of the government for the supply of plastics. We have yet to know if they will have a problem with that, and we are working with the Federation of Malaysian Manufacturers to understand more about this,” said Shamsul.

B2B SUPPLIER IN STRONGER POSITION

Though also an SME, Subang Jaya frozen food manufacturer Muslim Kitchen has begun the latest phase of virus control in a stronger position than companies that service the B2C segment.

The company has seen fewer barriers because it targets the retail market. Supermarkets and groceries remain open to customers, under the government’s emergency measures.

“Before the so-called lockdown, the market had been very slow. Somehow or other, for the last three or four days we have been receiving more orders from hypermarkets,” said chief executive Mustafa Kamal Wathooth. “Generally speaking the trend will continue if this lockdown continues.”

Orders from Hong Kong and the Middle East have also still been coming through from retailers that have been seeing heavy demand.

Yet while so far largely unaffected, Mustafa Kamal has had to make adjustments and weather the uncertainty.

Today, he stopped offering Muslim Kitchen’s products through food delivery services to reduce the risk of his staff becoming infected. He has also redoubled efforts to clean and sanitise the already HACCP-certified premises.

Worst, he is not even sure whether the company will be allowed to continue operating. “In case that the situation gets worse, maybe the lockdown will apply to us too.”

BUSINESS OWNERS TASKFORCE DEMANDS

This uncertainty could be overcome by a combination of better information from the authorities and effective measures to help keep small business afloat, according to Amir, who represents D’Tandoor in a quickly formed group of 100 small business owners.

Calling themselves the COVID-19 Special Taskforce Secretariat for NGOs and Entrepreneurs, the group launched on Wednesday to “plead and appeal” to the government to roll out a second stimulus package that would give priority to SMEs, self-employed entrepreneurs and laid-off staff.

They complain the first 20 billion ringgit package, announced by former prime minister Mahathir Mohamad on February 27, did not go anywhere close to safeguard businesses like his.

“These funds were provided to sustain people’s expenditure, not business expenditure, and only 3.5 billion ringgit was mainly provided to SMEs,” Amir said.

"The 10 things we asked for this week will focus on helping out SMEs because we are the biggest contributors to the GDP of the country.”

The measures include a deferment for the next six months of all loan premiums, statutory obligations and utility bills, and more freely available, collateral-free soft loans at a low interest rate.

The taskforce called for exemptions to sales and services tax for the rest of 2020 and urged the government to put pressure on landlords to lower their rents for six months.

It also demanded a lower corporate tax rate for the duration of the outbreak and double  tax deductions on the salaries of low-paid workers.

“We gathered together all the key SME players in the hope that our voice will be heard as SMEs,” said Amir, stressing the group has no bones to pick with the government, instead it is just “highlighting what we need for our survival”.

“We are appealing to them as Malaysia private sector. We are very scared and also we are considerably lost in this situation.

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.abdulalim@salaamgateway.com)

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