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Small businesses to suffer from being informal

The persistence of COVID-19 is likely to lead to a massive loss of jobs in the next six months, a report by the Economic Policy Research Center (EPRC) has predicted.

According to the report, over 75 per cent of employees projected to lose their jobs will be from the services sector. The report that sheds light on post Covid-19 recovery efforts among small enterprises was launched during at an event held on September 8 at Sheraton hotel.

It is titled MSMEs Resilience and Recovery in the Face of Covid-19. Speaking at the event, Francis Abibi, the chief economist at Uganda Development Bank, called for Ugandans to turn their efforts towards reviving the economy to sustain itself beyond the pandemic.

According to Abibi, any sort of relief to MSMEs should be inclusive as a large number of Ugandans are involved in the informal sector. He further stressed the importance of research as evidenced in helping the financial sector find a way forward.

A plan by the ministry of finance to counter the dire condition in which many small businesses are has led them to capitalize Uganda Development Corporation (UDC) and Uganda Development Bank (UDB) to the tune of Shs 1 trillion for the financial year 2020/2021.

These funds will be used to provide a stimulus package to small enterprises with the hope that they will ease the financial blow the pandemic has caused to them.

The downside, however, is the fact that most micro, small and medium enterprises (MSMEs) are informal businesses that are not registered and, for this reason, are likely not qualified for this facility.

Gideon Badagawa, the executive director of the Private Sector Foundation Uganda, urged for more skilling, saying that can play a vital role in improving the capacity of these businesses from being informal to actually start contributing to the economy.

“When we talk about MSMEs, 90 per cent of them are in the informal sector. We don’t know what they do, we don’t know who they employ, what they are producing, to whom they are selling.”

According to EPRC, the nature of these MSMEs makes it challenging to examine and understand their demands and challenges.
With more than 2.5 million people employed in MSMEs, according to Uganda Investment Authority (UIA), the effects of the pandemic are bound to affect approximately 90 per cent of the private sector.

aaronorena@gmail.com

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