SMEs and Entrepreneurship Development Determinants in Practice: Case of Uganda

Introduction

Entrepreneurship is an important element for the economic growth and development of nations worldwide, and it also serves as an engine for promoting innovation and sustainability. Small and medium enterprises (SMEs) have played a big role in the creation of employment and the alleviation of poverty in many different sectors of economies globally. Therefore, deliberating on the determinants of SMEs and entrepreneurship development is crucial as a step towards understanding fundamental aspects of entrepreneurial growth. Generally, SMEs put in an extra effort to survive, especially during the first five years of their life. This has become more crucial during the post pandemic era, because it presents greater risks and a more competitive and tougher business environment which complicates the existence of entrepreneurship and SMEs. Since the outbreak of the Corona Virus (Covid-19) in late 2019, most sectors of developed economies like the United States of America, China, the United Kingdom, Italy, France and Germany, have been adversely hit, with some lives lost and a lot of economic disruptions having taken place. SMEs have especially been affected, with severe business disruptions due to enforcement of lockdown restrictions. A big percentage of SMEs are counting losses, others are fighting hard to recover, while a considerable number of these companies have totally shut down operations, leading to massive job losses.

The global airline industry for instance, is facing a severe financial crisis due to Corona virus travel restrictions, airlines across the world are grounding planes, laying off workers and scrambling to preserve cash, as measures to contain the Corona virus outbreak prompt flight bans. This has led to a total reduction in travel demand and those airlines still operating are reducing seat capacity to allow for social distancing measures. This has come with serious financial implications and a ripple effect has been felt by SMEs that were relying on the airlines for products and services (British Broadcasting Corporation News, 2020, Cable News Network, 2020). In other parts of the world like India, researchers such as Mishra and Mishra (2020), note that other than the essential service sector providing health related products, utilities and telecom services, all the other sectors are affected by the pandemic in one way or the other. This whole situation brought by the pandemic has caused massive unemployment and crippled economies which are struggling to cater for the well-being of their citizens.

In Africa, the fate of SMEs and entrepreneurship is not any different. For example, PEP stores, one of the leading clothing discount retailers, is winding down its operations in Uganda. PEP started its operations in 2016 and it served as a strategic platform to enter the east African market with plans to expand. This however, has not been feasible because of the current and future operating environment. One of the main reasons for closure is the pressure from Coronavirus disruptions and adverse market conditions in the retail industry (Daily Monitor, 2020). Thus, most of the SMEs are re-thinking their business strategy in order to stay afloat, and others are badly affected because of supply chain disruptions and a drastic drop in market demand. Currently, SMEs in Uganda are tackling uncertainty because of curfew and lockdown measures which have severely affected sales and performance. For instance, shopping arcades, part of public transport, private and government owned academic institutions, and other businesses considered to be non-essential services have been caught up in this situation. As a result, a sizeable percentage of entrepreneurs are now changing from their core businesses to providing essential services so as to stay relevant. According to Kuratko (2006), it is the entrepreneurial persistence and tenacity that revives the economy back to normal after an economic downturn with time.