A business index by the Federation of Small and Medium-Sized Enterprises (FSMU) in Uganda has come out showing that 96% of SMEs in Uganda expect to either lay off or make redundant some of their employees this quarter, due to cash flow constraints while 51 % reported dealing with employee issues, as one of the most pressing challenges that they expect to deal with in the quarter.
The SME Business Index is an indication of the health of the Small and Medium Enterprise sector in Uganda. It is released every quarter by FSME from a survey of a sample of 1000 enterprises in different sectors like Personal services (Gyms, Saloons), Professional services (consulting, financial services, travel agents etc.), Retail or Wholesale, Tourism, Agriculture, Media, Communications and ICT, Education, Healthcare, Manufacturing and Non-Profit
The same report indicates that 96% of the respondents expect sales and profits to experience a decrease in Q3 of 2020 due to subdued demand as a result of the COVID-19 pandemic and the unwillingness by consumers to spend. 11% of the SMEs interviewed expect sales and profits to remain unchanged, while 6% expect sales to increase. The education sector is the least optimistic about increased sales, followed by the Tourism sector.
Speaking at the official release of the report at their offices in Ntinda, the Managing Director FSME John Walugembe said that SMEs have been most affected by the effects of Covid 19 pandemic, and most of them remained pessimistic as another lockdown looms due the increase in the Covid 19 cases.
“Reflecting the bearish sentiment in the SME sector, the SME Composite Index fell 4.6 points to 98 in August 2020, a significant decline compared to August of last year. It is observed that none of the six index components posted growth, this quarter due to the negative impacts of the COVID-19 pandemic on the economy,” he said.
Additional the report shows that most SMEs expect a slowdown in the growth of Private Sector Credit due to an increase in non-performing loans, credit relief, the loan restructuring measures and the overall economic uncertainty. However, 87% of the respondents are optimistic that their borrowing costs will experience a moderate decrease in Q 3 of 2020. This expectation is informed by the decision by the Central Bank to cut the central bank rate (CBR) by 200 basis points to 7% in June 2020 and its subsequent instruction to Commercial Banks to lower lending rates. 11% of the respondents expect an increase.