RAC: revista angolana de ciências | ISSN: 2664-259X

An epistemological study on the impact of covid-19 on

Angola´s business environment

Um estudo epidemiológico sobre o impacto da covid-19 no

ambiente de negócios de Angola

Estudio epidemiológico sobre el impacto del covid-19 en el entorno

empresarial de Angola

Paulino Ricardo Cossengue

ORCID: 0000-0003-4246-2046

Master. Assistant Lecturer at José Eduardo dos Santos University.

Huambo, Angola.

cossenguep@yahoo.com

DATA DA RECEPÇÃO: Abril, 2020

| DATA DA ACEITAÇÃO: Junho, 2020

Abstract

 

In the face of COVID-19 pandemic, governments and businesses have struggled to operate and find ways to respond to the effects of the disease. The present study conducts a research to find the right strategies for local businesses to cope and mitigate the damages upon National Health Service and business system as the virus spreads across the country. Methodologically, by large this research is supported by qualitative perspectives, and to a less extend by quantitative which is used mostly for statistical purposes. The literature review is the foundation upon which the discussion of secondary data is built, and in order to obtain solid findings the study adopts observation as the main technique to gather primary data. The results show that Angola can emerge successfully from the pandemic provided it manages to protect both the National Health Service and the business system. Most importantly, this study suggests heuristic technique to be the most appropriate tool to save the systems in question. In conclusion, despite not knowing what lies ahead, it sustains that global cooperation is the key to protect the entire world from the crisis but domestically countries must pay attention to both National Health Services and local businesses. In terms of structure, the research includes an introduction, literature review, a reflection on the Angolan context combined with the suggested technique or strategic model, and the conclusion.

Key words: Covid-19; Business; Health Service; Economy.

Resumo

Em presença da pandemia da COVID-19, os governos e empresas revelam dificuldades em operar e encontrar formas de responder aos efeitos da doença. O presente estudo procura encontrar estratégias certas que permitam

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as empresas locais suportar e mitigar as consequências sobre os Serviços Nacionais de Saúde e sistemas de negócios na medida em que o vírus se propaga por todo país. Metodologicamente, este estudo em larga escala é suportado pela perspectiva qualitativa e numa menor dimensão pela perspectiva quantitativa, esta última por razões estatísticas. A revisão de literatura serve de base sobre a qual a discussão de dados secundários se constrói. Com vista a obtenção de resultados sólidos, o estudo adopta a observação como principal técnica de recolha de dados primários. Os resultados revelam que, Angola pode sair desta pandemia com sucesso, desde que consiga proteger ambos Serviços Nacionais de Saúde e Sistemas de negócios. O mais importante ainda é que o estudo sugere uma técnica como instrumento mais apropriado para proteger os negócios em questão. Em conclusão, embora não sabendo do que se aguarda, o estudo sustenta que, a cooperação global é a condição chave para proteger o mundo da crise, mas domesticamente os países devem prestar atenção a ambos serviços nacionais de saúde e empresas de negócios. Em termos de estrutura, a pesquisa inclui uma introdução, revisão de literatura, reflexão sobre o contexto de Angola com uma sugestão de modelo estratégico e conclusão.

Palavras-chave: Covid-19; Negócios; Serviços de Saúde; Economia.

Resumen

Ante la pandemia de COVID-19, los gobiernos y las empresas revelan dificultades para operar y encontrar formas de responder a los efectos de la enfermedad. El presente estudio busca encontrar las estrategias correctas que permitan a las compañías locales apoyar y mitigar las consecuencias en los Servicios Nacionales de Salud y los sistemas comerciales a medida que el virus se propaga por todo el país. Metodológicamente, este estudio a gran escala está respaldado por la perspectiva cualitativa y, en menor medida, por la perspectiva cuantitativa, esta última por razones estadísticas. La revisión de la literatura sirve como base sobre la cual se construye la discusión de los datos secundarios. Para obtener resultados sólidos, el estudio adopta la observación como la técnica principal de recolección de datos primarios. Los resultados revelan que Angola puede escapar con éxito de esta pandemia, siempre que pueda proteger tanto los Servicios Nacionales de Salud como los sistemas empresariales. Lo más importante, el estudio sugiere una técnica como la herramienta más adecuada para proteger a las empresas en cuestión. En conclusión, aunque no se sabe lo que se espera, el estudio sostiene que la cooperación global es la condición clave para proteger al mundo de la crisis, pero a nivel nacional los países deben prestar atención tanto a los servicios nacionales de salud como a las empresas. En términos de estructura, la investigación incluye una introducción, revisión de literatura, reflexión sobre el contexto de Angola con una sugerencia de un modelo estratégico y conclusión.

