Experts suggest that hands-on training in utilizing digital platforms could be a vital tool for the recovery of micro, small, and medium-sized enterprises (MSMEs) in the aftermath of the COVID-19 pandemic in a recent study conducted by the Economic Policy Research Centre (EPRC) . The study, titled ‘The dynamics of the COVID-19 pandemic effect on SMEs in Uganda,’ examined 1,111 MSMEs over a three-year period, shedding light on the challenges faced during the pandemic and the subsequent recovery phase.
The extensive research, undertaken by EPRC in collaboration with the International Development Research Centre and the Ministry of Finance, Planning and Economic Development, focused on MSMEs from the manufacturing, tourism/hospitality, and education sectors in Uganda. The findings, presented by Smartson Ainomugisha, a research associate at EPRC, were unveiled on December 7, 2024, at Protea Hotel, Kampala.
Dr. Sarah Ssewananya, the executive director of EPRC, highlighted the study’s objective to provide evidence of the COVID-19 impact and identify necessary interventions for the post-pandemic economy. Emphasizing the critical role of enterprises in Uganda’s development, Ssewananya stressed the need for well-designed support systems to enhance resilience.
The study revealed that 64% of enterprises operated partially or shut down during the pandemic, with 60% facing limited cash flows. In Kenya, 46% of MSMEs temporarily closed for over a year, and 92% scaled down operations. In Uganda, over 60% reported reduced sales and profits, while 40% experienced increased costs. Shockingly, 60% of businesses closed permanently, resulting in a 41% job loss.
Before the pandemic, many businesses faced challenges, including informality, limited access to credit, climate shocks, and geopolitical tensions. Ainomugisha highlighted the disproportionate impact on micro and small enterprises, while medium-sized enterprises demonstrated greater resilience during lockdowns.
The study also indicated a shift towards local sourcing of materials during COVID-19, with Ainomugisha arguing that formalized businesses could positively impact the economy. However, the resilience score of many businesses was low at 0.1%, indicating ongoing challenges.
Challenges identified by the study include internal weaknesses, leadership issues, lack of staff competencies, market insensitivity, and difficulty adapting to changes. Inadequate planning, preparedness, and weak e-commerce adoption were also prevalent.
Policy implications from the study include providing patient financial support to MSMEs, making small business recovery funds more accessible, and increasing awareness. Capacity building, leadership training, and support for e-commerce adoption were recommended, along with formalization processes involving national identity cards and mobile phone numbers.
Concerns raised by participants encompassed the impact of the Ukraine war on businesses, studying borrowing trends, high interest rates, and the rising cost of living. Calls were made to freeze taxation on emerging businesses and invest in the creative industry for increased revenue.
While the government has introduced interventions and incentives, challenges persist post-pandemic. The Assistant Commissioner in the trade ministry, Steven Mbogo Kirya, highlighted the need for innovation commercialization and academia’s role in aiding entrepreneurs.
