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What does the COVID-19 pandemic mean for each small business owner?

What does the COVID-19 pandemic mean for each small business owner?

Mr. Eddie Sembatya, Project Manager at UGEFA and Managing Director at Finding XY, appeals to small business owners to continue being resilient through this period in which many countries, including Uganda, have implemented COVID 19 national lockdowns and other restrictions. Eddie shares his tips with business owners here. These tips call on enterprises who are struggling in light of the global pandemic to remain strong and continue to support their employees and wider networks in the green economy transition in Uganda.

Furthermore, in speaking to the Daily Monitor Uganda, Eddie Sembatya and Lewis Akenji, Executive Director of SEED, shared further insights relevant to a wider audience of private and public sector actors on why smaller green businesses are essential to Uganda's post-pandemic recovery. [Full article at Daily Monitor Uganda]

"The Covid-19 pandemic has jolted national governments the world over to provide emergency support to vulnerable parts of society and the economy. For Uganda specifically, this has exacerbated challenges already posed by heavy rains earlier this year and an ongoing locust invasion. Through the Covid-19 Task Force, the government has collaborated with private sector and development partners to deliver support such as food rations to most affected households and medical equipment to health workers. The Central Bank has further lowered the CBR rate and financial institutions have encouraged borrowers to defer loan repayments.

Such support is much needed. But financial aid should be directed at key economic players - such as Micro Small and Medium sized Enterprises (MSMEs) - that can ensure a sustainable post-pandemic recovery. Unfortunately, businesses least able to access the aid are often those that are most in need of it. It may seem counter-intuitive, but the key to a successful bailout package, especially when resources are limited, does not lie in the usual practice of giving more money to large corporations. Rather it would require targeted and tailored support for eco-inclusive MSMEs – these are businesses that do not only focus on profits but also on providing employment, social and health benefits to communities in which they operate, as well as addressing several of the ecological challenges now being reemphasized by the pandemic. It is for the above reason that SEED supports eco-inclusive SMEs.

In Uganda, MSMEs make up approximately 90 percent of the private sector and are directly linked to over 80 percent of manufactured output, according to the Uganda Investment Authority. Without counting the informal sector, MSMEs employ more than 2.5 million people in Uganda, equivalent to 90 percent of total non-farm sector workers. This should call for immediate attention when thinking of what to prioritize in the current crisis...

Support provided to businesses during this recovery should be treated as an investment in future prosperity, making it concomitant with how it contributes towards a people-centric and resilient post-pandemic recovery. [Finding XY and SEED] recommend three types of actions for eco-inclusive SMEs. The most immediate is remedial action, to reduce the financial burden on MSMEs in the hardest hit sectors. Examples are direct financial aid with a special fund dedicated to MSMEs, suspension or renegotiation of payments such as for loans, or providing government guarantees for quick and low-interest loans. A special insurance scheme can be set up for MSMEs and their employees against the pandemic shocks, or accelerate and expand the scope of existing mechanisms such as Uganda’s Agricultural Insurance Scheme.

The second type of action is capacity development in order for eco-inclusive MSMES to be better equipped at management, accessing finance, business acquisition and generally building more resilience into their models. SEED has been providing such programs for over 10 years, working with partners and national governments to provide direct enterprise support, as well as to better government policy and private sector instruments that affect MSME sustainability.

The third type of action, needed in the medium term, is to design policies and instruments that optimize the operational environment for eco-inclusive SMEs to thrive. Government should view support of MSMEs as part of its social protection program, given how strongly linked the performance of eco-inclusive MSMEs is to addressing unemployment among the less educated and marginalized populations, poverty reduction, and food security. Such actions would bolster the role of MSMEs while also helping to formalize Uganda’s sizeable informal sector. Furthermore, contributions of eco-inclusive SMEs to environmental protection and pollution prevention are aligned with international frameworks on sustainable development and climate change. Eco-inclusive SMES should thus be duly integrated in policy discourse towards national development priorities and recognised as making contributions towards government efforts to fulfil its international commitments.

In planning for the type of economy that should emerge from the pandemic, government would find efficiency gains in supporting businesses and communities that would make the society more resilient. In this respect, eco-inclusive MSMEs offer the best chance of linking entrepreneurship to inclusive and ecologically sustainable development."

Full article at Daily Monitor Uganda.

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Finding XY
The Green Enterprise Finance Accelerator is funded fully by the European Union and implemented by adelphi research gGmbH and Finding XY