Economic Effects of COVID-19 on Micro and Small Enterprises in Addis Ababa Surrounding Towns of Oromia National Regional State

Abstract

Micro and small businesses contribute a lot to Ethiopia's transition from an agrarian to an industrial economy. But now, the sector’s economic operations are affected by CVID-19. Accordingly, this study aimed to examine the economic effect of the COVID-19 on micro and small enterprises in Addis Ababa surrounding towns of Oromia National Regional State. To achieve this objective, quantitative data were collected from 436 MSE’s by questionnaire that represents the situation of the enterprises before and after the outbreak of the pandemic in December 2020. Data was analyzed by descriptive statistics method. The findings of the study showed that at the beginning of March 2020, before the outbreak of the pandemic, an enterprise had on average 3.8 workers whereas, after the occurrence of the pandemic, an enterprise had, on average, 2.9 workers. This implies that due to COVID-19, enterprises decrease their workers on average by 0.83 and the mean difference of workers before and after the pandemic was statistically significant at less than 1% probability level. Furthermore, 32.3% of respondents reduced their workers because of the pandemic, 60.55% and 31.02% of enterprises stopped working temporarily and partially (half a day) respectively. On the other hand, the enterprise's annual income for the year 2019 on average was 170,174.4 birr whereas it was birr 127,433.8 for the year 2020 during the pandemic and the mean difference was 42,740.6 birr which is statistically significant at less than 1% probability level. The main challenges enterprises faced during the pandemic were a fall in demand, decline of orders from customers, and lack of operating finance. Based on the findings of the study, training on a business recovery plan development and new line production, an extended debt repayment period, and provision of short-term credit are suggested to make enterprises recover faster from the adverse effect of COVID-19.