How has the COVID-19 pandemic affected key sectors of emerging economies—and the millions of people whose livelihoods depend on them?
What are the greatest challenges in these sectors? And how can people working in these sectors rebuild their incomes and their countries’ economies?
TechnoServe has worked on these questions for the past year, carrying out roughly 100 projects in 28 countries worldwide.
We were working in these places before the world changed suddenly in March 2020. And after the COVID-19 pandemic hit, we accelerated our efforts to support people fighting to forge a path out of poverty—and to provide rare firsthand survey information that could improve the development community’s response. With approaches adapted to meet public health standards, TechnoServe worked with hundreds of thousands of small-scale farmers and business owners to successfully navigate some of the most challenging economic times they had ever experienced.
At the same time, TechnoServe conducted systematic surveys with these women and men working in key economic sectors across Africa, Latin America, and India. This data provided on-the-ground insight into the experiences and challenges of the millions of people in developing countries struggling to overcome the financial blow of the pandemic.
As we pass the one-year mark of the pandemic, TechnoServe has combined its full survey data across sectors and countries with a year’s worth of programmatic insights. This report shines an analytical light on the most pressing problems facing small-scale producers in emerging nations—and the promising solutions that can help them power their country’s larger economic recoveries.
We focus on three key, interrelated sectors in many emerging markets:
- Commercial Agriculture – The sector is a critical component of the fight against poverty, with nearly two-thirds of the world’s poor relying on agriculture for their income.
- Food Processing – An important link in the agricultural supply chain, smallholder farmers depend on them as a market for crops, and consumers rely on them for safe, nutritious food.
- Small Businesses – Enterprises of under 50 employees provide 74% of all jobs in Latin America and the Caribbean and more than 90% of all jobs in India and Sub-Saharan Africa. They also sell food directly to millions of consumers, often in underserved communities.
Within these sectors, we analyze the three areas that caused the greatest disruptions to operations in small enterprise and agriculture:
- Markets – which changed or shrank almost overnight
- Supplies – which became more difficult and expensive to obtain
- Finance – which became less accessible as it was needed more
Effectively addressing the pandemic’s continuing impact on the developing world means first understanding its lessons from 2020. We now understand how—and how much—this crisis can upend the lives and livelihoods of millions of the world’s most hardworking and vulnerable people. But even more importantly, we also now understand some of the most promising ways they can emerge from this crisis even stronger.
Main Challenges Across Sectors
Inadequate access to markets, supplies, and finance created challenges within each sector of emerging economies. But across sectors, these problems highlight the broader and interconnected issues that entire economies face. Below, we illustrate how these challenges played out and magnified each other in many developing countries over the last year.
We also note how these challenges revealed gender imbalances across sectors and geographies. Underlying inequalities in assets, household responsibilities, time use, and mobility made it harder for many women to withstand the financial impact of the COVID-19 crisis. Any support efforts in the developing world must therefore proactively address these factors, if women are to have an equal opportunity to succeed.
COVID-19 Impact on Markets
Travel restrictions and lockdowns dealt a crushing blow to most industries in the developing world. In the first few months of the pandemic, 60-70% of smallholder farmers, small businesses, and food processors in our surveys reported losing income or sales as a result of the pandemic. Some ceased operations entirely.
Across the board, consumer demand dropped or shifted. In small shops under social distancing restrictions, customer traffic slowed to a crawl, decimating sales. Farmers and food processors saw demand plummet for more perishable food items, denting their income from these items. Even when these producers could meet demand for shelf-stable products, they struggled to get the food to market, challenged by a crippled supply chain and spiraling transport costs.
While the acute nature of these challenges eased over the year, the economic hit created a ripple effect that is still hampering these sectors.
Many farmers not only faced lower crop prices this past year, but also higher prices for food and farm inputs. This reduced their income and ability to invest in their farms, leading 34% to report in November 2020 that they had harvested less than usual that month—up from 15% in July.
Many food processors scaled back operations, reducing the availability of varied and nutritious foods available to consumers. Small businesses grappled with months of lower sales, forcing them to cut staff and limit their business operations in other long-lasting ways.
The coming year may hold little respite for these hard-hit sectors. Particularly for those dependent on retail and hospitality sectors, continued travel and social restrictions will restrict their ability to recover, even as other sectors bounce back. And additional outbreaks—particularly of more transmissible coronavirus strains—could cause shutdowns and restrictions that will re-inflict economic pain.
