Covid-19 leaves many Ugandans jobless

Workers will need help to navigate the Covid-19 crisis.

Sights of workers going through their phones as others engage in small talk during what would be their working hours have become a common fixture.

This is as a result of the outbreak of coronavirus disease (Covid-19) and the subsequent containment measures instituted by the government, beginning earlier last year to suppress the spread of the pandemic.

Before the pandemic, makers and suppliers of Majanja Tents, located in Kireka, which is one of the six townships that constitute Kira Municipality in Wakiso District, were a busy lot.

Weekends and festive seasons were their busiest periods. But for the last 10 months, even with the relaxation of the containment measures, business has not picked up yet. 

As a result, the proprietor of Majanja Tents has been forced to reduce pay for the 18 workers the company employees, with no hope in sight as the future still looks grim.

Speaking in an interview just days before the end of last year, the assistant director, Majanja & Sons Co. Ltd, Ms Sharifah Majanja, said business has dropped by at least 70 per cent, leaving them with no choice but to enforce pay cut.  

As long as restrictive containment measures remain in force, the casualty will be many, including the workers, who will have to contend with a pay cut or stay out of work until there is a sense of normalcy.

Brace yourself  

Majanja Tent is just one of the many service providers whose workers are lucky to be receiving half pay as many more are either out of work or have not returned to their places of work, which has knock-on effects on incomes, particularly for informal and casually-employed workers who make up nearly half of the country’s economy.

According to Economic Policy Research Centre (EPRC) report examining the effect of the risk presented by Covid-19 pandemic on Uganda’s businesses, indicates that labour, which is a key factor of production, should brace for hard times until such a period that a prescription for the pandemic has been found.

Results from the EPRC report project that in the event that Covid-19 persists for the next six months, which has since passed with additional three months, about 3.8 million workers would lose their jobs temporarily while 0.6 million would lose their employment permanently.

Predicted job losses

Over 75 per cent of employees projected to lose their jobs permanently are from the services sector such as the one Majanja & Sons Co. Ltd, is a player.

The other major concerns highlighted in the EPRC report relate to reduced product demand and potential inability to meet costs of operations by most small and medium enterprise, which makes up the majority of businesses in country, should the Covid-19 situation and the resultant containment measures persist for more than half a year. This is critical because it has an impact on employment as majority of micro and small businesses indicated in the report that they would exit business in the event the current situation persists for more than three months, which is now months beyond the predicted time.

Impact on workforce

Another study titled: Uganda Business Impact Survey, 2020, designed and conducted by the United Nations Capital Development Fund (UNCDF) and College of Business and Management Sciences of Makerere University under the guidance and supervision of Dr Dmitry Pozhidaev of UNCDF and Prof Hisali Eria of Makerere University, further reinforced what the labour market is up against in the wake of Covid-19.

Labour is an important factor of production. In economics, factors of production, resources, or inputs are what is used in the production process to produce finished goods and services.

According to the UNCDF report, work (labour) attendance has dropped significantly.

About 73.5 per cent of the responding companies miss over 30 per cent of their employees who are unable to come to work due to the lockdown and another 8.5 per cent miss at least 10 percent of their workers.

The sectors with more than 75 per cent of enterprises reporting the absence of above 30 percent of the total workforce include accommodation and catering, construction, social and business services.

Since the containment measures were enforced in March last year, layoffs have not stopped. In fact, they are likely to continue. The downward pressure of declining production due to a combined effect of a reduced workforce and slowing demand forces companies to look for ways to reduce their operating expenses including labour.

“62 per cent of the respondent companies are considering or have already started cutting jobs,” reads the UNCDF report. 

The biggest layoffs are implemented or planned by companies with 11-50 employees (72.5 per cent) followed by companies with 51-100 employees, 65 per cent of which are implementing or planning staff downsizing.

The industries that are bracing for the biggest layoffs include  accommodation  and  catering,  mining  and  quarrying, manufacturing, culture, sport  and  entertainment,  and  wholesale  and  retail  trade.

This trend would mean a loss of job for over 100,000 employees in the formal sector who are as a rule very qualified and experienced.

Labour paying the price

Covid-19 will have far-reaching impacts on the labour market.

Beyond the urgent concerns about the health of workers and their families, the pandemic and the subsequent economic shocks have impacted the world in a way not anticipated earlier, according to International Labour Organisaton (ILO) notes.

The effect of the pandemic and resultant containment measures are already manifesting in quantity of jobs (both unemployment and underemployment), the quality of work (for example wages and access to social protection) and effects on specific groups who are more vulnerable to adverse labour market outcomes, not to mention underemployment is also expected to increase on a large scale.

As witnessed in previous crises, the shock to labour demand, according to the ILO notes, is likely to translate into significant downward adjustments to wages and working hours. While self-employment does not typically react to economic downturns, it acts as a “default” option for survival or maintaining income - often in the informal economy.

Consumers in many economies are unable or reluctant to purchase goods and services. Given the current environment of uncertainty and fear, enterprises are likely to delay investments, purchases of goods and the hiring of workers.

The report recommends that swift and coordinated policy responses are needed at national and global level, with strong multilateral leadership, to limit the direct health effects of Covid-19 on workers and their families, while mitigating the indirect economic fallout across the global economy.

Protecting workers and their families from the risk of infection needs to be a top priority. Demand-side measures to protect those facing income losses because of infection or reduced economic activity are critical to stimulating the economy.

Income protection also mitigates the disincentives against disclosing potential infections, especially amongst low income and already disadvantaged groups of workers.

Sector leaders

Most businesses are facing serious challenges, especially those in the aviation, tourism and hospitality industries, with a real threat of significant declines in revenue, insolvencies and job losses in mainly service sectors.

The chief executive officer of Uganda Hotel Owners Association (UHOA), Ms Jean Byamugisha in an earlier interview said sector assessment indicates hospitality sector, employing about 450,000 people is expected to lose $900 (about Shs3.4 trillion), thanks to Covid-19 pandemic and its resultant enforcement measures.

With almost 500 hotels under its membership, Ms Byamugisha says the two— tourism and hospitality complement each other.       

Efforts to cushion or save the sector raking in the most foreign exchange earnings, are not forthcoming as yet. President Museveni in his 14th address during the peak of containment measures, said: “We have lost $1.6 billion (about Shs6trillion) from tourism.”

Mr Martin Wandera, the director of labour, employment and occupational safety and health at the Ministry of Gender, said while some jobs will be lost, others will emerge especially in ICT sector.

Effect of pandemic

Quality of jobs

The effect of the pandemic and resultant containment measures are already manifesting in quantity of jobs (both unemployment and underemployment), the quality of work and effects on specific groups who are more vulnerable to adverse labour market outcomes, not to mention underemployment is also expected to increase on a large scale.

The shock to labour demand, according to the ILO notes, is likely to translate into significant downward adjustments to wages and working hours. While self-employment does not react to economic downturns, it acts as a “default” option for survival or maintaining income - often in the informal economy.