News

COVID-19 roundup: ‘We appreciate the effort, but…’

Federal Finance Minister Bill Morneau (left) and Minister of Innovation, Science and Industry Navdeep Bains arrive for a news conference in Toronto on Wednesday April 1, 2020. The Canadian Press/Frank Gunn
article-aa

This article is a preview of The Logic’s Daily Briefing newsletter, sent every weekday.

Get complimentary access to award-winning reporting to navigate these unprecedented times. Sign up now.

It’s day 29 since Canada’s 100th coronavirus case. The number of cases is 19,184 as of publication time, up 1,287 since yesterday, a seven per cent increase in daily new cases from the three-day prior average. On their respective 29th day, U.S. daily new cases were up 22 per cent from the three-day prior average; the U.K. had a 28 per cent increase in daily new cases from the three-day prior; and in Italy, new cases were down seven per cent.* 

The U.S. now accounts for close to a quarter of all COVID-19 cases;  its total deaths are now at 14,262. Italy reached that grim milestone on day 31 after its 100th death; the U.S. is on day 23.

More wage subsidy changes: The federal government is making changes to the Canada Wage Subsidy Program (CEWS) to ensure more high-growth firms qualify, Finance Minister Bill Morneau announced Wednesday. While applicants must still show their monthly revenue has dropped to get the salary assistance, they can now choose to compare against their average intake across January and February of this year, instead of to the corresponding month in 2019. “A high-growth company that’s created good jobs in the past year might not show significant declines [in revenue year-over-year], but its growth may be significantly off track as a result of COVID-19, jeopardizing its ability to keep its workers,” he said. 

Several innovation-economy executives have expressed concerns to The Logic about their eligibility for the program since the government announced the criteria last week. High-growth firms by definition are likely to have increased sales significantly year-over-year, and technology companies are more likely to be hurt by a reduction in future business than immediate revenue loss. While firms may have significantly more revenue than the previous year, they’ve often invested even more in staff and R&D to prepare for even more sales. And software-as-a-service (SaaS) companies typically take short-term losses to acquire customers with long-term value, but may see those prospects dry up. Since the government first announced the CEWS, tech companies have laid off nearly 2,900 workers, The Logic’s ongoing analysis shows; at least one cited its ineligibility for the program as a factor.

Innovation Minister Navdeep Bains acknowledged the concerns of startups and scale-ups on Wednesday, and said the changes to the CEWS will benefit “thousands and thousands of high-growth firms across the country.” 

Joseph Fung, CEO of Waterloo-based Kiite, said he’s glad the government is listening to businesses’ feedback. The draft legislation is “definitely an improvement, but will only help a small portion of SaaS companies.” Very early-stage firms will benefit most from the revised January-February comparison point, but “by definition, they also employ the fewest,” he said. “For more mature subscription companies, a drop that large in that window is unlikely, and the core issue remains that the more mature companies staffed for sales growth, not for present revenue.”

Also Wednesday, Ottawa revised the CEWS’s revenue-decline threshold for the first month—companies will only have to show a 15 per cent decline in their business in March to receive the aid, although the 30 per cent mark still applies for April and May. Firms will also be able to choose whether to report their numbers using cash rather than accrual accounting. Dan Kelly, CEO of the Canadian Federation of Independent Business (CFIB), said that change will benefit firms whose books don’t reflect their operating reality. A company may typically record revenue when it sends out the bill or finishes a phase of a project, not when a client cuts the cheque. “You might be sending out invoices that you actually never get paid for, but your books look fine,” he said. The cash-accounting option may help firms that sell to other businesses and collect fees annually, since renewal payments may be delayed, according to Fung. But it likely won’t benefit consumer-focused software companies that charge users’ credit cards weekly or monthly, meaning cash and revenue are closely linked.

Council of Canadian Innovators executive director Benjamin Bergen is less pleased with the changes. “We appreciate the effort, but these provisions are not attuned to the innovation economy and leave so many Canadian technology firms in a lurch,” he said, calling for more targeted measures from Bains’s department. The scale-up lobby group and CFIB are both calling for Ottawa to eliminate the revenue test entirely. But Morneau signalled that’s not likely. “There will always be businesses who have not been as impacted by COVID-19, that won’t be eligible,” he said. “The plan was to make it so that we were capturing businesses who had a significant revenue decline.”  

