COVID 19: BEFORE YOU DONATE TO THE NATIONAL FUND

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According to the Bank of Uganda Monetary Policy Statement issued for April 2020, the COVID-19 pandemic has led to a severe contraction in economic activity due to a combination of global supply chain disruptions, travel restrictions, measures to limit contact between persons, and the sudden decline in consumer demand. Trade, investment, growth, and employment have all been affected by the crisis.

Whereas the pandemic triggered numerous health concerns; businesses are equally suffering from lost revenue and disrupted supply. With enhanced containment approaches encouraging social distancing and stay at home; the medical curve has been flattened in a number of jurisdictions (indicating fewer new cases of COVID-19 with containment as compared to jurisdictions that have not adopted such measures). However, while the medical curve is seen to be flattening, the economic curve is seen to be steepening.

Governments all over the world are now considering measures that would prevent their respective economies from falling into a deep recession. As this is being done, the role of the private sector in aiding Governments to at least mitigate the short-term impact of the disease cannot be underestimated. The private sector, largely in the developing world has joined hands with their respective Governments to calm the situation. In countries like Nigeria, the Democratic Republic of Congo (DRC), Senegal, Angola, and South Africa among others, the private sector has contributed billions of dollars to support the fight against COVID-19. The International Monetary Fund’s (IMF) policy tracker of responses to COVID-19 by country reveals close collaboration and support measures in cash and kind from the private sector, intergovernmental agencies and other stakeholders as among the key fiscal policy responses the Government of Uganda is exploiting in mitigating the impact of COVID-19.

I keenly follow the ongoing contributions to the National COVID-19 fund and I applaud organisations that have contributed generously. However, my challenge is that some organisations may have contributed millions and millions before they could assess the longevity of their cash flow. I have seen in the media, a number of organisations that have failed to pay or have halved salaries of their staff but have contributed huge sums to the fund. Our intention should not be to be seen contributing, but we should aim at contributing selflessly, putting in regard our known responsibilities. An organization that ensures uninterruptible pay for its staff, especially during this time, would have contributed to the COVID-19 fund because maintaining staff pay has far-reaching effects to economic stability due to its related impact on effective and aggregate demand.

Organizations need to evaluate their ability to meet recurring expenses at least for the foreseeable future. Strategies for sustaining and or resuscitating effective demand together with a well-managed supply chain will enable organisations to withstand the roaring impact of a recession that may result from this pandemic.

Akin to blood donations that Ugandans have contributed many times, not everyone is eligible to donate. Tests are performed before someone is allowed to donate blood and anyone found ineligible is disqualified. Conditions that may guide on the eligibility to donate may include; one’s health particularly their status in relation to non-communicable diseases, age, weight, history of bleeding disorders, among others. The reasoning and probably the efficacy in this; is that blood should not be drawn from a person with insufficient amounts putting them at danger even in the pretext of saving another.

Recovering and returning to normal business operations should be a Cash-flow management target that should be integral to any business’ overall COVID-19 risk assessment and action planning in the near term. It is therefore important that organisations evaluate and refine strategies that:

  • Ensure a robust framework for managing supply chain risk
  • Focus on the cash-to-cash conversion cycle
  • Will retain their staff and ensure that the organisation can continue paying salaries (reasonable adjustments may be expected depending on operations);
  • Will support continued operations for the foreseeable future;
  • Manage and expedite receivables
  • Consider alternate or non-traditional revenue streams
  • Minimise significant liabilities with the tax authority;
  • Ensure sustainability so that they will not seek Government support in the foreseeable future as this would be perceived as a give and take conundrum.
  • Reconsider capital investment plans, and
  • Enable Directors to think beyond the companies’ walls

I applaud initiatives taken by organizations in making donations especially at such a moment when no one is certain as to when the impact of the disease will stop to bite.

The efficacy in donations should not be to donate for one to be seen but it should be to donate for purpose. Like a person whose haemoglobin content is adjudged incapable to support the adequate quality of blood products for recipients, an organization that is unable to meet its recurring expenses for the foreseeable future should probably not be making large COVID-19 contributions. Doing so would not be in the best interest of the organisation or even the wider public.

By CPA Charles Lutimba
Manager, Standard & Technical Support – ICPAU

2 COMMENTS

  1. Well put.thanks for the write up.some pipo or companies may want to follow bandwagon n forget about their cash flow back ground. Thanks

  2. Thanks CPA Lutimba, many of this organizations have ignorantly offered an oversight to their cash flows in the long run but also at the same time throwing their few “leopards” in a cave enclosed with “hungry lions.” Stay at home#stay safe.

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