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14.04.2020 Article

Covid-19 Crisis: Impact On Innovation Hubs & Coping Mechanisms

Covid-19 Crisis: Impact On Innovation Hubs & Coping Mechanisms
LISTEN APR 14, 2020

Background
Globally, countries are hit by the COVID-19 pandemic and most are devastated by the shocking effects. From a virus that affected public health, the meteoric spread of the pandemic is now a global socio-economic and political threat for which no nation is spared. In a short space of time, nations all over the world have had to quickly assess and understand the situation, respond swiftly to save lives and their economies from crumbling. A recession is declared by the International Monetary Fund (IMF); either as bad as 2009 or even worse. On the macro-economic front, revenue shortfalls, reduced production and consumption, rising unemployment, projected growth now expected to plummet are some implications of the COVID-19 crisis, altogether magnifying the vulnerabilities of developing economies during and post corona.

What does this mean to small and growing businesses (SGB)? The disruption of the pandemic on businesses manifests in closed borders, value chain effects, truncated business investments due to heightened uncertainties. The situation leaves many SGB the pain of dealing with increased operational costs with unmatched productivity which translates into losses either in the short and even long term.

This exposition is a product of virtual individual and group discussions with hub managers across various regions in Ghana, hence offers an appreciable practical insight of the situation at firsthand.

Objectives

  1. Highlight the current effects of the COVID-19 crisis and projected impact on innovations hub
  2. Explore possibilities and how hubs can position themselves to optimise the opportunities
  3. Identify relevant support to cushion hubs against the risks
  4. Outline how potential partners could collaborate with hubs for a stronger ecosystem support

Challenges and Impact

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Hubs act as focal points and physical spaces that nurture and refine ideas in developing innovative products to foster innovations and promote entrepreneurship. One of the pillars of innovation hubs lies in their strength of building networks of innovators creating solutions to societies' pressing problems. By this, the physical convergence of startups to iterate ideas, tinker prototypes and develop market-ready products thus provides a supportive environment for experimenting. However, this very core selling proposition of hubs has been destabilized by the COVID-19 crisis as citizens comply with social distancing by way of adhering to precautionary measures such as the imposition of a lockdown in selected areas to flatten the curve.

Revenues from trainings, events and use of co-working space as the main income-generating avenues for hubs have been tremendously affected in the past few months and expected to worsen in the coming months, unfortunately. As it is with many organisations and programmes following lockdown directives and containment measures of the crisis, almost all trainings, events and meetings generally at hubs have been cancelled or postponed indefinitely. The responsiveness of hubs to switch and run online sessions though presents an opportunity to engage startups remotely, the practicality of pricing such digital services or converting into an income-earning model for hubs' sustenance is to be navigated. Due to underlying geographical, infrastructural and socio-cultural

barriers, the adoption rate of digital services itself is limiting with unrealistic possibility of converting to paid services. For example, startups or users in Kumasi or Tamale are less likely to pay for digital services compared to users in Accra.

Investment thrives where there is stability. Amidst uncertainties in the global economy and business in general, hubs are experiencing stalled partnership agreements and investments with a bleak outlook. For most hubs that attract funding from international partners, this trajectory is worrying with the current near-halt in programme implementation.

With unmatched productivity, increased operational expenses is another headache of hubs having to incur fixed costs such as rent, internet and general staff salaries as hubs figure out how to deal with the dicey situation of being sensitive by not laying off staff and economical as at the same by cutting costs. For some hubs, considerations are ongoing to reduce staff salaries for the current month and subsequently if the situation remains the same or worsens. But the reality remains that whether halved or slashed to a quarter or even less, payment of some fraction of salaries against zero revenue for a couple of months is not financially healthy for the survival of hubs.

One post-corona phenomenon expected is the behavioural change that is likely to affect the 'normal' way of doing business even several months after the crisis. For hubs, this means a lot of people will exercise restraint or be extra careful in attending social and business gatherings before fully adjusting to participating in meetings and networking events. Patronage of hubs' services physically, therefore, remains threatened.

Opportunities
Clearly the swiftness with which startups are responding to the crisis by innovating products and services to reduce spread, mitigate effects and monitor progress among others has been encouraging. From fabricating tech-enabled devices to bots and developing of digital tools and platforms, startups have heeded to the call for joint action by governments and development partners in the fight against the crisis. This puts startups in the limelight as rapid actors when locally- sourced innovations are required, thereby boosting the relevance of startups and hubs accordingly as innovators and enablers.

More than before, the use of virtual spaces in learning and working has become prominent as organisations adapt to home office, schools using digital classrooms and meetings transitioning to tech spaces. Opportunities exist for hubs to expand their reach by routing events through digital spaces while creating content to intensify digital skills training for organisations as new markets openings, and re-strategise to be more resilient.

Amidst the crisis, hubs have the chance to develop close connection with their communities. The new community is virtual. As hubs take stock of their operations as businesses, they are presented with the opportunity to take introspection of their activities and invent ways of staying connected to its customers even without making sales.

Responses from Hubs and Government
To disperse experiences and share ideas on how hubs and entrepreneurs are coping with the impact of the crisis, the Ghana Hubs Network organized a virtual knowledge sharing and event that focused on women-led entrepreneurs under the Women Entrepreneurs in Ghana's wing. Additionally, the network launched a virtual mentoring programme; an initiative for hub members to connect, at the same develop innovative strategies to remain productive for hubs' adaptability and business continuity.

