Papua New Guinea’s retailers and manufacturers alike reporting significant drops in revenue this year. How serious is the downturn?

R H Group’s Vision City shopping mall in Port Moresby’s Waigani district.

Ask around retail and manufacturing businesses in Papua New Guinea right now and you’ll get a consistent response: sales are down. Depending on who you talk to, the drops are notable: 15% to 20% is a range most commonly cited, with some harder hit and others doing better.

‘In general, retail sales for 2013 are down,’ notes Nathan Ho, Executive Director of R H Trading (part of the Malaysian-owned R H Group). ‘However, R H Hypermarket is fortunate to experience average 10% down as compared with 2012.’

One of R H Hypermarket’s competitors, Sir James Tjoeng of Boroko Food World, is also reporting a ‘small decrease’ in business at the company’s Gordons store in Port Moresby, although its new Waterfront Foodworld, opened just 12 months ago, is reporting a slight increase in sales.

‘When the LNG money was around, people just threw bodies at their business.’

Anecdotal evidence also suggests a softening of the rental market in Port Moresby.

Chey Scovell, CEO of the Manufacturers Council of PNG, reports his members are experiencing revenue falls this year of ‘20% to 30% across the board’.

What’s causing the downturn?

‘There are indications that the spin-off activity from the PNG LNG project to the non-mineral sector is declining, as shown by lower levels of sales and employment,’ noted Loi Bakani, Governor of the Bank of Papua New Guinea in his latest Monetary Policy Statement, released this week.

‘Last year, we had difficulty getting drivers and tradesmen but now there’s more of them around. Clearly, some high value workers have been made redundant,’ notes Sir James Tjoeng.

Another factor is the marked drop in income from agricultural commodities, with some food manufacturers reporting a fall in sales due to less disposable income in rural communities.

The weakening kina, which is making imports more expensive, is also not helping.

Should we worry?

As a leading retailer remarked to Business Advantage PNG recently, while the drops are sizeable, it’s important to remember that these falls are from record levels—levels caused by a short-term phenomenon: the construction phase of the PNG LNG project. It is unrealistic, they said, to expect such sales volumes would last forever.

What seems certain is that many businesses are going to have to live with lower income for a period, and that will also mean controlling costs and managing debt.

‘When the LNG money was around, people just threw bodies at their business. The costs of services went through the roof,’ remarks Chey Scovell. ‘Business has now got to  “lean up”.’

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