Photo credit: World Bank / Ousmane Traore
Authors: Girum Abebe and Christina Wieser
To understand how the COVID-19 pandemic affects businesses in Ethiopia, the World Bank, in collaboration with the Job Creation Commission (JCC), has implemented a high-frequency phone survey of firms in the capital city of Addis Ababa.
Using results from the phone surveys between April 2020 and October 2020, we examined two key areas: how the pandemic has impacted women entrepreneurs versus men, and whether businesses have been able to use technology to regain their footing.
This blog highlights our findings.
Are women entrepreneurs affected more by the pandemic than their male counterparts?
The short answer is yes. Women-owned businesses were no more likely to be closed due to the COVID-19. The pandemic has, however further exacerbated the gender gap in business earnings and job security. Click To Tweet
Unsurprisingly both men- and women-owned firms experienced a drastic decline in sales revenue. The dip, however, appears to have been more severe in women-owned businesses. In 2019 average sales revenue for women-owned businesses were only 18 percent of their male counterpart’s business revenues, but by April 2020 (the early part of the pandemic) their revenue had declined to a mere 6 percent. Sales revenue slightly recovered for women-owned firms in June but was still only at 10 percent of male-owned businesses. Furthermore, while worker layoffs have been limited in scale, women employees appear to be affected the most — when the pandemic struck in March, 64 percent of laid-off workers were women.
For businesses that closed due to the pandemic, the economic opportunities available to men and women varied widely — women entrepreneurs’ labor outcomes tended to be worse than their male counterparts. Click To Tweet A striking difference was the share of firm owners who reported to be no longer working. Twice as many women business owners — close to 60 percent — reported that they were not engaged in any work for pay compared to their male counterparts (32 percent). This reflects common gender differentials in labor market outcomes. Entry to formal paid work is often more difficult for women and instead, they are forced to engage in unpaid family work as caregivers and homemakers.
What can be done to begin closing the gender gap? During the pandemic, it’s key to have timely support for small and vulnerable women-owned businesses. For example, the Women Entrepreneurship Development Project injected additional capital to an existing credit line dedicated to women-owned businesses and Micro Finance Institutions (MFIs) that serve them. Projects like these hold lessons on quickly targeting and effectively delivering support mechanisms.
Do businesses adapt new and innovative practices in responses to the COVID-19 pandemic?
“Turning crises into opportunity” is probably one of the oldest adages of business. However, it appears that in responding to the COVID-19 pandemic crisis, firms in Addis Ababa have largely missed an opportunity to transform their way of doing business, at least in the first six months of the pandemic. Click To Tweet
Additionally, the pandemic barely changed the nature of products or services firms offered. It also did not affect their investment in new tools, such as equipment, software, and digital solutions, to modernize their existing operations.
The faster adoption of innovative and digital technologies might be hampered by infrastructure constraints. For example, internet connectivity and digitalization have remained poor in Ethiopia compared to other African countries. That’s why it’s crucial to support businesses in acquiring and using digital and online technologies. The pandemic provides an excellent opportunity to devise strategies and policies that promote the adoption of these technologies. The Ethiopian government and development partners should invest in telecom infrastructure, enhance digital skills, increase investments in research, and development in order to improve knowledge and affordability. Click To Tweet Such interventions can trigger a change in business models in the private sector that can potentially generate long-lasting benefits to the entire economy.