‘They need to quarantine Moscow’ How small businesses in Russia’s capital are scrambling to stay afloat as coronavirus clobbers the economy
The coronavirus pandemic has clobbered small- and medium-sized businesses around the world. In Moscow, the story is no different. Would-be clients are staying home and the city’s surgeon general has ordered the closure of gyms, pools, special clubs and groups, and more, while the federal government has shut down nightclubs, movie theaters, and children’s playrooms. Following presidential orders that cancel work nationwide for most Russians next week, from March 30 to April 3, shopping and entertainment centers — small business’s last bastion — will also close down. “Thank you for continuing to come here. Honestly, we’re afraid we’ll lose our jobs”; “thank you for not canceling your cleaning”; “thank you for agreeing to lessons by Skype” — these are messages small enterprises in Russia are increasingly sending their remaining clients as coronavirus engulfs Russia’s capital. Meduza correspondent Alexey Yablokov spoke to small business owners in Moscow to find out how they hope to survive the coronavirus crisis and what help they’re getting from the local authorities.
The news website RBC estimates that shutting down for a single day costs the average shopping and entertainment center in Moscow and the surrounding region roughly 60–155 million rubles (between $775,800 and $2 million). Fitness clubs in the area will lose as much as 300,000 rubles ($3,900) a day, while coffee shops in the city center will lose 100,000–200,000 rubles ($1,290–$2,585) in daily earnings. In effect, small businesses will be left without any revenue, but they’ll still be on the hook for property rental fees, taxes, and staff salaries. For many enterprises, the situation is nearly hopeless.
The owner of a small chain of children’s event centers in Moscow and the surrounding region, Yulia Timofeyeva says 60 percent of the parties planned at her facilities since March 15 have been canceled. Since March 24, thanks to orders from regional officials, she’s had to close down three of her sites. At the same time, she has to keep paying a team of 20 employees, not to mention her leases. “We’ve already cut all operating costs to zero and we’re trying to pivot to online formats but this isn’t making it any easier,” says Timofeyeva.
According to Natalia Maksimova, the director of the “NewArk” dance studio (which has more than 300 students, including both children and adults), her business has suspended all classes because of the mayor’s orders, but she still needs to pay the lease and her instructors’ salaries. “It’s all really hard,” Maksimova admits. “Also, we spent a lot of money on equipment to disinfect our classrooms, hoping that we’ll still be allowed to resume work with small groups of 12 people or fewer. We wrote a letter to Moscow’s Consumer Market and Services Department. The rent is our biggest problem. It’s a commercial lease.” Hoping to get at least some subsidies to cover the rent, Maksimova says she’s also called a government hotline set up to support entrepreneurs.
Alexander Endovin owns and manages the restaurant “Brasserie 0.33.” Business plummeted by as much as 60 percent in the last week, he told Meduza. “There’s only one thing that can save us: they need to quarantine Moscow and recognize the pandemic officially as a force majeure circumstance. Then we could all tell our landlords and staff: ‘Sorry but we can’t pay anyone anything at this troubled time.’ But everyone we’re talking to now is saying that there will be no quarantine in the foreseeable future.”
Additionally, businesses in Moscow have to worry about more than making lease and salary payments. For example, “Dasha’s Pies” founder Darya Sonkina says her suppliers have abandoned their fixed prices and sharply raised her costs, while wholesale customers (like coffee shops) have started canceling orders because they’re closing down.
The city’s entrepreneurs are fighting hard to stay afloat, moving to online events, organizing home deliveries, and flooding social media with desperate posts about discounts and “happy hours.” Sometimes, clients themselves reach out to help. For example, members of a local Facebook community in Moscow’s Aeroport and Sokol districts organized a support group to keep the neighborhood’s restaurants and other small businesses from folding.
The first collective appeal to the government from independent entrepreneurs was on March 16, when restaurant owners in St. Petersburg sent a petition to Governor Alexander Beglov. The document, signed by 19,000 people, specified several demands that restaurant owners say would help their businesses survive the epidemic. In particular, they asked the governor to recognize the spread of coronavirus officially as a circumstance of force majeure, to exempt food services and dining establishments from all taxes for 120 days, suspend utility bills for up to 120 days, cancel all planned and unplanned inspections of their premises, and so on. On March 25, fifty-eight major retailers and owners of foodservice chains sent a collective letter to Prime Minister Mikhail Mishustin asking for government assistance, including a variety of financial deferrals and a moratorium on tax payments.
Promises to help
To help these people, Moscow’s Entrepreneurship and Innovation Department launched a special hotline on March 16. According to the website for “Small Businesses of Moscow” (the publicly funded institution that runs the call center), operators help “quickly resolve issues experienced by business owners related to the general instability of the world economy caused by the spread of coronavirus.”
On March 24, to test the city’s support initiative, Meduza asked several business owners to call the hotline and ask for assistance. Here’s what happened next:
Darya Sonkina (proprietor of “Dasha’s Pies”): “They answered the phone quickly. It wasn’t like I was 105th in line. A young woman answered. She was polite if a little sad. I told her that we’re having problems paying our rent, that our revenues are falling. The woman transferred me to the ‘Business Support Headquarters,’ where I spoke to another sympathetic woman. She advised me to write a letter to my landlord and told me to cite specific executive orders by [Moscow Mayor Sergey] Sobyanin and [Russian Prime Minister Mikhail] Mishustin. I wrote down her wording exactly: ‘I ask you to consider the possibility of reducing or delaying the contracted rent.’ It’s one thing to write a letter, of course. I’ll write it, but the landlord will still have the final say. Whether he’ll consider what I’m asking or not is anybody’s guess.”
