A World Bank report has shown that lockdowns and other restrictions imposed by various governments across the continent as measures to contain spread of the COVID-19 pandemic resulted in the loss of about half of sales of businesses.
According to the bank’s Africa’s Pulse report, on average sales dropped by 49 percent across firms in Sub-Saharan Africa – a decline comparable to that in other low- and middle-income countries (48 percent) but greater than the decline experienced by high-income-country businesses (32 percent).
Countries which imposed stricter lockdowns, the report adds, experienced a sharper drop in sales than those with relaxed lockdown measures. For example, sales volume dropped by 75 percent in South Africa and by more than 60 percent in Kenya and Côte d’Ivoire, whereas that of Ghana, Nigeria and Senegal recorded levels close to the regional average. However, Chad, Tanzania and Togo registered the lowest drops in sales volume, between 34 and 39 percent.
The report further showed some sectors were significantly more impacted than others. The largest declines in sales were reported by businesses that were more intensive in face-to-face interactions and involved tasks which could not be performed from home.
For instance, firms in accommodation and food services experienced a 74 percent decline in sales, followed by those in food preparation which recorded 63 percent decline; and transportation and storage services which also recorded 56 percent. The decline in sales in the manufacturing sector and ICT was comparable to that for the average sector in the region. Although agricultural and mining firms were the least affected, their sales still dropped by 38 percent, the report stated.
Besides the factors mentioned which led to more decline of sales in some sectors than others, the size of firms also determined how much companies lost. For example, micro firms (that is, those with fewer than five employees) registered a decline in sales of 55 percent. Small firms (with five to nine employees) had a drop in sales that was comparable to the average across all firms in the region, while large firms (more than 100 employees) had the smallest decline in sales, at 39 percent.
Use of digital technology
Despite the negative impact the pandemic had on firms across the continent, there was also a positive side – namely, the use of digital technology to carry out their activities. According to the report, across sectors of economic activity in sub-Saharan African countries, firms in sectors with a greater share of tasks/jobs which can be performed from home were more likely to have increased their use of digital platforms in their businesses.
For instance, sub-Saharan African firms in financial and ICT services were most likely to use digital platforms in response to the pandemic-shock (40 and 39 percent, respectively). More than one-quarter of the firms in retail and wholesale trade started or increased their use of digital platforms. Finally, firms in agriculture, construction, accommodation services and manufacturing were less likely to have expanded their use of digital platforms (less than 20 percent).
The size of firms was also a determinant to firms’ acceptance of digital technology. Larger firms, the report states, were more likely to use digital technologies in response to the pandemic-shock than smaller ones. Also, the likelihood of firms using digital platforms to respond to the shock ranged from 17 percent (micro firms) to 35 percent (large firms).
Additionally, the uptake of digital platforms was more widespread among formal firms than informal ones. This was the case in selected countries of the region with available data—namely Ghana, Senegal and South Africa. Formal firms in South Africa were more likely to adopt digital platforms than informal ones, with probabilities of 53 and 38 percent respectively.