over the next year, Katrina’s impact on the U.S. economy could result in slower growth of the Gross Domestic Product (the nation’s production of goods and services) by 0.5% to 1%, and slower job growth — a loss of about 20,000 jobs a month. It gets worse. An estimated 400,000 Americans will likely lose their jobs, according to a report issued by the Congressional Budget Office.
Although rebuilding New Orleans should give the economy a boost, the question at hand for black entrepreneurs is whether African American businesses will get a shot at the billions in reconstruction contracts that will be doled out and whether the black customers will come if they build it. One need only look at the demographics of the Mississippi Delta to see how many African Americans have been affected. Pre-Katrina, the black population in Louisiana was 32.5%; it was close to 66% in New Orleans. In Mississippi and Alabama, blacks made up 36.3% and 26% of the population, respectively, according to the Census Bureau. That’s roughly 3.6 million African Americans.
BLACK BUSINESS IN PERIL
Scores of black businesses have been wiped out as a result of Katrina. In Mississippi alone, more than 2,000 black-owned businesses were severely affected by the hurricane, and these firms generated sales and receipts of $126 million, according to the Economic Policy Institute. Louisiana had some 20,000 black companies that generated nearly $886 million that were affected (see chart). The vast majority of these are small businesses, and it is likely that most won’t open their doors again, leaving thousands jobless. Skyrocketing fuel prices, resulting from a slowdown in oil out of the Gulf, will affect companies across the board.
In the short term, the effects on black businesses are obvious: the immediate devastation of businesses and the complete loss of markets. There’s likely to be a significant change in New Orleans’ demographics. Many suspect that after rebuilding, it will no longer boast such a large black population. The impact on black businesses in the Gulf will be “dire,” says Eugene Cornelius Jr., district director for Louisiana Office, U.S. Small Business Administration. “It will mean devastation to the African American business community in New Orleans as we know it.” Long-term, in the region as a whole, more than 60,000 black-owned businesses generating $3.3 billion a year could potentially be impacted.
By late September, minority business owners across the Gulf Coast claimed they were being shut out of the rebuilding process and that contracts were being doled out to white business owners who had longstanding connections with federal officials. Also posing a challenge to black business owners is that there are few black businesses of scale that can handle such daunting projects. It’s the proverbial catch-22; black-owned firms need to be large enough to handle these projects but they need the business to get to that scale.
UNEXPECTED DIASPORA
Sandra Berry and her husband, Joshua Walker, owners of The Neighborhood Gallery in New Orleans, were displaced by Katrina and ended up in Atlanta. Their gallery was once home to