Palabras clave: Covid-19; Negocio; Servicios de salud; Economía.

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INTRODUCTION

The world is in turmoil, the science in both health and economic context has been tested, and governments are facing one of the greatest health and economic challenge in history. As the virus progresses, the level of anxiety and confusion across the world increases, and the fact that each nation tries to prove to have better response than the others seems to make the situation even more difficult. It is obvious that the level in a scale of damage has differed considerably from country to country. However, what is important at this point is the fact that the health and economic systems around the world are all affected. Debates on current and post pandemic economic performance are taking place and some of these lead to an understanding that although the virus is spread all over the world, its impact is expected to be much more damaging in the developing countries than in the richer countries. This argument may be supported by Sheffrin (2004, p. 277) when notices that,

“Economists who have studied the process of economic growth in detail find weak evidence that poorer countries are closing the gap in per capita income with richer countries. On average, it does not appear that poorer countries grow at substantially higher rates than richer countries are growing. Although there are some success histories, such as Japan and other Asian economies, including Hong Kong and Singapore, there also economies such as Zambia´s that have regressed”.

A reflection upon this argument may lead to an understanding that countries with no sophisticated health service and robust economies to rapidly respond to coronavirus will be hit the most.

There are evidences suggesting that most governments have shifted attention to the process of saving human lives over business lives. This approach may be efficient to protect people from catching the virus, but not from hunger, which is another factor leading to death. In other words, by overlooking support for businesses, companies declare bankruptcy, and people are laid off, which is

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another way through which people die. It is an important factor to consider, particularly in developing countries where unemployment benefits is nonexistent. Obviously, at the beginning nations did not believe in the ability of the virus to spread throughout the world.

Similar measures such as social isolation, closing borders and internal lockdown have been taken with a view to save human lives. However, it is important to remember that not all countries have the capacity to sustain these measures in the long-run. Therefore, an important question is raised: To what extent are developing countries like Angola prepared to sustain not only their health services but also the business environment during and beyond Covid-19 pandemic? In addition, evidences have shown that within a few months the pandemic has forced many businesses to close and others to adopt different business model to survive. Apart from this, many health services around the world have been taken into distress. A close eye on these facts may suggest that planning and acting for business future, in time, during the Covid-19 pandemic have turned into one of the greatest challenges governments and companies are facing today.

The importance of the present research dwells on the fact that it discusses and analyses on difficulties faced by businesses and health services in the current circumstances. Therefore, it helps to predict how the Angolan market will look like after the crisis. In addition, this enables companies and managers to prepare and maneuver businesses to gain strategic positions as the difficulties arise. In other words, it equips businesses and managers with knowledge to create and implement a successful recovery plans. Just as Usialko (2020, p. 2) suggested:

“Recovery planning involves looking not just at the current moment and determine how to best navigate an ongoing crisis but also looking ahead to what the future holds and considering how businesses will be best positioned for future success. In other words, recovery planning has to be about how businesses can not only survive but also thrive”

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Therefore, it is clear that, in time, the crisis will pass, and the landscape beyond covid-19 will certainly look different from the past. If this is the case, then, businesses must be able to adopt alternative strategies to not only survive but also growing in the new normal business environment, and this research provides firms with information on what will happen and what is to be done to secure business sustainability in the days to come.

This research intended to assist business companies and the National Health Service to identify sustainable strategies to prevent them from further decline and bankruptcy during and post Covid-19.

Although the coronavirus affects the entire world, and therefore an immediate global response is required, this study is focused specifically on the Angolan business environment. Nevertheless, experiences of other countries will be taken into consideration in order to provide the best possible results.

Having shown narrowed down the study, it is becomes essential to comprehend the discussion and the analysis around this thematic within the academic and scientific context.

LITERATURE REVIEW

Standard measures were taken by governments around the world. Social isolation, closing of borders, and suspension of non-essential activities are applied with an intent to slowdown the rate of infection and to protect human lives. However, one believes that in times of crisis, the most important action to be taken is the one that aims to stabilize businesses (Uzialko, 2020).

