Four million Ugandans could lose their jobs if the Coronavirus pandemic persists for the next six months, according to the business climate index published by the Economic Policy Research Centre.
EPRC conducted a survey, sending questionnaires electronically to 147 businesses which are a panel of businesses based on the Uganda Bureau of Statistics Census of Business Establishment. The businesses were asked on their activities, access to raw materials, price of inputs, operating expenses, demand, price of output, revenues, productivity, employment, as well as credit and liquidity constraint.
The study established that in the event that COVID-19 persists for the next six months, 3.8 million workers would lose their jobs temporarily while 625,957 would lose their employment permanently. over 80 per cent of workers predicted to permanently lose their jobs are from Kampala whereas in other regions there might not be a permanent lay-off.
Such layoff would constitute a reduction of 42 per cent in temporary employment and 7 per cent permanent employment. The projection is based on national estimates for employment which currently stands at 9 million, according to Uganda Bureau of Statistics 2018.
“Over 75 per cent of employees projected to lose their jobs permanently are from the service sector. This is highly expected since most of the services in Uganda involve face-to-face an interaction which contravenes the social distancing requirement,” The report indicates.
The report also indicates that majority of micro and small businesses would exit the business in 1 to 3 months in the event the current situation persists while the majority of the medium and large firms do not foresee closure.
It further states that 110 businesses reported a reduction in the number of employees due to the risk presented by COVID-19 and subsequent lockdown measures. The report indicates that although some businesses have reduced salaries by more than 50 per cent, Interestingly, 18 per cent of the businesses have reportedly increased salaries for their employees.
Businesses in agriculture have undertaken the largest restructuring in the workforce, due to a severe decline in agricultural demand and revenues. According to the report, COVID-19 pandemic lockdown has reduced business activity by more than 50 percentage points. Businesses in agriculture experienced the largest decline in business activity with 76 per cent of the firms reporting severe decline and 12 per cent reporting a moderate decline.
“This could be largely attributed to COVID-19 containment measures such as transport restrictions, quarantine, social distancing and ban on weekly markets, which have hindered farmers’ access to input and output markets, thus undermining their productive capacities. “it reads.
According to the report, the western and northern region report experiencing the largest decline in business activity, while the central region experienced the least decline in business the activity followed by Kampala.
EPRC says there is a need to offer a fiscal stimulus package to support firms to address immediate liquidity challenges, reduce layoffs and avoid firm closures and bankruptcies especially for small and medium firms in the service sector.
In order to address immediate cash flow challenges, EPRC has called on the government consider one or a combination of: tax rate reduction, reducing taxable income, offering tax credits, and offering tax refunds. They have also called on Government to pay all outstanding arrears against supplies made to the government.