6.2 Contextual Challenges

Lack of provision of support was reported as a challenge by 95% of businesses surveyed. This included the lack of any form of financial support (e.g., loans), as well as the provision of assets (such as equipment and supplies), and training.

Most of the businesses in the PSS sample mainly cater for local markets. On average companies report that 65% of their income comes from local markets. In addition, 12% of income comes from markets within their region. Only about 2% of income on average comes from exports.

In terms of resources assessment, the majority of businesses rated the availability of relevant market supplies as “very bad” especially in their city/area (67%) and international markets (77%).

COVID-19 has had a significant impact on the financial climate

More recently, the global outbreak of COVID-19 has added a new layer of complexity to the Libyan labor market, presenting new challenges to an already fragile private sector. Overall, there was an overarching agreement in the PSS that COVID-19 had an impact on businesses in Libya; 84% of businesses surveyed said it had an adverse impact, across all sectors, but the most affected were businesses in manufacturing, agriculture, construction, and wholesale goods. Furthermore, the most agreed-upon impact of the pandemic was ‘making lower sales/profits’, followed by ‘increased prices of production’, illustrating a further blow to economic stability. Other key effects included ‘absence of inputs needed for production’ (37%), ‘challenges of getting products’ (39%), and ‘using company savings’ (32%).

Figure 11: Proportion who felt COVID-19 had a business impact, by sector

Making lower sales/profits

Key inputs needed for production are scarce

Prices for key inputs needed for production increases

Challenges getting products to markets due to shutdown / movement restrictions

Had to take emergency loans

1% 37%

48%

39%

Had to use savings

32% 76%

01

In the summer of 2020, views about the full impact of COVID-19 were uncertain. Generally, the impacts that private sector stakeholders reported at that time can be summarized as follows.

COVID-19 had four effects on competition

a. Increases in competition attributed to fewer business opportunities b. Increases in competition attributed to a rise in available labor c. Decreases in competition within industries due to the closure of similar businesses d. Some companies have attempted to diversify their services to survive the impact of COVID-19, leading them to experience new competition.

02

Many SMEs maintained staff levels and salaries, yet this lacked sustainability

a. Low-skilled, semi-skilled and contract workers are those most likely to have faced salary reductions or have been released from employment. b. Many employers have indicated feelings of social responsibility towards maintaining salaries, using company reserves to do so. c. Employers in SMEs negatively impacted by COVID-19 that have continued to pay salaries indicate that they will soon be forced to reduce salaries and/or employee numbers if the situation does not improve, indicating severe consequences on employment. d. Power cuts and unreliable internet connections demonstrate the weakness of Libyan infrastructure in being able to support long-term remote working. e. Most businesses, including those that have reported no impact or a positive impact from COVID-19, express that they have postponed or cancelled business development plans due to concerns regarding the longevity of COVID-19, indicating a long-term effect on growth.

However, many interviews, from both early in the pandemic and more recently, described the impact of COVID-19 as contextualized in the midst of ongoing conflict and longstanding challenges within the Libyan economy. Historic fragility in the Libyan labor market is viewed as compounding the impact of COVID-19 in some ways, adding new pressures to an already under-developed private sector and a stretched public sector.

Conversely, this same legacy was also described as providing a buffer to the COVID-19 impact in two specific ways. Firstly, many people in Libya still work in public sector roles (a 2015 World Bank study put the proportion of the workforce employed in the public sector at 85%) and it was described that these workers were able to retain some of their salary during lockdown, so only a few were reliant on the private sector businesses that were impacted most. Secondly, the economy in Libya is heavily dependent on imports rather than production, so there were a limited number of manufacturing companies that had to close.

Some responded that the impact was sector specific, whilst others commented on the changing skills sets required to adapt to the situation, claiming that the pandemic has resulted in an increased demand on online and digital skills, though this view was not consistent.