“Among the economic consequences of these measures is the closing or slowing down of many factories around the world, an abrupt slowdown in inter-continental trade, and a decline in the supply of imported goods. The reality is for micro and small-sized business, prioritizing health over their economic needs is not a viable option, as businesses need trade to survive and on the other hand, government needs them to provide jobs and maintain economic stability” (Vallejo, 2020, p. 3).

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Therefore, it may suggest that neither cutting costs nor keeping businesses shut will provide solution to the current novel called coronavirus.

According to Drucker (1985) assumptions related to the environment determine what a company is paid for, those related to core competences indicate where a company should excel, and the ones about clear mission statement define what a company considers to be significant results. At this point, it is important to understand that companies are made of people, and therefore, these assumptions define positions taken by individuals who lead or work for such organizations.

Lynch (2006), argues that when the mission statement is clear, it leads to a clear strategy, and in return, this, make people believe in what is there to be done. In this way, workers make the most of their intelligence and motivation based on the system to move the organization forward.

This argument assumes that businesses cannot walk alone. When the author referrers not only to organization but also to the system, clearly explains that the success of any economy depends upon the combination of forces between businesses and governments. In other words, while governments create appropriate systems to accommodate businesses, companies and managers define strategies to operate in the systems. Unless the environment is analyzed, this combination will never be understood. This is supported by Dobson, et al. (2004, p. 18) who assumes that:

“At the extreme the general environment concerns factors that not only affect the organization and its industry, but also the general business sector. More closely related to the organization is the competitive environment, which is concerned with issues like position of suppliers, buyers, direct rivals and governments”.

The illustration in the figure below explains the existent interdependence for different levels of the environment:

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General Environment:

Economic, Political, social, technological, and regulatory component

Competitive environment, Suppliers, Product, Labour, buyers, Rivalry

The organization

Internal environment

Marketing, Finance,

Production, and

Personnel aspects

Figure No. 1. The organization and its environment

Source: (Dobson, 2006, p. 19)

It clearly demonstrates the extent to which companies and businesses depend on governments. Despite the fact that businesses are positioned in a different environment, which is the internal, every action taken from this same environment is controlled and regulated by the general environment, which is the external and subject to governments domination. This explanation supports the idea that business strategies will always be successful, provided governments create appropriate business environment.

ENVIRONMENT ANALYSIS

According to Dobson, et al. (2004, pp. 19, 20), there are six different factors to be taken into consideration when analyzing business environment:

“Number one is to undertake an overall process of auditing the environment influences to identify which factors have affected the past performance and which will influence the future. Number two consists of evaluating the nature of the business´s environment in terms of complexity and uncertainty. Number three is to analyze

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the structure to identify the key forces operating in the competitive environment. Number four is to analyze the business´s position relative to its competitors. Number five is to consider the internal environment with the aim of identifying the strengths and weaknesses of the organization, and number six is to undertake SWOT analyzes to understand not only the internal but also the external environment”.

Each of these factors plays an important role in the process of finding a successful business position in the market. Therefore, a thoroughly examination of each one of these factors will certainly reduce the risk for businesses and for the economy as a whole.

SCANNING THE BUSINESS ENVIRONMENT

The process of scanning the environment is key to guarantee business and economic success. Johnson, et al. (2008) sustain that, a general audit of the environment is crucial to determine the right option for firms, as it enables experts and managers to identify and gain the right feeling for forces to determine the current and predict the future business circumstances. This is to be conducted on the regular bases to detect initial signs that guide businesses in the decision making process, especially in relation to the need for changes in strategy.

Although in specific terms, a number of factors such as, economic, technological, legal, political, social and cultural are the building blocks for the environmental analyzing process, the scanning in particular raises two important and related questions:

1.What factors in the external or general environment are hindering businesses from growth?

2.Which of these factors are the most relevant in the short-term and in the long-term?

