Forget China, think local

Future outlook

Overall, close to three out of every ten businesses (26.8%) are worried of decline in demand while 22.7% worry about ability to pay costs in the event that the pandemic persists for the next six months.  Other concerns include reduced production and productivity, loan repayment, and reduced supply of inputs.

Majority of micro and small businesses would exit business in 1 to 3 months in the event the current situation persist. Overall, 21.6% of the businesses would close in 1 to 3 months while 20% would close in a space of 3 to 6 months. Majority of these however are micro (83%) and small (53%).

In the event that COVID-19 persists for the next six month, about 3.8 million workers would lose their jobs temporarily while 0.6 million (625,957) would lose their employment permanently. Projection based on the national estimates for employment, currently at 9 million (Uganda Bureau of Statistics, 2018)8 such layoff would constitute a reduction of 42% in temporary employment and 7% permanent employment. Over 75% of employees projected to lose their jobs permanently are from the service sector. This is highly expected since most of the services in Uganda involve face-to-face interaction which contravenes the social distancing requirement.

The EPRC also notes that over 80% of workers predicted to permanently lose their jobs are from Kampala whereas in other regions there might not be permanent lay-off.  Businesses in agriculture are more likely to maintain the size of their workforce compared to other sectors, with 40.4% of them foreseeing no lay-off in the next six months.

Also, businesses in manufacturing are more likely to lay-off employees in the event the pandemic persists for the next six months. Workers of smaller businesses are more vulnerable to the risk presented by COVID-19 because 71.5% of the businesses in this category reported that they would trim their workers. Most businesses cite reduced demand for their products, followed by inability to pay costs.

Declining demand for products

Approximately half of the businesses in the country have experienced decline in demand for their goods by more than 50%. Eight out of every ten businesses (83%) reported having experienced decline in demand for its products, with 49.4% reporting severe (more than 50%) decline. Meanwhile, 33.3% of the surveyed businesses reported moderate (less than 50%) decline (Figure 8). Higher percentage of the businesses in agriculture experienced severe decline in demand (71%) compared to other sectors. This could be attributed to loss of income-earning opportunities leading to decline in consumption of agricultural products since their demand is more income elastic. In addition, risk aversion, due to fear of contamination, has reduced visits to food markets that were allowed operate. Also, the restrictions on vehicle movements reduced purchases by the urban middle class. Furthermore, the closure of institutions such as schools and hotels has highly contributed to decline in demand in the agricultural food stuffs. In response consumers have stocked dry rations which has reduced demand for other fresh agricultural produce.

Regarding size of business, higher percentage of small businesses experienced severe decline in demand compared to other categories of businesses.

The EPRC survey used a rapid survey of businesses based on its Business Climate Index (BCI) methodology in which questions were sent via email to 147 business establishments. The questions focused on COVID-19 related business risk indicators of: level of business activity, access to raw materials, price of inputs/raw material, operating expenses, domestic and international demand, price of output, revenue of the business, productivity, employment, and credit and liquidity constraint.