Local economy finding ways to pivot through the pandemic

It's no secret the kind of impact public health measures have had on the economy.

Small to medium-sized businesses have felt the squeeze the most throughout the pandemic including industries like restaurants, transportation, arts and entertainment, and tourism-related businesses. 

Tony LaMantia is the President & CEO of Waterloo EDC and he said that since March 2020, there's been a tale of two economies locally.

“The folks who are on the right side of the digital divide have done really well in this environment,” said LaMantia, “they've continued to grow, they've continued to expand their markets and continue to be profitable.”

Not every business has been on the right side of the digital divide meaning they couldn't virtualize how they do business. 

“Those specifically in hospitality and personal services were hit the first and the hardest, and they're likely going to be the last ones to come out of this when there's more visibility on a stronger recovery ahead founded by a broad vaccination program.”

LaMantia notes that Waterloo Region has fared better than most regions in our province.

“Our tech core and because it has made investments over decades into virtualization and knowledge-based economies, so strong financial services, strong advanced manufacturing and a strong manufacturing sector with the tech sector really blossoming [has helped our region].” 

LaMantia said that when you add the work-from-home phenomenon – it has led to great migration out of the Greater Toronto Area into mid-size and smaller cities. 

“Kitchener, Cambridge, and Waterloo census metropolitan area was the second fastest-growing in the country this year,” said LaMantia, “when you look at the last five years, we've had a lot of net migration and I think the pandemic has accelerated that.” 

There's still a lot of pain being felt across the local economy despite Waterloo Region faring better than most. Waterloo EDC had to take a step back on how it does business so it could pivot and start helping smaller businesses where it could. 

“We decided that it was important to pivot around this time last year,” said LaMantia, “we needed to support where the local community needs were.”

LaMantia said that with the big global hunt for PPE at the start of the pandemic because of a shortage, his organization had to pivot priorities to support local PPE mobilization.

“That's where the need was [at the time] and on a parallel path, we started the 'Business Economic Support Team of Waterloo Region', we thought this virus was going to unfold in real-time, and we are going to have to work with municipal, provincial and federal leaders on supports for business,” said LaMantia. 

Waterloo EDC, the Greater Kitchener-Waterloo Chamber of Commerce, Cambridge Chamber of Commerce, and Communitech were all part of the support team.

“The whole idea was 'let's see what's happening on the ground in real-time – the impacts', let's follow that information to municipal, provincial and federal leaders and as decisions were made on supports, we'll communicate them down and tinker to see how we are doing,” said LaMantia. 

LaMantia admitted that pivoting the focus to a more local community need was a tough decision and he didn't expect it to be good for business. 

“We assumed it was going to be a really tough year, and by May of last year we only closed two foreign direct investment deals valued at $12-million,” said LaMantia, “I told the board based on the forecast that we were going to close $150-million in inward investment in about twelve deals. In May, the message was that we weren't going to hit our target but the board told me to stick to what we need to do for the community.”

By November 2020, La Mantia said that the PPE deals that the Waterloo EDC were directly involved in with InkSmith, Eclipse Automation and Pri-Med Canada added $80-million to the investment of the economy and some of the other deals started to come through as well.

“We not only hit our target after that but we did better than 2019,” said LaMantia, “the whole point was we pivoted to support local needs, it wasn't about business but it ended up being really good for business.” 

As we continue in 2021, LaMantia said that it's almost the mirror-opposite. He said it's starting off really, really tough. 

“We are really starting to see the fatigue on the part of small business, they are really running on fumes,” said LaMantia, “we're going to pay particular attention to how our small companies and in particular the tourism and hospitality industry are doing right now under the stay-at-home orders.”

LaMantia said that he doesn't feel like our region is going to need a big push on PPE capacity this year much like last year because of how the region reacted.

“We went from zero, to a PPE powerhouse,” said La Mantia, “we've got a range of PPE companies, distributors, testing kit makers, you name it. I think the focus for us this year is to get a little closer to core business but not lose sight of the support that small businesses need.” 

