Forget China, think local

Business activity

The EPRC found that COVID-19 pandemic and subsequent lockdown has reduced business activity by more than 50 percentage points. This means all businesses surveyed were performing below potential. Businesses in agriculture experienced the largest decline in business activity with 76% of the firms reporting severe decline and 12% reporting moderate decline.

The EPRC says COVID-19 containment measures such as transport restrictions, quarantine, social distancing and ban on weekly markets have hindered farmers’ access to input and output markets.

Micro and small businesses reported experiencing a larger decline in businesses activity compared to medium and large firms.

“This is not surprising since most of the micro and small businesses halted operation due to inability to implement Standard Operating Procedures (SOPs) such as the provision of on-site accommodation for employees,” the report says.

In addition, employees of SMEs use public transport—which was banned on March 25, just days after the first case of COVID-19 was registered in Uganda.

Access to raw materials/input

COVID-19 pandemic has severely affected access to inputs used by micro and small businesses particularly in manufacturing and service sectors. Whereas majority of the small, medium, and large businesses reported moderate reduction in access to inputs, the highest percentage of micro business (38%) reported no access to inputs at all, while 36% reported severe decline. Similarly, 49% of the small businesses reported severe reduction or no access to inputs at all.

Regarding sectors, a high percentage of businesses in the manufacturing sector reportedly experienced severe reduction (26%) or no access at all (24%) compared to other sectors. This could be attributed to disruption in supply chains due to factory closures in China and other main suppliers of intermediate inputs for many manufacturers in Uganda.

Prices paid for raw materials

Overall, 55% of the businesses reported to have experienced moderate increase in the price of inputs although inputs for businesses in agricultural sector have become relatively cheaper. Its notable that majority of the businesses in agriculture (43%) reported having experienced a decline in the price of input during the period. This could have been as a result of a fall in demand, which coincided with a buildup of inventory.

On the other hand, inputs of manufacturing businesses have become relatively expensive largely due to disruption in the global supply chains, owing to closure of factories abroad.

Additional operating expenses

COVID-19 containment measures such as hand sanitizer, soap, hand washing facilities, and social distancing have resulted in a slight increase in operating expenses for businesses. Overall, nine out of ten businesses have reportedly experienced increase in operating expenses due to preventive measures instituted by government to curb the spread of the virus. However, majority of them (62%) reported an increase of less than 25%. Only 38% of the businesses reported an increase in operating costs of more than 25%.

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