Parliament still has to pass legislation implementing the CEWS, and the government reportedly wants all-party agreement on its bill before recalling the House of Commons, possibly over the long weekend. But NDP innovation critic Brian Masse said after reading the draft, he’s still concerned that startups, seasonal businesses and non-profits will have difficulty accessing the program. “The model’s so myopic in terms of its focused timeframe,” he said. “I’m hearing from a lot of businesses they’re just not going to bother.”

SR&ED money flowing? The Logic reported last week that nearly $200 million in tech tax credits was on hold, and that Kitchener-based Encircle was considering layoffs if it didn’t get the money. Now Encircle’s $1-million payment is coming. “[The Canada Revenue Agency] just called and they are forgoing the audit on our [Scientific Research and Experimental Development] claim and moving forward with the payment. This is awesome news and I hope this is what they’re doing for all tech companies,” said CEO Paul Donald. Boast Capital, which helps over 500 firms get SR&ED money, has seen a “small number” of audited clients move ahead as well, co-founder Lloyed Lobo told The Logic Wednesday.  

Mask on: More than 10,000 Instagram accounts have started selling masks claiming to protect against COVID-19 in recent months, most of which don’t meet safety and price regulations, according to social media research firm Ghost Data. Online mask-peddling has surged in tandem with the spread of the virus and underscores the challenges social media companies face in thwarting hucksters. Google and Facebook have both banned ads for medical face masks, and Amazon and Shopify have removed thousands of merchants touting unsubstantiated health and safety claims for their coronavirus-related products. But a global mask shortage, coupled with new advice to wear non-medical masks in public, has complicated the platforms’ efforts. While some of the sellers Ghost Data identified could be selling legitimate products, “there are no guarantees that advertised products are genuine and safe,” the report reads.

In the markets: Markets were mixed on Wednesday with European indexes down and gains across North American stocks. The S&P 500 was up 3.14 per cent and the Dow Jones increased 3.44; the Nasdaq gained 2.58 per cent and the S&P/TSX rose 2.50 per cent. The loonie dipped to 71 cents on the U.S. dollar. The OECD reported the biggest monthly drop in economic activity on record; its leading indicators suggest a “sharp slowdown” in all major economies except India, which is showing signs of just a “slowdown.” The findings add to mounting evidence that a global recession is already here. The World Trade Organization, meanwhile, is anticipating that global trade will contract between 13 per cent and 32 per cent, with the upper range on par with drops seen in the Great Depression. RBC CEO David McKay is likewise bracing for long-term disruptions to global trade and urging Canada to shore up its domestic supply chains. “We need to think about how to be more self-reliant in the areas that matter most to our competitiveness and prosperity,” he said. And as stocks plunge, Americans have started hoarding cash, with the number of physical notes in circulation rising 1.8 per cent during the week ended March 25. 

“As we gaze into the abyss of the coming months and years, we needn’t care what gazes back.”: Mark Spitznagel, the head of Universa Investments, which made a 4,144 per cent return on investments in the first quarter of the year, told clients that he does not know what will happen next. 

Forty per cent of Canadians are worried about potential for civil disorder: Statistics Canada surveyed over 4,600 people on the real-time impacts of COVID-19 in Canada. Other results include one-third of Canadians reporting they were extremely or very concerned about family stress; 84 per cent saying they’re concerned the pandemic will overload the health-care system; and one in 10 women saying they were concerned about violence in the home. The agency also released an estimate showing energy prices dropped nearly 11 per cent, fuelling a 0.4 per cent drop in the industrial price product index for March. That decrease is still a fraction of the 2.9 per cent drop in November 2008, at the beginning of the recession. StatCan cautioned that its flash estimates were based on incomplete data. Building permits are down 23.2 per cent compared with March 2019, with B.C. and Ontario seeking the sharpest drops. Twenty-six per cent of COVID-19 cases in Canada are due to travel. Of those, nine per cent have been hospitalized. 

Cross-country checkup: Quebec is projecting 1,200 to 9,000 COVID-19 deaths by the end of the month. In both scenarios, Quebec health officials project cases will peak on April 18. Saskatchewan is forecasting between 3,000 and 8,000 deaths at its peak. Alberta Premier Jason Kenney outlined a “relaunch strategy” that will include as many as 20,000 COVID-19 tests per day, robust screening of international travellers entering the province and using location tracking to monitor people meant to be in quarantine. The strategy would be implemented once social-distancing rules are relaxed, likely not until the end of May. B.C. Premier John Horgan said the province will also ramp up the screening of international travellers, saying, “I wish we had done it a week ago.” Ontario, meanwhile, reported its biggest single-day increase in COVID-19 infections on Wednesday, with 550 new confirmed cases, even as the province decreases its testing. Premier Doug Ford said the level of testing was “unacceptable,” demanding that 13,000 tests—Ontario’s full capacity—be done every day. The province has suspended environmental-reporting and -consultation rules, arguing the measures could hinder its ability to quickly respond to COVID-19. 

