The Plight of Micro Small and Medium Enterprises Amidst COVID-19: A Post-lockdown Analysis Based on Business Climate Survey

Abstract

The COVID-19 outbreak and the subsequent containment measures have had devastating effects on Uganda’s businesses resulting in the economy’s general slowdown. Despite the macro-level impacts, evidence at a micro-level, especially regarding the post lockdown period, generally remains anecdotal. More specifically, that relating to schools—the most prominent formal private-sector employer in Uganda and worst affected by the school closures—is lacking, notwithstanding the phased re-opening of schools that started in October 2020. In this special Business Climate Index Issue, we examine the pandemic’s impact on MSMEs and private schools in Uganda, considering the lockdown and post lockdown period and schools’ re-opening. Results indicate that the emergence of the COVID-19 pandemic and the subsequent measures to contain its spread negatively affected business operations in all sectors of the economy, albeit with different magnitude. After the lockdown, businesses faced severe liquidity constraints while re-opening. In this case, female owned businesses in the services sector reported a much dire financial situation. In addition, access to credit remains a challenge as financial institutions remain pessimistic about the future business environment. Nonetheless, employment in businesses showed signs of recovery, albeit sluggishly, with much slower employment recovery in the services sector.