Small businesses and their challenges during COVID-19 pandemic in developing countries: in the case of Ethiopia

Small businesses and their challenges during COVID-19 pandemic in developing countries: in the case of Ethiopia

COVID-19 is shuddering the world economy and it is a pandemic making a giant distractions to life and livelihoods as well as social and economic systems in the world. Based on different reports, it is the most horrible global crisis since WW II. This virus is highly transmittable and has spread with inconsistent progress in every corner of the world without any variance. COVID-19 is a massive health crisis BUT also much more.

One of the biggest trends to emerge during the COVID-19 pandemic is small businesses going online and creates different opportunities to solve many challenges. Indeed, for many small businesses, the internet remains a lifeline, helping them to stay afloat during the pandemic.

According to Facebook’s report, in the 30 days prior to the survey fielding, 23% of businesses reported using digital ordering tools, 16% service delivery tools, and 37% digital payment tools. 36% of operational personal businesses that use online tools report that they are conducting all their sales online. However, we have also seen a lot of small businesses find creative ways to succeed during COVID-19, from expanding into new markets to finding new ways to deliver their products and services. At the same time, a number of large technology companies such as Facebook and Google are creating new ways for small businesses to connect with their customers.

Even when businesses remain open, employees are experiencing financial cuts from lost employment or fewer hours worked. It’s important to remember that any time a business closes or has to lay off workers, it affects entire communities of people who rely on income from jobs to support themselves, and in turn, support other local businesses and organizations.

Most impacted groups, sectors and geographic areas by COVID-19 in Ethiopia

In the country, specially, employees working in micro, small and medium-size enterprises (MSMEs) in the urban and rural sectors including (manufacturing, construction, trading, retail, hospitality, and tourism), predominantly helpless children and adolescents such as street children, workers in industrial parks who are already laid off or in danger of losing their jobs, frontline health care professionals, Children of school-going age who are from poor, food insecure households, groups with specific vulnerabilities (persons living with HIV/AIDS, persons with disabilities, older persons, the homeless), migrants, returnees/relocates and returning migrants, Developing regional states (DRS), MSMEs in supply chains in construction, manufacturing, agro-industry, hospitality, tourism, and retail, MSMEs in supply chains for agricultural and horticultural exports as well as production + marketing of critical food crops and soon.


30% + of Ethiopia’s SMEs could be in jeopardy, mostly in urban areas and those embedded in small-scale manufacturing, export, construction, and service industry supply chains.


A 10–15% loss of employment/livelihoods leading to a cumulative loss of perhaps 1.6–2.4 million jobs/livelihoods depending on the severity and duration of the crisis, mostly in urban areas. In the worst case, 3.2–4 million could lose their jobs/livelihoods. Knock-on effects on small businesses/enterprises and self- as well as wage employment in both the formal and informal sectors, especially in the services sector, affect larger urban centers most sharply with business closures and rising unemployment or loss of livelihood and loss of productivity in the case of widespread illness in the workforce.

Sectorial/sub-sectorial impacts


Production might drop by 30% if producers revert to the extensive production system for cash crops. Significant income losses in specific sectors, e.g., livestock, horticulture and supply chain disruptions, are an increasing possibility. Start-up of agro-industrial parks will be delayed and broader negative impacts on food availability, access, and utilization.


Under severe pressure, likely to be one of the most impacted sectors.


Total shutdown or sharp drop in production capacity and reduced employment in industrial parks, subsectors such as textiles and garment and leather and leather products will be hit hard, the flower industry faces catastrophic losses and agro-food processing but beverages subsector will be relatively less impacted.

Services (tourism, hospitality, aviation, trading, retail)

High likelihood of closure of businesses and large-scale loss of jobs/livelihoods, in both the formal and informal sectors, especially in urban areas, women, who are disproportionately represented in the informal sector, will be impacted seriously and significant and prolonged forex losses from tourism are very likely.


The COVID-19 pandemic has resulted in school closures across the world. It is estimated that learning for 89% of the world’s student population has been disrupted. In Ethiopia, schools have been closed since 16 March 2020 and this is likely to remain the case until the end of the academic calendar. This means that over 26 million children are currently not in school, of which approximately 77% are primary school pupils. These children are neither learning nor benefitting from other school-based support mechanisms, such as protection, health, and school feeding. In short, children’s well-being is at risk. Key education indices which were already dismal before the COVID-19 pandemic are at risk of worsening in the current crisis.

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