The concept of technology for business development encompasses two key facets. The first is in terms of sophisticated machinery or tools employed in production, including manufacturing and/or value addition; and second is business digitization using ICT or internet technology, commonly termed as e-commerce.
This article focuses on leveraging the latter, to support recovery and survival of business enterprises in the face of COVID-19 pandemic and post-pandemic period. Besides human life or health, the COVID-19 pandemic and associated restriction measures have ravaged several Micro, Small and Medium-sized Enterprises (MSMEs). Business enterprises have been, and many are still in turmoil, and depending on the sector, and other conditions, the ravages of the pandemic are seen from; disrupted business operations and supply chains, plummeted sales, financial stress, unprecedented employee lay-offs, and complete shutdown among others.
Due to the pandemic, the social distancing rule, among other measures has highly restricted physical contacts or face-to-face meetings for businesses or MSMEs. As a result, remote work or business and virtual events are now becoming a norm in most institutions – part of the famous “new normal”. Indeed throughout the world, plenty of enterprises or trading activities are going through intense shifts into increasingly digital and interconnected cyberspace. Nonetheless, this “norm” is yet to be fully adopted by the majority of the MSMEs in doing business in Uganda.
Why should MSMEs bother about technology adoption?
Business enterprises should not partake in digitalizing only because of supply-side reasons (e.g. for reliable or sustained supply chains), but also because of the need to harness opportunities created through demand-side responses.
There are immense business opportunities created on the demand side, as markets and different consumers respond, in part, in a bid to abide by COVID-19 mitigation measures. For example, consumer’s use of ICT or internet technology to search for goods and services, as well as digital payments, are skyrocketing.
Some of the evidence on internet use by consumers in the time of COVID-19 reveal that there has been a sustained surge in consumer search and viewing on mobile internet gadgets, as well as streaming business-related videos.
Statistics on social media use, for instance, use of Facebook business pages increased by almost 1 million between March and September 2020. Therefore, the conduct of business remotely or virtually is critical for accelerating the recovery and survival of MSMEs during the COVID-19 pandemic and in the post-pandemic era. In the future, use of digital infrastructure by MSMEs will no longer be a question of choice, since it is now a reality that business clients and partners including consumers and employees will expect digital facilities in the conduct of most businesses.
There are some business enterprises, albeit just a handful, that have leveraged technology to stay afloat during the COVID-19 period. Some of the success stories in Uganda and beyond include Wena—a digital hardware solution that posted more than 80% growth in the business of construction materials (attributed to digital conduct of business) during the COVID-19 induced lockdown. Another example is Jumia Uganda, an e-commerce enterprise, whose sales of food and various non-food items were boosted. Jumia became increasingly relevant during the pandemic, as it attracted more than 3,000 market vendors in Uganda to sell their produce online, and experienced increased product purchases. Another enterprise is Udemy – a digital skills training business solution and/or learning marketplace. This enterprise, according to their global performance report, experienced an exceptional increase in consumer enrolments (by 425%), and an 80% increase in usage by businesses and public institutions. In a similar vein, some available evidence reveals that e-commerce platforms have increased businesses by triple-digit, following COVID-19 outbreak.
However, MSMEs in Uganda are strikingly constrained on digitalization due to, among other things, high cost of the internet (e.g. data cost and taxes), and high charges by the regulatory body (National Information Technology Authority – NITA). Majority of MSMEs also have inadequate capacity or technical competence to use ICT technology, especially those at the micro and small scale. In a practical business sense, the prohibitive cost of internet and low capacity of MSMEs cannot enable business enterprises to fully engage in digital marketing and product delivery. In addition, businesses can hardly use digital applications successfully to access business recovery and development credit facility from Uganda Development Bank, as well as digital credit from other financial institutions.
To effectively leverage technology for MSMEs and ensure that they keep afloat or survive and recover during and post-pandemic, it is necessary to establish a policy environment and responses that strengthen e-commerce and the digital ecosystem for rapid business recovery. The government should strategically act to lower the cost of Internet, and through NITA, widen the scope of IT certification across MSME sectors, size, and geographic location. Specifically, to ensure inclusiveness in the MSME space, the certification programme should increase attention to addressing issues of small-scale enterprises, rural-based enterprises, and women enterprise development.
Additionally, it is crucial to take measures to fast-track the development and implementation of the national e-commerce strategy and ICT infrastructure support for MSMEs. The efforts to move MSMEs towards digital technologies must be complemented by MSME capacity enhancement through technical assistance in digital marketing and sales, internet connectivity and utilization, or digital skills development.
Tonny Odokonyero is a Research Fellow at the Economic Policy Research Centre