What businesses demand to withstand coronavirus shocks

Closed shops at Namayiba bus park. Businesses that rely on physical spaces and interpersonal interactions such as restaurants, supermarkets, markets, hotels, tour operators are experiencing a severe drop in sales. PHOTO BY ABUBAKER LUBOWA 

In Summary

Thousands of Uganda’s Small and Medium Enterprises (SMEs) mostly regarded as the country’s
engine of growth are struggling to survive. The Covid-19 pandemic has reduced their sales, resulting into cash flow problems. Mr John Walugembe, the executive director of Federation of Small and Medium-sized Enterprises-Uganda shares insights with Prosper Magazine’s Dorothy Nakaweesi on how SMEs can survive during and after this pandemic. Below are the excerpts:-

By Dorothy Nakaweesi

The Covid-19 Pandemic has hit the world-Uganda inclusive. How have SMEs been affected?
SMEs constitute more than 80 per cent of Uganda’s private sector, account for between 70 to 90 per cent of non-farm employment and value added. They shall, therefore, be disproportionately affected by this Covid-19 pandemic. Specifically, they will experience: Quarantines, travel restrictions, market lock downs, the ban on public transport and social-distancing measures are leading to a fall in consumer spending.

Businesses that rely on physical spaces and interpersonal interactions, such as restaurants, supermarkets, markets, hotels, tour operators, bars, gyms are experiencing a severe drop in sales. Reduced sales are likely to result in a cash flow crunch in these businesses.
Many small businesses import inputs or products for sale, from China. These will suffer shortages. The ban on public transport will also disrupt domestic supply chains.

Due to diminished cash flows, many businesses are struggling to pay their employees and meet their other financial obligations. Moreover, the heightened uncertainty is leading to a reduction in access to credit, as financial institutions are less sure of the businesses’ ability to pay back loans.
Staff are staying home due to fear of catching the virus or lack of public transportation. SMEs are, therefore, struggling to operate at full capacity, due to these staff constraints.
In the longer-term, this pandemic may lead to an economic slowdown or recession.

How can SMEs live and beyond COVID-19?
SMEs need to appreciate that remote working is the way to go. They need to embrace it and find innovative ways of supervising staff that may not necessarily be in the same physical location.
It may be a pandemic, but it comes with opportunities which SMEs need to look out for. For instance, increased demand for home delivery of food and other necessities, increased demand for sanitisers and face masks, increased demand for digital transacting and manufacturing.

Secondly, investing in the hygiene, safety and wellbeing of your staff is one aspect SMEs should appreciate that the post COVID-19 world will demand that they adhere to strict hygiene and work safety standards. They need to, therefore, start preparing early.
Going forward, SMEs need to have an up-to-date and robust risk management strategy that helps to anticipate and mitigate these risks.

As the pandemic confines people to their homes, what kind of incentives do SMEs need to weather this storm?
SMEs need tax relief to have extra cash to meet their daily business operational expenses, since their cash flows are suffering. Individual income tax relief offered to consumers will also boost their purchasing power and ability to demand for goods/services from SMEs.