Effects of COVID-19 on Ethiopian Businesses
To take a closer look at the effect of the COVID-19 pandemic on African businesses, on June 6, the World Bank released a policy brief analyzing the results of a telephone survey examining the impact of COVID-19 on Ethiopian businesses based in the country’s capital, Addis Ababa. The survey, which solicited responses from 550 companies between May 6 and May 27, was the second in a series conducted by the World Bank and the Ethiopian Job Creation Commission to monitor the impact of COVID-19. on formal enterprises in Ethiopia and inform policy responses. to the pandemic.
As shown in Figure 1, businesses in Addis Ababa report that the COVID-19 pandemic has affected their business primarily through a substantial decline in demand for their products or services. The collapse in demand has been accentuated since first round of investigation, while only 62% of all companies reported this effect of the pandemic on their business, compared to more than 80% in the second round. In contrast, the impact of other areas has declined since the first round of the survey, with fewer businesses reporting the impact of the forced closure of businesses, markets and shops, as well as the restriction of movement workers. Notably, the impact of COVID-19 on businesses varies by business sector. For example, companies in manufacturing are more likely to be affected by lower supply and higher prices for raw materials and intermediate goods than service companies, while service companies are more likely to be affected by the closure of businesses, markets and shops.
The policy brief says that since the first round of the survey, which took place between April 5 and May 5, businesses in Addis Ababa have started to resume operations, the share of businesses that completely halted their activities increasing from 41% in the first round of the survey. to 29% in the second round. However, despite these reopenings, businesses are still facing significant financial strains, which have only increased over time. Figure 2 shows that while most businesses say the most important financial issue they face is paying rent, financial stress has increased across the board. In particular, the payment of invoices as well as staff salaries and social security contributions has become significantly more difficult for companies since the first round of the survey.
To address these issues, the survey also included questions about policy measures that would be helpful for businesses to survive the COVID-19 crisis. The guidance note indicates that most companies indicated that waiving tax payments would be the most helpful policy measure, followed by covering, reducing or freezing operational costs and freezing or alleviating debt payments.
For more on the impact of COVID-19 on African businesses, see Impact of COVID-19 on Micro, Small and Medium Enterprises in Uganda by Corti Paul Lakuma and Nathan Sunday.