Hubs are also taking individual actions to engage partners on possibilities of remodelling programmes to suit the current needs and adopting workable approaches on what is feasible and new ways of implementing programmes. It is incumbent for hubs to explore partnerships with variety of organisations in addition to identifying new business models to cushion revenue streams.

Government of Ghana's GHC 1 billion (USD 173 million) Corona Alleviation Programme is an example of direct stimulus package to relieve small businesses, alongside Bank of Ghana's reduction of policy rate from 16 to 14.5% with other monetary and fiscal policies to mitigate the economic effects of the crisis on small businesses generally for which hubs qualify. However, questions about the framework, eligibility and mechanism for accessing the funds linger on the minds of hub managers. As the Ghana Hubs Network researches into the necessary steps to access the fund, it is prudent for hubs to analyse strategies to utilize and repay loans in anticipation of acquiring debt relief from the government and other investors.

Possible Measures to Support Hubs

Cash Relief
Hubs are in dire need of financial support to serve as a buffer to cushion increased overhead expenses during and after the period. Cash is king, say hub managers. Fixed and running costs such as rent, staff salaries, internet are wrung off hubs' account even though most activities have been closed during the crisis. Hubs will still have to incur some expenses due to the nature of cost and becomes difficult to avoid. Basic survival at this point is cash injection at least for short term relief and stability as hubs navigate the nuances of more lasting solutions. Non- cash support like tax waivers and annulment or deferment of statutory obligations are necessary form of support to hubs as indirect cash saving interventions. Support Partners: Government, Development Organisations, Investors

Capacity Development
There is the need for hubs to improve their capacity in creating and delivering curated contents and tailor-made training to meet the needs of startups and communities remotely. The digital space is flooded with loads of information which may be distracting to users. For this reason, it is critical for managers to transmit knowledge into engaging and developing contextualised contents by sharpening their competencies in functional areas for relatable content delivery. As experiences of hubs are not the same, this will require a design thinking approach to help hubs re-centre and focus on market-driven services for startups and partners. Support Partners: Training Developers & Facilitators, Development Organisations

Digital Support
Providing access to digital devices and internet services for most startups that had to use computers and internet at the hubs is needed. Whereas the provision of hardware devices may seem unrealistic in the short term, negotiating with telecommunication companies and other services providers for heavily discounted internet packages is a much-needed relief to significantly save cost of data for hub managers and staff to stay connected and work remotely. Support Partners: Telcos, Digital Service Providers, Development Organisations, Corporates Inst.

Skilled Human Resources
Resources with specialised skills and expertise in remodelling and developing products and services either directly for hubs or startups by extension as consultants or mentors could be helpful for hubs at this point. Without limit on the kind of services such external resources could offer hubs, a great deal of benefits exists to harness the knowledge of experienced human resources especially for hubs that struggle to pay for highly skilled resources. Support Partners: Institutional Mentors, Corporate Institutions. Development Organisations

Plans for Further Digitalization
There is a drastic fundamental change in the way we work, study and live. But this also presents enormous opportunities for the use of digital tools to thrive. A key discovery during the pandemic is the embrace of digital tools of platforms. The message of harnessing the potentials of digitalization couldn't have been clearer and more relatable. Hubs are considering online and offline alternatives as hybrid options for training to address the connectivity challenges in delivering services to targets.

About Ghana Hubs Network (GHN)s
The GHN is the umbrella organisation with the mandate of hubs in Ghana to develop and coordinate activities, build their capacities, develop and implement entrepreneurship programmes in areas of tech, business and creative arts. Registered in 2017, the GHN is a strategic organisation setup to promote and amplify the work of innovation hubs that are providing support to the entrepreneurial ecosystem. The network is founded around three main pillars: a) Advocacy b) Capacity building; c) Diversity and Inclusion. With a current membership of about 30 hubs, its key role is to bring together different stakeholders ranging from academia, private sector, policy makers, NGOs, investors, foundations and the media to build new networks and promote collaboration to help empower entrepreneurs, build startups and propel innovations and job creation. Over the years, the network has been a key actor supporting Government of Ghana's entrepreneurship programmes such as delivering trainings nationwide under the National Entrepreneurship and Innovation Programme (NEIP) and looking forward to further collaborations for inclusive growth.

Conclusion
Hubs are critical nodes of innovation and promote entrepreneurship by nurturing startups. In these rough times, the ability of hubs to adapt to the harsh effects and inherent risks of COVID-19 transcends their own survival to continuously supporting startups as important enablers of innovation, skills development and job creation is crucial. To move past the distressing effects of the crisis, a mix of internal and external measures by hubs and ecosystem players are much needed in optimizing the full potentials of the situation and safeguarding hubs' sustainability.

Hubs will have to re-examine their business models and strategies to explore emerging needs and offer suitable services to startups and new market segments and do so as a race against time. Government, development partners and private sector institutions could leverage on the speed, energy and ingenuity of hubs to collaborate by developing and implementing responsive programmes that reach a broad spectrum of sectors and target groups for value and improve the quality of lives ultimately.

Contact Paulina Adjei Advisor, GIZ
[email protected]

Acknowledgement (Hubs Engaged) Ispace
Hapaspace Impact Hub Accra Hopin Academy
Centre for Social Innovations Tentmaker
Ashesi D Lab Yison Tech Hub Tentmaker
Stanbic Bank Incubator Ho Node
Fab Hub Women's Haven

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