It is undeniable the role Small and Medium Enterprises (SMEs) play in developing economies. They not only account for the majority of businesses worldwide but contribute greatly to job creation and global economic development with 90% of businesses retaining more than 50% employees worldwide.
In Uganda, SMEs make up over 70% of our economy and contribute above 20% to the GDP. They range from service providers, selling of goods, information technology, agriculture down to furniture artistry.
According to the World Bank, there will be need for 600 million jobs by 2030 to absorb the growing global workforce which makes SME development a high priority for many governments around the world. In emerging markets, most formal jobs are generated by SMEs which create 7 out of 10 jobs.
However, access to finances is a key constraint to SME growth, it is the second most cited obstacle stifling business growth in emerging markets and developing countries.
With COVID-19 looming over Uganda and stringent measures being taken to curb the spread of the virus, 70% of SMEs have lost 70% of their revenue as indicated by a study done by Economic Policy Research Centre. Job layoffs have left many unemployed which inevitably affects the economy.
Whereas companies have sent their employees packing, some have adapted to new ways of work.
Peter Kimbowa, the Founder and Team lead of CEO Summit while addressing entrepreneurs on Innovation Led Entrepreneurship on Friday, 15th May 2020, shared that since the global outbreak of COVID-19, the internal management of risk in the area of receivables and payables is one of the biggest challenges.
He emphasized that an entrepreneur’s primary role is to identify and solve customer needs. He added that we are addressing the new meaning of work which simply means what you do and not where you go to work.
70% of employees are working remotely while 30% still have access to office.
An African proverb goes, “When fishermen cannot go to the sea to fish, they repair their nets”. This implies that if they can not go and reap from work, they will use the opportunity to re-frame their thinking models, learn more and understand better how best to contribute to social development.
Furthermore, Dr. Kimbowa encouraged an open-minded approach by entrepreneurs revise their business models, and have the maturity to fit their solutions to the current demand.
Challenges SMEs are facing with the pandemic.
Business Uncertainty: Dr. PK encourages entrepreneurs to use this time to Seek and respond to change, and make use of that change to create solutions. “Entrepreneurs need to push products to customers, or pull customers into their products, either way they need to have their products in constant interaction with the customer”.
Liquidity and solvency: Entrepreneurs products are not selling off yet there is need to pay rent and meet long-term financial commitments. Companies are likely to collapse, and go through different stages of solvency including; administration, private arrangements, and perhaps liquidation of the company.
How an entrepreneur can get their business back on its feet;
The most important thing for an entrepreneur or SME right now is talent optimization. Identify the skills that your employees have or can pick up to enable the organization satisfy the new customer.
Re-purpose their business models. Businesses need to Identify all that they can do to remain smart and relevant. Query how your business will survive with the money and influence you have.
Adapt to the new normal. Even though most organizations are responding with lay-offs and restructuring, adaptation would be the best option.
Financial stability: Pay attention to the trends government has set in the area of taxes and loan extensions to stagger payments and cost of money. Remember that suspension or delayed payment does not mean that it is forgiven or non-payable.
Inventory as a function of disruption in the supply and operating costs has been affected. It is no secret that for many businesses, operation costs have gone up by 90% in cases of no re-purpose. Inventory levels have gone down and in areas where they haven’t, cost of input has risen.
Adaptation to digital service delivery tools. Customers have become fiscal and more powerful because they seek convenience and whoever does not offer convenience is no longer of interest to them. The mobile phone has become a tool for delivery and service provision.
Prove your reliability: A number of SMEs have to defend their international certification. They must prove your reliance to suppliers now more than ever.
What SMEs should do to counter the changes?
- Scrutinize your business for risks and mitigation measures.
- Identify internal management risks including operational risks and how to address them.
- With the limited resources, how can businesses operate with remote workers?
- Communicate the changes—Your message and tone are important. Silence is also communication, it can be interpreted as abandonment of responsibility and leadership by your staff.
When people are exposed to new changes, it is almost impossible to take them back to an older experience.
In this period of time, SMEs should not compromise on quality, however they must start operating as though they were no government. Make major assumptions to yourself and your employees, create targets, work programs and work streams as though they are is no government.
Keenly listen to the trends government has set in the area of taxes and how they affect you.
The issue of governance should be handled especially in family businesses since the founder syndrome undermines growth of SMEs.
Entrepreneurs need to acquire financial literacy to understand the standards and guidelines in managing liquidity and solvency.
SMEs need to work collectively to build massive onslaught on the market. It takes mobilization and sensitization by creating mechanisms and guidelines for people to work together. SMEs will later reap from synergies of unity and working together.
Post COVID-19 smallness will kill you. We need massive onslaught to get going.
Lastly, collection and utilization of data is better than oil or gas. Therefore, to give it attention now is to reap largely in the future.
With this crisis in place, there are many problems that emerge, all of them needing solutions. This means that there is money now more than ever. Business opportunities lie in the challenges that are constantly ignored in the community. It is a tough call working in this period, however for SMEs to harness, they need to build synergies and move in serious BUBU businesses in order to scale.
We need more dreamers and inventors. African dreamers should break down barriers to create solutions.
Dr. Peter Kimbowa is a Leadership Catalyst, Talent Optimization Coach, Strategy Execution Expert, Author and Futurist, named one of the World’s 101 most fabulous Global Coaching Leaders 2020 by The World Human Resource Development Congress (HRD).
He is also the founder and team leader of the CEO Summit, and the CEO Apprenticeship Program.