It is no strange event for us in these modern times to face up to the frustration of having to reboot a "crashed" electronic device. However, regardless of the #crisis faced, there are clear instructions from the manufacturer on what steps to take to return to "normal". So with #Covid19 creating an urgent and global need for a reboot of #economies, will we be able to return to "normal"?
The world can definitely look towards a manufacturer's recommendation that would require the reboot to be comprised of a balance between #health and #wealth. For the various business sectors such as #tourism, #transport and #hospitality (inclusive of restaurants and coffee shops) however, this reboot seems to have no handbook or precedent. Various #analysts have as expected, come up with divergent views that leave so much space in between their suggested outcomes that a 'jumbo jet" could be flown between them.
On a more practical approach, the businesses will have to be very efficient and logical from our point of view and go for revised business plans with ironically the lowest possible #debt arrangements. The relaunch also where possible should take a serious look at localised customer bases that can handle border closures at short notice.
As part of the reboot, all of the mentioned sectors need cash now.
Our feeling is that debt payments that can be avoided however, will provide more room for manoeuvre if any shock to #cash flow ensues. The reliance on stimulus funds (although good willed from a status quo point of view) that end up in helping to repay debt, also do not in the short and medium term allow fast response to cash shocks and creates a havoc on DSCR ratios to say the least.
The reliance on the overseas clientele, should be used strictly for expansion that against all current teaching relies on debt to accommodate rather than balance sheet which is a mistake for "global shock" resilience.
The conversation continues: www.rdjconsulting.co.za
RDJ Consulting is an Energy and Sustainability advisory service based in Namibia, with global experience. www.rdjconsulting.co.za