On 21st May 2020, the Government of Uganda represented by the Ministry of Trade Industry and Cooperatives, Makerere University and Uganda Revenue Authority (URA) along with the United Nations Capital Development Fund (UNCDF) launched the Uganda Business Impact Survey 2020. The report, which incorporates responses from over 1,000 firms, demonstrates the impact of COVID-19 on small and medium enterprises (SMEs) in Uganda. The report also makes recommendations on how local businesses can be supported to relieve them of the negative effects of the pandemic and accelerate economic recovery.
The report is being published at a time when Uganda has moved to ease the lockdown restrictions by allowing a few businesses to reopen subject to government delivering face masks. The country has been in a lockdown for over 45 days and only businesses providing essential services such as food markets and grocery shops remained open. Since the nationwide lockdown commenced, business operations have significantly slowed down.
Insights from the survey show that:
• The downward pressure of declining production due to a reduced workforce and slowing demand has forced companies to look for ways to reduce their operating expenses including labour. 62.3 percent of the respondent companies are considering or have already started cutting jobs.
• Ugandan companies are fragile and have a relatively low cash flow. Only about 15 percent of surveyed companies can sustain more than three months of operation on their current cash flow.
• Some industries expect an increase of over 30 percent in the cost of inputs and operating costs. These include manufacturing, production and payment of utilities (electricity, heat, gas and water), where 45 percent of companies expect an increase of more than 10 percent.
• Use of digital solutions is the most popular adaptation measure yet uptake is low with only 40 percent of all companies using online channels.
The report highlights how the pandemic has not only affected business operations during the lockdown period but will continue to affect operations even when the lockdown is lifted. Recovery for most businesses is expected to take more than three months and possibly until the end of the year. 70 percent of the respondent businesses estimate a recovery time of more than three months.
While presenting the report, Head of UNCDF in Uganda Office Dmitry Pozhidaev urged business owners to be innovative, “by definition a business involves risks and not all risks can and should be covered by government, businesses need to innovate to stay afloat.”
Some sectors like the tourism industry, which started slowing down in January and all but stopped in early February, does not expect to recover until over a year from now, bringing full recovery to sometime next year. Building on the projected recovery expectations, the report provides recommendations to support business recovery and survival.