Informal Economy

National Budget prioritizes Informal sector recovery in Fiji

This month, the Informal Economies Recovery Project Team sat down with Fiji’s Minister for Commerce Trade Tourism and Transport - Hon. Faiyaz Siddiq Koya. He spoke to us about the Fijian Government’s recently announced national budget, and how it is designed to support COVID-19 recovery in the informal sector.

Article | Suva, Fiji | 31 August 2021
Contact(s): bernard@ilo.org
Hon. Faiyaz Siddiq Koya.

What are some of the key findings in the recent second wave business survey conducted by your Ministry?

Approximately a total of 2200 businesses participated in the survey. A few key findings include:

• From the respondents, 80.3% were from sole traders, 13.8% were from companies, 2% were from partnerships,1.5% were from co-operatives and 2.4% were from unregistered business.

• 1,688 or 77% of the respondents are have experienced a 50% decline in sales. This is largely attributed to the loss of customers or market segment. For example Food and Beverage business operators have stated that as they are unable to offer dine in services coupled with the imposition of the curfew hours, there has been a notable decline in their customers and ultimately sales.

• Other issues that have impacted the business community include; businesses are sometimes unable to meet customer demand due to supply issues; meeting rent obligations despite business closure or decline in sales; depleting cash reserves to meet operational costs; customer compliance to COVID19 protocols; and meeting Credit Obligations despite losing their customer base and declining sales.

• 1,010 or 46% of the survey population are operating at reduced hours. Business operators are experiencing a decline in sales but their operational costs such as utilities, rent, and credit obligations remain fixed. Therefore business operators have had to scale back their operations to be able to remain open to offer their services and products.

• Only 11% or 249 business operators have been able to digitally diversify their business or exploring options of moving into the digital space. These businesses have taken advantage of the social media platforms as a means of advertising and taking orders. There are a few who have explored the possibility of developing their individual ecommerce platforms however the cost of obtaining and maintaining the payment gateway is exorbitant.

• It is encouraging to note that businesses do understand the impact of the advisories from the Ministry of Health and Medical Services or the protocols from our Ministry have on their business operations, as 1,703 or 77% of the survey population has stated they would like to receive supplementary information related to COVID-19.

• In terms of the assistance required 66% of the survey population had requested for assistance in the form of grant or loan to be able to meet operational costs of keeping their business open, in addition 24% requested for relief in meeting their credit, rent and tax payments.

What are the key initiatives in the 2021-22 national budget, supporting MSME’s, especially those in the informal sector, to recover from COVID-19?

The Budget is focused on recovery and rebuilding. There is something for every Fijian in the budget, whether you are in the formal or informal sector, micro, small, medium or large business, public service vehicle driver, student, elder or person with disability.

The 2020-2021 Budget is based off 3 principles namely;
• Vaccination rates
• Recovery of businesses, particularly MSMEs; and
• Future proofing Fiji against future pandemic and natural disasters

There is a whole range of key initiatives announced in the national budget for businesses, particularly for MSMEs which include but not limited too:

i. COVID-19 Government Credit Guarantee Scheme
The Reserve Bank of Fiji (RBF) is providing special funding to commercial banks and financial institutions. These financial institutions will lend these funds to businesses at maximum 3.99 percent.

For the first two years, Government has committed to pay their interest rates for businesses. Basically, businesses will not have to pay anything for the first two years.

MSME can access finance and use it where they need it most. They can borrow this money to pay for wages and salaries, rents, utilities, purchase stocks or cover any other working capital needs and operational needs.

We understand Fiji Development Bank has been taking the lead role in implementing this initiative.

ii. Stronger Together Job Support Scheme
Employers are guaranteed a wage subsidy by the Government equivalent to the minimum wage rate of $2.68 an hour when they employ Fijians.

iii. Waiver of fees
Government pays for market fees for about 8000 market vendors, pay for base fees for taxi, buses, minivans, carriers, fishing industry/fisher folks - inshore fishing licence fees and other associated MSAF fees, amongst other sectors.

iv. Encouraging E-Commerce
Partnership with Reserve Bank of Fiji and Vodafone to increase the usage of digital platforms such as VitiKart and M-Paisa.

v. Changes to FNPF Policy
The FNPF is allowing members between the ages of 50-54 who have been unemployed for 12 months or more and their FNPF balance $10,000 or less. These individuals will be able to withdraw their funds to start up their own business venture.

vi. Collaboration with Development Partners
The Ministry also intends to collaborate with development partners in our MSME recovery efforts.

How will government monitor and measure the impact of the support provided to MSMEs?

The Government has various monitoring mechanisms in place. It requires a collaborative effort to ensure we have the right systems in place to methodologically monitor and measure the impact of the support.

The Ministry has a dedicated Monitoring and Evaluation team that goes out to inspect and record how MSMEs are performing or growing after receiving assistance.

Ministry also conducts routine surveys as another tool of monitoring MSMEs.

We also continue to talk to MSMEs on a daily basis whereby they provide their feedback and concerns on how they are able to access and utilise the respective assistances.

Pre COVID-19, MSMEs particuraly those in the informal sector, contributed significantly to national GDP. They can be a significant partner for COVID-19 recovery. In the “new normal” what would be expected of MSMEs if they want to continue to operate and contribute to national economic recovery?

Agreed. MSMEs have been and will continue to be a critical driver of economic recovery. Obviously, the business changing business environment where lockdowns, curfews and protocols are the part of operating in new normal.

MSMEs are expected to adapt and adhere to the COVID safe measures and protocols. They need to be innovative and remain informed of what is happening around them. MSMEs must be aware of the safety measures and be aware of the protocols.

We strongly encourage to explore the digital economy and capitalise on e-commerce. In light of current environment, it is safer, convenient and easier.

At the same time, they must come forward to take advantage of the numerous incentives announced in the 2021/2022 National Budget.

Many MSMEs are in the informal sector and therefore vulnerable to environment and economic shocks. Since the start of COVID-19 we have had 3 major cyclones and the next cyclone season is a few months away. What is the government’s strategy to transit these MSMEs from informality to formality?

A lot more advocacy, education and awareness on the benefits of formalising their businesses is needed.

The Ministry has aligned its grant assistance programmes to registered businesses as to incentivise those in the informal sector to register their businesses and apply for it.

If there is one important advice/thing you would like to share with other pacific government counterparts, in terms of supporting MSME recovery, what would that be?

As policy makers, we must continue to create an enabling environment for MSMEs to recover and survive. We must continue to offer support and targeted assistance to MSMEs. There could be opportunities amongst the Governments and MSMEs to collaborate and explore regional partnerships and strengthen market access.