The answers to these apparently very simple questions, represent one of the greatest challenges facing companies and managers today. It is also clear that, the same answers to these important questions are the key for business in

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general to lay foundation for emerging from the current covid-19 pandemic with less harm. On the other hand, the concept leads to an understanding of the fact that the market is dynamic and unpredictable. Natural disasters, virus leading to pandemics, and many other catastrophes may change the environment in such a way that governments, businesses, and societies are forced to change strategies and the way they perceive the environment. Again, this is in accordance with Dobson, et al. 2004, p. 23) stressing that:

“The more dynamic and complex the environmental conditions are, the more uncertainty increases. Modern organizations are increasingly finding that they are facing both a dynamic and highly complex environment. Complexity comes in different forms. First, it can result from the sheer diversity of environmental influences faced by an organization. Second, it can arise because of the amount of knowledge required to handle environmental influences. Third, it can be due to the different environmental influences which are, in themselves, interconnected”.

This concept is supported by Storey (1994) who notes that, to achieve the lowest level of uncertainty requires an environment with static and simple conditions. In this context, competition is almost nonexistent, markets operate in a programmed or routine context, technical and strategic progresses are straightforward, and the changes at every level are easily predictable. Obviously, in today´s global economic environment such scenario became unrealistic. Therefore, it may be sensible to agree with Dunphy, quoted by Burnes (2000) who advocated the approach for western businesses, standing in favor of managed incrementalism to avoid not only stagnation engendered by the pandemic, but also brutality related to rapid business transformation.

“Not surprisingly, this has led to an increased interest in how organizations move between periods of stability and instability” (Burnes, 2000, p. 254). What has been seen over the years with some frequency to a certain extent is governments stepping up to rescue businesses and in return businesses contribute to the

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process of boosting the economy. This is the combination that has proved to be the key driving and sustaining forces moving countries forward (Gjika, 2020).

In this perspective, despite the fact that nothing is clear in relation to what the future holds, strengthening the relationship between government and businesses appears to be the only way out. This general discussion leads to the specific and the center of the investigation, which is the Angola environment.

ANGOLA BUSINESS ENVIRONMENT

Angola´s business sector has long been affected by the economic crisis of 2008. The dramatic downturn in the national business environment can be traced back as far as 2018 (Gjika, 2020). This important piece of information is supported by another study by the Angolan National Institute of Statistic on employment rate in the same period, as demonstrated bellow.

Graph No 1. Angola employment rate 2018-2019 data further forecast

In contrast, a study by Angola Press (2019) shows that over the last five years more than 70 business companies have declared bankruptcy. This portrays the notion that there is a lack of consistent data to an extent. However, what is at hand leads the research to an understanding that the downhill fall escalated, and inevitably affected a number key factors in the economy as reflected on the following table.

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Table No 1. Historical unit frequency

No

Angola Labour

 

Last

Previous

Highest

Lowest

Unit

 

 

 

 

 

 

 

 

 

 

1

Unemployment rate

31.80

30.10

35.00

19.90

Percent

[+]

 

 

 

 

 

 

 

 

2

Minimum Wages

21454.10

21454.10

21454.10

3757.00

AOA/Month

[+]

 

 

 

 

 

 

 

 

3

Population

31.70

30.81

31.70

5.45

Million

[+]

 

 

 

 

 

 

 

 

4

Labour Force Participation

88.40

87.10

88.40

86.50

Percent

[+]

 

Rate

 

 

 

 

 

 

 

5

Living Wage Family

149400.00

149400.00

149400.00

149400.00

AOA/Month

[+]

 

 

 

 

 

 

 

 

6

Living Wage Individual

61900.00

61900.00

61900.00

61900.00

AOA/Month

[+]

 

 

 

 

 

 

 

 

7

Employed Persons

9924.68

9931.55

9931.55

9073.32

Thousands

[+]

 

 

 

 

 

 

 

 

8

Employment Rate

60.30

60.90

61.80

60.30

Percent

[+]

 

 

 

 

 

 

 

 

9

Unemployed Persons

4627.16

4271.11

4627.16

3675.82

Thousands

[+]

 

 

 

 

 

 

 

 

10

Wages High Skilled

211500.00

209600.00

211500.00

179200.00

AOA/Month

[+]

 

 

 

 

 

 

 

 

11

Wages Low Skilled

47400.00

58200.00

58200.00

47400.00

AOA/Month

[+]

 

 

 

 

 

 

 

 

12

Youth Unemployment Rate

56.50

54.20

56.50

52.40

Percent

[+]

Source: Adapted from (Gjika, 2020)

Due to the fact that businesses have reached the shut-down price and people have been increasingly made redundant from jobs, with the country living on trade deficit, the economy inevitably continue to shrink, and until the recovery point is found, the economic downhill fall seems to remain digging deeper for quite some time.

