Georgian business in the face of the Covid-19:
What difficulties are companies experiencing?

A decrease in demand is the most significant side effect of Covid-19 for Georgian companies among all sectors, shows the new study of PricewaterhouseCoopers Georgia LLC (PwC Georgia) and the Investors Council.

The purpose of the survey, which included 1,938 respondents, was to properly assess the scale of the impact that companies are facing during the coronavirus pandemic and to consider the challenges they will face after it.

The intention of the study was to capture the "first" reactions of businesses to the pandemic situation. 

The survey answers the question of what difficulties businesses experience, what are their first actions related to combating the effects of the virus, what is the situation of companies in terms of financial liquidity and what are the businesses' predictions regarding the development of the situation in their companies.

Here are the key findings of the survey:

• 65% of the surveyed companies identify a decrease in demand as the major challenge;
• Over 59% of micro self-employed enterprises have suspended their business activities in response to the emerging difficulties;
• 63% of respondents indicated a more than 50% revenue drop in March and April 2020 compared to last year;
• 44% of companies have not reduced their employees in March and April 2020;
• 71% of the companies operating in accommodation and food service sectors predict revenue drop above 50% in the upcoming three months compared to the previous year;
• More than 60% of companies in the agriculture sector do not expect a reduction in the headcount or unpaid leaves for the employees in the upcoming three months;
• Only 15% of companies forecast that they can maintain their liquidity over six months;
• 79% of the respondents see the need for additional financing, from which 85% have not yet approached financial institutions;
• 27% of the respondents look for additional funding to finance the working capital.

How did companies find the way out of the challenge?

Decreased demand, cash collection shortages and changes in customer behaviours triggered liquidity challenges of the companies. As a quick solution to resolve decreased demand and liquidity issues, companies started to reduce their headcounts.

More than 50 per cent of surveyed companies have already experienced some employee reductions, with the tourism and service-related industries being most vulnerable (more than 40% have already reduced 100% of their employees). The agriculture sector has been the least affected from this perspective“, reads the research.

Financing challenges

As the trend continues, the majority of companies are facing additional financing challenges. 79 per cent of respondents mention that they need additional financing. However, 85 per cent of those companies have not yet approached the financial institutions and the majority that did were not successful in obtaining additional financing.

The only exceptions from that segment were large enterprises: 42% of companies who approached banks were able to obtain additional financing, 22% were rejected and 36% are still waiting for a response“, reads the research.

Regions vs Tbilisi

The analysis shows differences in the expectations in the regions compared to the Georgian capital city of Tbilisi. From the surveyed companies, fewer in the regions expect a drop in revenues by more than 50 per cent than in Tbilisi (44% in regions compared to 51% in Tbilisi).

These differences are maintained in the headcount reduction field too: 45 per cent of the companies from regions have not planned headcount reductions compared to 37 per cent of companies in Tbilisi.