Rwanda: Study - 57% of SMEs Were Affected By COVID-19 Lockdown

Passengers queue to board a bus at Nyabugogo Taxi Park in Kigali (file photo).

At least 57.5 per cent of small and medium sized enterprises (SMEs) operating across different industries closed operations between March and April due to Covid-19 impact, a new study by Business Professionals Network (BPN) and the University of Rwanda shows.

The closure of small and medium sized businesses means that hundreds of workers were sent home, either with or without any financial package as businesses grappled with the pandemic.

SMEs make up more than 90 per cent of businesses operating in the country and employ thousands of people

On average, entrepreneurs reported having about 35 employees before the crisis, and having 16 employees working at the moment, the study released on Wednesday shows.

The study is based on a sample of SME entrepreneurs engaged in agriculture, food processing, manufacturing, hospitality, automobile services, private schools, and fashion among others.

The result, they say, 42. 5 per cent of entrepreneurs were found to be running operations, partially or fulltime, but only 35.8 per cent were selling, while 57.5 per cent were not operating at all.

But even those that were operating were faced with logistical and transportation challenges, constraints in acquiring raw materials due to the disruption of supply chains.

The study shows that 64.2 per cent of entrepreneurs are not selling any products or services due to the lockdown measures that stopped movement of people, and affected consumer demand.

It also highlights that only 26.1 per cent of entrepreneurs were producing new products in the same period, while 68.7 per cent were not producing new products, and 5.2 per cent have only been producing for a few days.

Alice Nkulikiyinka, the Director of BPN told The New Times that the study is in many ways a representation of the impact that the novel Coronavirus pandemic has had on small businesses.

"They (entrepreneurs surveyed) represent entrepreneurship in Rwanda, but not mostly doing business across the whole country," she said.

While entrepreneurs surveyed are those that have worked with BPN through the organisation's four-year entrepreneurship programme, Nkulikiyinka says they generally have features other SMEs have.

Popular local SMEs such as Uzuri KY, Lamane Bakery, Select Kalaos, Event Factory, Moshions and Rwanda Clothing were among the respondents.

The data was collected between March 28 - few days after Rwanda was put under total lockdown, - and April 11, and 134 entrepreneurs were interviewed.

The research was collected by "BPN coaches who have a longstanding and trusted relationship with the entrepreneurs" and allowed the firm to "reliably collect important, sensitive business data."

Recovery response

Nkulikiyinka indicated that this is one of the series of studies that the company is conducting to inform the Government's recovery response for different businesses in the country.

Almost all surveyed businesses are said to have reopened, but with new ways of operating, including adopting e-commerce models, shifting to online marketing or digitizing other operations.

However, many entrepreneurs, some of whom are servicing business loans, are uncertain about their capacity to deal with the crisis if the Covid-19 pandemic persists.

Despite fears from entrepreneurs that Covid-19 will greatly affect their businesses, many have not been contacted by any institution or even their banks about any support.

Many entrepreneurs believe understanding the real impact of Covid-19 on their businesses would be one of the ways to cope with the crisis, while others believe financial support is critical.

The Private Sector Federation on May 4, signed a Memorandum of Understanding with Access to Finance Rwanda in a new initiative aimed at supporting entrepreneurs in Rwanda to adjust to economic realities of COVID-19.

The Government announced earlier this month that it will roll out a special economic recovery fund estimated at over $200 million (approximately Rwf186bn) aimed at supporting local businesses that are hardest hit by the coronavirus pandemic.

The fund will support businesses through loan restructuring for the tourism sector specifically hotels, providing working capital for businesses most affected by Covid-19 to keep them operational and avoid lay-offs as well as loan guarantee for SMEs and micro-businesses.

editor@newtimesrwanda.com

Follow https://twitter.com/Julio_Bizimungu

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