In response to the situation, decisions have been made by the government in recent years. For instance, since the elections the new government has been making different changes in the political and economic systems. One of these has to do with the fact that the government has been presenting the country to the world as a new market, and opened to foreign investment.

Even though it is neither to achieve a free-trade level nor a common market, it is an attempt to obtain a certain level of economic integration. Just as defined by Dessler (2002, p. 30), “Economic integration occurs when two or more nations obtain the advantages of free trade by minimizing trade restrictions between them”.

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In this case, several barriers have been reduced and in some cases were completely dismantled. The legal permit given for the wholly owned subsidiary and foreign direct investment to take place, the tax exemption on imports of essential products, and many other alternatives aiming to boost the economy are just some of the examples. According to Adam Smith, quoted by Sheffrin (2004, p. 286),

“The size of a market was important for economic development. In larger markets, there are more incentives for firms to come up with new products and new methods of production. The lure of profits guides the activities of firms, and larger markets enable firms the opportunity do make larger profits. This provides another rationale for free trade. With free trade, markets are larger, and there is more incentive to engage in technological progress”.

Here, clearly the author assumes that there are two main factors guiding businesses to success. One is the size of the market, and another one is the freedom given to businesses to operate. It means that when the market is large and the trade barriers to foreign investments are removed, the return on investments for business companies is definitely guaranteed. However, due to Covid-19 pandemic, companies around the world are experiencing a lack of financial capacity to invest even in their home countries. This particular evidence, may suggest that foreign investment in Angola remains to be seen, and hence, the strategy of opening the country to foreign investment may be subject to failure.

On one hand, from the economic point of view, the current environmental condition sends a negative signal to development perspective. On the other hand, it may be a sign of hope for domestic business companies, since a decline in foreign direct investment reduces competition, and consequently provides domestic businesses with sufficient breathing space and scope to recover. Notwithstanding some major economic difficulties, business companies may emerge from successfully from the crisis provided the right technique is adopted in the right time. In here, the following technique is suggested.

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DEFINING THE TECHNIQUE

The most common tactic associated to business creativity is the heuristic technique, which is an iterative process consisting of information, analysis, and synthesis. This same technique is strongly suggested by Wickham (1998, pp. 159,

160) when sustaining that:

“Each cycle refines the insight into the opportunity and makes it clearer. This process may be made explicit but more often it is simply the way in which the entrepreneur has learnt to develop a decision when faced with opportunities and challenges”.

Information

Market characteristics

Product characteristics

Buyer characteristics

Analysis

Synthesis

Understand critical relationships

Redefine critical

 

relationships

New opportunity Figure No 2. Heuristic discovery: Information, analysis and synthesis

Source: Wickham, 1998, p. 159

In order to understand the simplicity of the technique, it is crucial to know the logical sequence of the technique chain. Here, the starting point is the data gathering. In other words, the first stage involves collecting data. In the second stage, the data is processed to generate information. In the third stage, the information is analyzed to turn it into knowledge. Finally, in the fourth stage the knowledge is synthetized, transforming it into intelligence or experience which is the key instrument to support companies in the process of identifying new business opportunities.

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There are many ways to apply this technique in Angola. One of them could be to identify countries with the lowest death toll like Germany, Austria, Timor, Israel, Namibia, and Madagascar.

Kotler (2008) stresses that, if one cannot innovate, one must find a way to imitate the innovators. In business, it is crucial to understand that there are those who make things happen, those who watch and learn from things happening, and those who admire things happening. Therefore, by watching, Angola will learn from those who make things happen. Collecting and analyzing data from those countries using the heuristic technique, will certainly lead to a point where the Angolan government and business people will understand how each of them is dealing with the pandemic without putting great strain on economic and health systems.

There are several techniques to be adopted in times of economic difficulties. However, given the turbulence and constant changes engendered by the Covid-19 pandemic, the Heuristic technique may be the most appropriate to recommend to Angola business managers and entrepreneurs, including the government, as it enables easier access to information, analysis, and synthesis in efficient and reliable way to identify business opportunities.