Boris Kupriyanov, owner of the Moscow bookstore “Falanster”: “I called. A very diplomatic young girl answered. I explained that my revenues are down by roughly 50 percent, like with everyone else, and that business is drying up. I didn’t get any concrete assistance. In general, I got the impression that it was like they themselves didn’t know what help to offer and they were just collecting material and basically interviewing people.”
Denis Kolbasov, manager of the “Chook and Geek” comic book store: “I called and they answered in about 15 or 20 seconds. It was a woman on the other line. She asked how she could help me and I told her that my name is Denis and I represent the interests of a small business. Like with everyone else, our sales are down 50 percent and it’s led to problems with paying the rent. I said I wanted to find out what measures the government is offering. Has there been any decision to reduce rents, maybe postponing payments or introducing installment plans? In response, I was asked to answer a questionnaire, either over the phone or online. They said there are no concrete measures in place now, but they’ll use the survey’s results to form recommendations for business owners. They also said they have a psychologist on staff who can help entrepreneurs communicate with employees if any of them are worried or nervous. I didn’t bother to talk to the psychologist. We’ve got a close, tightly-knit team and everyone already gets it.”
The support line
Hearing these testimonials, Meduza naturally wanted to know more about this hotline. The Entrepreneurship and Innovation Department’s call center is based on the east side of the city, almost on the capital’s outskirts, in a building that houses the “Small Businesses of Moscow” public institution. That organization’s CEO is Andrey Zheleznyakov, who told Meduza that the agency was created in 2012 to help ordinary people become entrepreneurs and support local residents who have already opened small businesses. For the most part, people call or visit Small Businesses of Moscow for legal support, asking how to open a business, how to close a business, how to draw up documents, and so on. The organization has a presence in every district throughout the city. In its first seven years of operations, the public institution compiled almost 200,000 contacts, says Zheleznyakov.
Now many of these people are calling the city’s hotline and reaching the call center that occupies a small room in the Small Businesses of Moscow’s building. The room is lined with potted flowers and filled with five or six women, all on the phone with worried business people from around the city. The women wear medical masks — why, it is unclear. Every couple of minutes, you hear from different corners of the room:
“Small Businesses of Moscow! Alina speaking. How can I help you?”
“Hello! Go ahead. This is the hotline, yes. The first assistance measures were published today, you can find them online…”
“I’ll transfer you to the Business Support Headquarters. Will you be needing a psychologist?”
A woman named Olga Meshcheryakova, the top supervisor in the room, is responsible for managing the dispatchers. It’s hard to exaggerate her experience in the communications business. Meshcheryakova has worked at call centers since 2003. Over the years, she’s spoken to millions of people by telephone and handled a variety of issues, working with car dealers, Aeroflot Airlines, and the media. Anyone who works for the Small Businesses of Moscow’s hotline is vetted rigorously and subjected to Meshcheryakova’s unbending will. For example, in job interviews, she asks applicants to explain to her in simple words how to tie a shoelace. “The way someone chooses their words and finds their bearings will tell me a lot: speech, reaction, and all of it will say if this person is right for the job.”
“Someone might call and scream and maybe even swear at us. Well, so what? Maybe he’s in trouble. Maybe he’s under a lot of stress. Okay, so he’s hurled some abuse and said how awful we are. Our task is to be understanding and hear them out and offer the questionnaire to understand what he wants,” explains Meshcheryakova. “True, it’s basically the same story with everyone calling now: ‘Revenues are falling. We need to pay salaries and rent, but how? We want to stay afloat and move people to remote work, but how? According to the rules, we’re supposed to warn staff two months in advance, but we don’t have that option now. What should we do?’”
Last week, the women at the hotline fielded more than 550 such phone calls. This was all before Moscow’s mayor issued executive orders on March 24 implementing contingency measures to support businesses and before Vladimir Putin’s national address on March 25, when the president announced that entrepreneurs will get a six-month deferral on most taxes and a moratorium on debt repayments.
How Putin and Sobyanin will help struggling businesses
The Moscow mayor’s crisis response plan features some of the following initiatives:
- Postponing payments on organizations’ property and land taxes
- Deferring rental payments or even temporarily canceling these charges for firms that rent premises from the city
- Reducing payments fixed in trading contracts and extending the deadlines for paying trade fees
These support measures primarily target organizations operating in areas hit hardest by the coronavirus slowdown: food services, tourism, hospitality, culture, sports, recreation, and commerce.
Lawmakers and the government cabinet will draft and implement the relief program President Putin outlined in a national speech on March 25. So far, we know it will feature some of the following things:
- Small- and medium-sized businesses will be allowed to defer all tax payments (except Russia’s value-added tax) for the next six months
- Microenterprises will get these benefits and also be allowed to defer all social security contributions. For small- and medium-sized businesses, meanwhile, the federal government will cut the size of social security contributions in half, from 30 to 15 percent of employees’ salaries
- Microenterprises and small- and medium-sized business affected by coronavirus will also be permitted to defer loan repayments for the next six month
- A six-month moratorium on fines, debt collection, and creditors’ applications for bankruptcy of debtor enterprises
Even now, however, despite the relief measures for small businesses announced by the government, Moscow’s hotline is still lighting up. Some callers haven’t yet heard the news and others aren’t sure what happens next. After all, somebody on the ground has to carry out these initiatives. At the very least, the operators working the phones can now offer worried business owners more than questionnaires and psychologists.
Translation by Kevin Rothrock