The Effect of COVID-19 on the Operations of Agro-processing MSMEs in Uganda

Abstract

Uganda’s Micro, Small and Medium Enterprises (MSMEs) are among the worst affected businesses by the COVID-19 pandemic. This policy note examines how the pandemic has affected specific operations of the agro-processing MSMEs. Based on a unique survey of 172 agroprocessing MSMEs conducted in February and March 2021, we find that some firms could re-evaluate their production processes and adapt their production to items demanded by pandemic conditions, such as Personal Protection Equipments (PPEs). Agro-processing MSMEs continued to rely on retained earnings as the primary source of working capital, suggesting that it will take longer for them to scale up the business. More than one-half of micro agro-processing firms reported decreased access to imported inputs, affecting the productivity and the quality of products. There was an overall stagnation in the use of digital payments such as mobile money by agro-processing MSMEs. Finally, very few firms accessed the stimulus package offered by the government of Uganda. This was attributed to a lack of awareness of the availability of such support facilities and bureaucratic red tape. The policy note calls for interventions to security concerns impeding the further use of online payment and marketing while addressing the cost of technology hardware acquisitions among agro-processors; and a rethink of the approach used to reach MSMEs with support and the need to deal with the red tape and bureaucracies associated with receiving public support.