The impact of the COVID-19 lockdown on SMEs and employment relationships in Uganda

  • During 2020, governments in many developing countries introduced severe restrictions on economic activity and mobility to curb the spread of COVID-19. In Uganda, public transport and non-essential businesses were closed from early April to June 2020.
  • This policy brief reports on the results from a phone survey of a representative sample of SMEs and their workers conducted in late 2020 to study how SME activity and employment relationships were impacted by a prolonged lockdown.
  • The findings show the strict three-month lockdown resulted in a significant increase in firm closures, but these closures were by and large temporary.
  • They also uncover substantial resilience of informal labour relationships to the shock. Although most workers were let go during the lockdown and 15% of workers migrated to other locations, 76% of the furloughed employees were recalled back to work by the same employer after the lifting of the lockdown restrictions.
  • Even though most firms reopened, and a considerable share of workers were re-hired, this has been accompanied by substantial income losses: firms are now earning 30% lower revenues and workers are earning 30% less incomes than before the lockdown.
  • The results suggest a key role for liquidity and wage support policies to help impacted firms and workers.