The federal government is spending $3 million to help organizations quell the spread of online misinformation and racism linked to COVID-19. The University of Alberta is disregarding all winter 2020 term grades for calculating GPA and evaluating admissions applications. Saskatchewan is considering a $50-million small-business aid package. Manitoba 150 celebrations have been pushed to next year. B.C. is closing all provincial parks. Royal Canadian Legion branches across the country are turning to fundraising to carry them through the pandemic. Lawyers in Ontario are now permitted to witness will signings by video calls. Ottawa students with no Wi-Fi access have been told to head to school parking lots where hotspots have been set up. The Stanley Cup is also self-isolating

Bay Street to Main Street: Air Canada has rehired the 16,000-plus workers it laid off last week, crediting the federal government’s wage-subsidy program. While the employees will be paid, they won’t be working, “as there is no work for them given we have reduced our schedule by approximately 90 per cent,” Air Canada spokesperson Peter Fitzpatrick told the Toronto Star.

  • TD Bank has shifted over 9,000 call-centre employees to working from home. 
  • CIBC has received about 250,000 payment-deferral requests.
  • Car insurance companies are pledging to lower rates and issue rebates.
  • An Amazon Ottawa worker who tested positive for the virus was working until March 19; the plant’s management informed employees on April 4. 
  • Maple Leaf Foods has closed its poultry plant in Brampton, Ont. after three employees at the facility tested positive for COVID-19; the plant is being deep-cleaned.
  • Manitoba dairy farmers are trying to donate their milk instead of dumping it.
  • Ontario will allow cannabis retail stores to reopen until at least April 13 for curbside pickup and delivery.
  • InkSmith, a Kitchener, Ont.-based tech startup, has launched a new company called The Canadian Shield by InkSmith that will produce and distribute face shields.
  • Thornhill Medical has expanded its workforce and partnered with a bigger manufacturer in order to produce 10 times as many ventilators as it used to.
  • Shopify CEO Tobi Lütke has joined forces with a group of tech entrepreneurs and venture capitalists to create Fast Grants to fund research on coronavirus prevention and treatment. The first grants will be awarded April 12, after which application decisions will be made in less than 4 hours. Approved researchers will receive a payment of between $10,000 to $500,000 “as quickly as your university can receive it.” For Canadian recipients, Fast Grants makes funding recommendations to the Thistledown Foundation.
  • Google has launched a free tier of its Stadia game streaming service in Canada and 13 other countries. 

Crowdsourcing the crisis: Remitr, an online banking platform for businesses, has created a directory of services for small businesses. Tax Templates is creating a free worksheet to help Canadian businesses calculate their wage-subsidy payments. Blume, a personal-care and education startup based in Vancouver, is crowdsourcing donations to get protective gear for B.C. health-care workers. Toronto journalist Laura Howell is conducting an audio experiment: a collective COVID-19 dream diary. You can participate by recording a short voice memo on your phone about your dream and send it to [email protected]

Postcard from San Francisco: Reva Seth has been at home for almost a month now, helping lead the Lambda School—which offers online classes in coding—as it copes with a surge in demand. “It’s people who have lost their jobs, or are furloughed and thinking about, ‘What can we do right now to make ourselves more employable?’” said Seth, a bestselling author who worked at Canada 2020 and the Brookfield Institute before becoming Lambda’s director of communications. The mood in San Francisco has changed rapidly, said Seth, with tension in grocery-store lines and people shaming each other on the platform NextDoor for not wearing masks. “I’m sure that’ll happen in Toronto after a while as people just get worn out and more worried about what’s going on,” she said. 

Lambda has been sharing best practices with elementary and high schools that are shifting to online learning. The school has faced some criticism recently from former students concerned about its payment model, which requires no tuition upfront in exchange for a cut of future earnings. Seth said there’ve been no issues with former Lambda students who have been laid off trying to make payments. “The way the income-share agreement works is that if your income drops below US$50,000, then you don’t have to pay any longer,” she said. In addition to her work, Seth is juggling online learning for her three children, aged seven, 10 and 13, alongside her husband Rana Sarkar, Canada’s consul general in San Francisco. “It becomes this sort of push-pull like, well, ‘How important is your call compared to my call?’” she said, adding that in her home-schooling, she’s mostly looking for little wins: “Did we read for 20 minutes each? Did we manage to get outside? Did we do a bit of math?”