Since Covid-19 was first reported in Angola, local production companies have stepped forward in the fight against coronavirus pandemic. Businesses previously overshadowed by foreign giant companies are now rising from unknown ashes, and make themselves available to work hand in hand with the government (Hairsine, 2020), just as stated by the famous British entrepreneur, Branson (2009), a real entrepreneur is the one whose ability is to identify opportunities to maximize wealth in times of crisis.

On one hand, it is a precious window of opportunity for domestic businesses to grow. On the other, it enables government to make better choices when it comes to resource distribution priorities.

In the past five years, due to long-term economic difficulties, the government has been withholding payments from business companies. This in particular,

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affected those in construction industry, and in retail business sector. Therefore, many national businesses have gone bankruptcy. To worsen the chaos, now that the country is in a better position to pay its debts, the government has chosen to pay foreign companies over domestic ones. Nevertheless, national businesses are proving to be loyal to the nation in times of difficulties, by working alongside government in the battle to defeat the covid-19 pandemic. Clearly, the country is confronted by its unique chance to address the real business difficulties in Angola.

Uzialko (2020), argues that there are important steps that were not taken in time, and now businesses in developing countries pay the price. According to the author, in spite of health crisis affecting economies, countries are invited to address a number economic aspects like inflation, interest rate or loans, bureaucracy in the process of accessing financial funds from banks, and listening to entrepreneurs and business managers who ultimately hold the truth in relation to strategies leading to solid recovery of the business environment and the economy as a whole.

On the ground of health and safety, countries have sacrificed their economies. However, the long waiting period for vaccine suggests that the virus will be around for some days, months or even years to come. Therefore, countries which have managed to combine both life and business support will certainly be better prepared to face the post covid-19 consequences. It may seem like an impossible mission for governments to carry, but in the long-run it will certainly pay-off, as it enables the economy to emerge stronger from the crisis.

CONCLUSION

It is a fact that the entire world has been hit by the Covid-19 pandemic, and nations are struggling to emerge from the crisis. Notwithstanding, the present study argues that in the current state of Covid-19 pandemic, ensuring support for both health service and economic system can be the most solid response to the virus. Countries choosing to protect human lives over businesses have seen a significant number of companies filing for bankruptcy protection, and rapidly increased their unemployment rate. With many people made redundant,

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Associação Multidisciplinar de Investigação Científica (AMIC)

Revista Angolana de Ciências. Publicação Arbitrada, Semestral. Vol.2. No. 2. e020203, p. 01-18. Ano 2020.

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developing countries like Angola may protect people from death engendered by the Covid-19, but will fail to save people from hunger, which is another way to put people to death.

It is obvious that in relation to life saving, government must listen to scientists, but when it comes to the economy, the space should be given to business specialists. Foreign investment appear not to be the solution for the catastrophe facing the world today.

It is crucial to figure out how countries with lower death toll have managed to keep their heath and economic systems on track. Most importantly, the study suggests the heuristic technique which enables companies to gather information, to analyze, synthesize, and identify new opportunities for both health and business environment.

Most importantly, it demonstrates that the most important factor hindering Angolan businesses from growing may not be the current pandemic. Instead, it points out that the long-term government debt to local businesses remains the main problem preventing businesses from growth.

Overall, looking at the Covid-19 as a worldwide problem, the research is attempt to assume that global cooperation will determine the successful response to the current pandemic. However, due to the fact that resource capacity in terms of technology, finance and human differ from country to country, local strategies become crucial to guide health services and the economy.

This leads to an understanding that in Angola, local independent researchers must step forward to assist business companies and the National Health Service with their enquires. Therefore, this study provides Angola business sector with the technique to not only overcome the current difficulties but also to develop the ability to look beyond Covid-19.

Like any other investigation, this confronted a number of stumble blocks that prevented the study from achieving the expected degree of results. One of the difficulties has to do with the fact that every single country is still learning

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different ways to deal with the pandemic, and therefore there is no solid information on defeating the crisis. The other difficulty is the lack of sufficient business data related to Covid-19 crisis in Angola. However, no limitations diminish the importance of the current study. Instead, it lays a solid foundation for further researches on the same topic.

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Revista Angolana de Ciências. Publicação Arbitrada, Semestral. Vol.2. No. 2. e020203, p. 01-18. Ano 2020.

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