A Gender Analysis on the Effects of COVID-19 on Ethiopia’s SMEs

The impact of COVID-19 on businesses is wide and diverse, bringing about opportunities for some while threatening the existence of others, and this is especially true in Ethiopia. At RENEW, we have been creating interventions to help businesses weather the storm. One of the interventions that the Accelerating Business Growth (ABG) Project, led by RENEW, has created in response to COVID-19 is a widely accessible virtual webinar series designed to keep companies informed and to provide resources that will help them make critical decisions during these difficult times.

Over the last few months, we have continued to run a number of webinars, including our virtual Women in Finance Series, recognizing the need for women business owners to stay connected during this time. We have seen a significant increase in participation, showing the importance of solidarity amongst women business owners and executives during the pandemic. At the end of all our webinars, RENEW has polled participants using a set of questions with 6 to 9 indicators to assess and better understand the effects COVID-19 is having on companies.

The resulting company data was gender-disaggregated and analyzed in order to better understand how COVID-19 was impacting female-led versus male-led companies so that we, and the greater development community, could continue to refine our existing interventions using a data-driven approach.

Out of the 95 respondents in total, the spread between female versus male participants was roughly equal at 51% and 49%, respectively. The respondents were predominantly operational companies with a fairly even distribution among the business stages (i.e., micro, small, medium, etc.) across both females and males. Further, the sector spread between female and male companies is also largely similar. And by having these three factors roughly equal and not skewing the data with significant outliers, RENEW believes the data is statistically under control.

The business owners were polled about the effects of COVID-19 on their companies, wherein they could choose as many of the eight pre-listed indicators that applied to them. Within the female participant category, “a decline in local sales/revenue” was cited the most with a 51.2% prevalence rate (excluding pre-revenue companies, this becomes a 39.5% prevalence rate). In comparison, the male participant category “a decline in local sales/revenue” and a “delay in an expansion project” were equally cited the most with a 40% prevalence rate for each (or a 35% prevalence rate for the two reasons if we exclude pre-revenue companies).

 

The business owners were then polled about the measures they were taking to survive during this period, wherein they could choose as many of the nine pre-listed indicators that applied to their companies. Within the female participant category, “decreasing costs” was the most cited action with a 41.9% prevalence rate (34.9% excluding pre-revenue). In comparison, the male participant category “looking for new markets” was the most cited action with a 45% prevalence rate (35% excluding pre-revenue). When we exclude pre-revenue companies for male-led companies, “working to improve the product or businesses” also has a 35% prevalence rate.

Finally, the business owners were polled on what they would use funding on if secured, wherein they could choose as many of the seven pre-listed indicators that applied to their companies. Both the female and male categories chose “growth - working capital” as the most cited use of funding at 62.8% and 62% respectively (37.2% and 47.5%, respectively, excluding pre-revenue companies). Interestingly though, the second most cited use of funding for each category differs - for females it is “Survival - salaries and other expenses”, whereas males listed “Pivot - launch new lines of business in response to COVID” (this remains unchanged when we exclude pre-revenue companies).

 

RENEW believes that these observations provide further support for our investment strategy to help SMEs become gender-smart and be run by gender-balanced executive teams. Having both women and men in positions of leadership, management and decision-making not only drives gender equality but, we believe, is simply smart investing. There are a number of research reports and data on how gender-smart companies (i.e., gender-equal boards, executive teams, etc.) outperform their non-gender-smart peers in terms of financial performance (1).

In the gender analysis outlined above, we see how female and male entrepreneurs respond differently to COVID-19 (“inward” versus “outward” looking); something that we have even experienced at RENEW. Both approaches can be right and good for the company, but it's in having that diversity of thought at the executive and management level that builds balance and brings about opportunity, something that is particularly important during times of hardship.

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