Drinking from the firehose: Security concerns about Zoom Video Communications continue to grow as Taiwanese officials and the German foreign ministry both restrict its usage. The video platform also faces a class-action lawsuit brought by one of its shareholders for, among other issues, failing to accurately disclose it was not end-to-end encrypted.

  • Twitter CEO Jack Dorsey has pledged US$1 billion of his stake in Square, the payment firm he co-founded, to coronavirus-relief efforts. So far, he has donated $100,000 of the proceeds to America’s Food Fund to “help fund meals to people impacted by COVID,” according to a publicly available spreadsheet he shared in a tweet.
  • Airbnb will pay its new investors over 10 per cent interest in return for the US$1 billion in funding announced Monday. It is also in talks to take on as much as US$1 billion in additional debt. 
  • Amazon is testing disinfectant fog, which is used by airlines and hospitals, at a Staten Island warehouse following worker protests. The e-commerce giant is also ending its delivery service for non-Amazon packages starting in June.
  • Disney may check its theme-park visitors’ temperatures once restrictions are lifted.
  • Postmates’ “Fleet Relief Fund,” which is designed to provide financial relief to drivers, is paying some as little as US$30.
  • General Electric workers in the U.S. have taken their protests nationwide to demand their factories are repurposed to create ventilators. 
  • Tesla is reducing pay for its salaried employees and furloughing hourly workers until May 4.
  • Oyo, the SoftBank-backed Indian hotel startup, is furloughing thousands of workers.
  • Funds raised by Asia-focused venture capital firms fell to a seven-year low in the first quarter.
  • Healthtech startups are also facing layoffs.
  • Finance chiefs across industries are looking to speed up automation investments.
  • Nintendo had to suspend shipments of its Switch console in Japan because it could not keep up with demand.

Around the world: Today marks 100 days since the detection of a “pneumonia of unknown cause” near a seafood market in Wuhan, China at 1:38 p.m. on Dec. 31, 2019. The city, which was subsequently locked down for 76 days, entered a new normal Wednesday, with the status of its economic and social places officially “changed from ‘suspended’ to fully ‘restarted.’” Honda is among those to reopen its factory in Wuhan, though it is maintaining social distancing rules and temperature checks. As the city cautiously celebrates, China and Russia have agreed to temporarily close their shared land border. Aggressive restrictrictions in the San Francisco Bay Area are slowing the spread of the virus, where in one county, the number of cases has gone from doubling every three days in March to now doubling every two weeks. For the first time in its history, Italy declared its seaports “unsafe,” adding that it will no longer authorize the landing of migrant rescue boats or be able to guarantee the security of their lives. Hong Kong has announced financial relief measures worth HK$137.5 billion. 

Turkey is tracking those diagnosed with COVID-19 through their mobile phones. European researchers have released the code they used to build an app that uses Bluetooth signals to track users’ movements, in an effort to measure social distancing. The European Union is deliberating a unified policy on such technology. Mauro Ferrari, the European Union’s top scientist, has resigned three months after starting the job, saying he has been “extremely disappointed by the European response to Covid-19,” citing “the complete absence of coordination of healthcare policies among member states, the recurrent opposition to cohesive financial support initiatives, the pervasive one-sided border closures.” U.S. hospitals claim the federal government is quietly seizing medical supply orders; no information has been provided about where they’re going or how they will be distributed. Broadway has extended its closures until at least June 7. American singer-songwriter John Prine has died of coronavirus complications. Last year’s Miss England has switched her crown for her stethoscope. 

“I keep having people say, ‘Gee, it’s like we’re living in a Stephen King story. And my only response to that is, ‘I’m sorry’”: The horror author had to rethink setting his next novel in 2020, after realizing that one of the plot lines depended on two characters going on a cruise. Said King: “I immediately set the book in 2019, where people could congregate and be together and the story would work because of that.”

* We’re now emphasizing new cases, rather than running totals, because “flattening the curve” is when each day’s new cases are fewer than those of the previous day. The percentage increase is determined based on how today’s cases compare to a rolling three-day prior average. Numbers may also vary based on countries’ individual testing capacity and reporting.

Our reporting team is working tirelessly around the clock to deliver the very latest information on the COVID-19 crisis. If you like our journalism, please consider subscribing. You can get a subscription today for more than $100 off your first year.