Julie Kwiecinski is the director of provincial affairs for Ontario at the Canadian Federation of Independent Business and she said that only 37 per cent of businesses are fully open right now.

“32 per cent are fully staffed and 18 per cent are making normal levels of sales,” said Kwiecinski.

The CFIB is calling on the provincial government to come up with a better plan to start reopening the economy to try and help businesses in the province.

“What we are suggesting is to give us a plan, and we are suggesting allowing all businesses across all sectors to open their doors in-store business but at a 20 per cent capacity. We are asking for that to happen on Feb. 10 when the current stay-at-home measures expire.”

Kwiecinski said that her organization has put forward many different versions of the same plan to the province to allow some form of in-store business.

“The 20 per cent is a good number when you are talking about different sectors and if you look at what other provinces are doing in terms of a capacity restriction, that's fairly reasonable.”

Kwiecinski said that the government needs to start moving from subsidies to sales.

“Nothing replaces a subsidy better than allowing businesses some kind of in-store revenue, no matter what they do.”

LaMantia said that businesses need to be fully aware of the supports that are out there for them right now.

“There are supports for property tax deferment, there are supports for utility bills, continued support for virtualization – there are all kinds of programs, but if you're a service business you can't virtualize that business. For those, the most important thing right now is to take advantage of the wage subsidy, any kind of low-interest or no-interest loans, and what we can do is to continue to talk to the provincial government on more flexible support programs.”

Right now, LaMantia feels the Ontario Small Business Support program is a little bit too narrowly-focused in its criteria. 

“You have to hit three criteria to be eligible, less than 100 people, your revenue has to have fallen by at least 20 per cent from April of last year and you have to have been directly affected by the emergency order on Dec. 26 – so you have to hit all three.”

Kwiecinski echoes that concern and said many businesses are falling through the cracks. 

“We're spending a lot of our time now finding businesses that have fallen through the cracks and trying to get the government to address those businesses. A dry cleaner is a very good example. They are considered essential but nobody is going to them right now. They aren't making revenue yet they can't even apply for this new grant,” said Kwiecinski. “There are many, many more examples of businesses who are all ineligible.” 

Kwiecinski said that the average debt for Ontario businesses right now is $93,000 and the current grants won't cut it for those who are looking for help.

LaMantia said that it's extremely important that our region has the tech sector that will help keep our economy elevated through the pandemic. 

“It's not only helped to maintain the economy but there has been a lot of expansion within that sector that we've seen. It's been a really solid anchor but also a magnet for more talent.”

La Mantia said the next step for the economic recovery here locally is to keep a keen eye on the sectors that have struggled the most.

“They are going to continue to need a lot of support and they will require the EDC's support, so I plan with the rest of the leaders in our community to continue to support local business and do that visibly,” said LaMantia, “I think that's important to build confidence and to get back to basics.”

Waterloo EDC plans on continuing to market the region aggressively to help ensure a healthy economic recovery.

“We're going to be back bidding for companies to locate to Waterloo Region, we were already chosen with a few companies but the investment might be on hold right now because the firm was trying to figure out what to do. That is going to start a massive new focus on expansion and we want to be apart of that.” 

LaMantia said 2020 was a big departure from what the Waterloo EDC is used to doing.

“If you look across North America, there wasn't too many investment promotion agencies that did what we did, I can't think of any that just focused on local business retention, expansion and PPE,” said LaMantia, “I'm kind of looking forward to getting back to doing what we do well which is marketing the region, working with civic leadership on promoting the expansion of local companies.”

Waterloo EDC is hoping to spend a lot more time helping local companies scale. 

“We want to help local supply chains more domesticated so that our advanced manufacturing companies have more local suppliers and we saw with the challenges of that was in PPE (…) we are going to need more local companies that are apart of that supply chain.”

LaMantia said it's something different than what the Waterloo EDC is normally used to dealing with but the pandemic has shown how important it is to focus on the local businesses in our community.