This archive report was first published on 19 May 2020.
As Uganda grapples with the economic impact of the COVID-19 pandemic, a new report by the Economic Policy Research Centre (EPRC) at Makerere University paints a bleak picture for the country's micro and small businesses.
According to the report, published on May 19, 2020, the prolonged lockdown measures have already taken a toll on these businesses, with many operating at less than 50% capacity.
The report attributes the decline to measures such as transport restrictions, stay-at-home orders, social distancing, and the ban on weekly markets, which have hindered farmers' access to input and output markets.
Small and medium-sized businesses have been particularly hard hit, with nine out of ten reporting an increase in operating expenses due to preventive measures instituted by the government.
For example, the border closures have led to supply chain disruptions and a reduction in tourism revenue, which has had a significant multiplier effect on the hospitality sector.
Access to inputs used by micro and small businesses, particularly in the manufacturing and service sectors, has also been severely affected, reducing production and increasing operating expenses.
The country's agriculture enterprises have been worst hit, with challenges accessing inputs arising from transport restrictions and the ban on weekly markets.
The report projects that if the lockdown persists for the next six months, about 3.8 million workers would lose their jobs temporarily, while 600,000 would lose their employment permanently.
The report notes that the prevailing situation provides Uganda with an opportunity to develop a critical domestic value and supply chains, allowing businesses to have a stable source for their inputs and saving on scarce foreign exchange.
“Reliance on international rather than regional supply for raw materials and intermediates may be adversely affecting businesses in Uganda. This calls for firms, especially the micro and small companies, to explore the East African Community and Comesa market to get their supplies,” the report notes.
The EPRC report recommends a stimulus package to help firms address liquidity challenges, reduce layoffs, and avoid closures and bankruptcies.