Impact on Women
Among farmers and small business owners surveyed by TechnoServe last year, women consistently reported greater challenges with markets and sales—a difference ranging from one to seven percentage points in each monthly survey. Since more women tend to be small-scale traders, they were disproportionately affected by travel restrictions and other health-related shutdowns.
Moreover, their household duties gave them less time and ability than men to adapt to changing market conditions. And for many women, school closures meant a sudden, significant increase in their childcare burden, further limiting their ability to manage income- generating activities.
TechnoServe worked with the women in its programs to overcome market-based challenges in a variety of ways: helping set up digital sales platforms; facilitating direct linkages between entrepreneurs and wholesalers; and working to increase women’s membership in farmer groups, which helped them access built-in market relationships.
Future pandemic recovery programs need to address women’s specific challenges in accessing markets. This includes not only directly supporting women’s economic advancement, but addressing underlying social issues that may inhibit their market activity, such as a lack of child care and restrictive or even abusive conditions in their homes.
COVID-19 Impact on Supplies
The story of supply challenges in 2020 is the story of farmers and businesses being squeezed at both ends. COVID-related disruptions increased costs, which were passed along from each link in the supply chain to the next. The triple hit of higher supply costs, lower sales, and general market disruptions wreaked havoc on livelihoods across the developing world.
Many problems originated with the border closures and travel restrictions that marked the first few months of the pandemic. Import restrictions, road checkpoints, and border inspection backlogs caused long delays in the movement of materials. Worsened by the weakening of many currencies against the dollar, transportation costs soared.
The higher price of doing business compounded the challenges many farmers and small businesses were already facing from market disruptions. Farmers who struggled to afford more expensive seeds, fertilizer, and other inputs, turned to less-effective substitutes or drastically reduced the amount they used.
These decisions, taken in the first few months of the pandemic, echoed through the rest of the year, as the share of farmers reporting lower harvests than usual jumped dramatically from July to November.
But these farmers are also, of course, suppliers themselves—often to the food processing companies who rely on their crops to meet the growing demand for packaged food across the developing world.
Many of these processors scrambled to find new sources of raw food as once-reliable suppliers fell victim to COVID-19 disruptions. At the same time, many food processors faced labor shortages due to lockdowns, and purchased less from farmers as a result.
The final domino in the agricultural supply chain is the micro-retail sector—consisting of small shops that sell many of these food processors’ products to consumers across the developing world. These shops, and many other kinds of enterprises, faced spiraling supply costs from all the previous links in the supply chain. They raced to adapt their business approach, and, supported by loosened transport restrictions, reported much lower rates of supply challenges by the end of 2020.
But by then, many farmers were harvesting fewer crops. Food processors were scaling back operations. Small businesses had laid off employees or even shut their doors entirely. The damage had already been done.
Impact on Women
Women experienced greater supply challenges than men at roughly the same rates as market challenges (the difference ranged from two to seven percentage points in each survey). Women’s supply networks are often thinner than men’s, leaving them with fewer business contacts to draw upon in order to rebound from disruptions in existing networks.
TechnoServe addressed these disparities in similar ways as it did with women’s market challenges. It facilitated women’s connections to farm inputs or other suppliers through an approach that included digital solutions and expanded participation of women in business groups.
These types of proactive approaches need to be incorporated into any pandemic recovery programs to ensure that the restoration and improvement of supply chains in emerging markets are both resilient and equitable.
COVID-19 Impact on Finance
Pandemic-related challenges to accessing finance remained a top concern across sectors from the summer of 2020 through the end of the year.
Beset by rippling economic shocks, many farmers and enterprises found a financial sector that could not respond to their needs. Broader economic uncertainty and the risk of business failure too often stopped the financial taps just when they needed to flow faster.
Government support programs eased the blow, but not enough. Even at the end of 2020, one in five small business owners and two in five smallholder farmers said they were struggling to access enough finance as a result of the COVID-19 crisis. Their coping mechanisms will continue to shape economic recoveries into this year, as the resulting scale-back in many business operations created negative knock-on effects across sectors and supply chains.
Many small businesses did not survive this belt-tightening. And as economic conditions rise or fall this year on the back of an unpredictable virus, many more will not survive in the future. Their implosion, ironically, will be more costly than the price of a business survival loan. Beyond the obvious initial impact on an entrepreneur and his or her employees, a business loss is often a loss to an entire community.
Many enterprises, particularly in the food processing sector, provide essential goods and services to a community that it gets nowhere else. For that reason, a lack of adequate financing can not only shut down a business, but shut down a remote area’s only reliable supply of milk, shoes, or medical care.
Greater access to finance in the short term, therefore, will likely be less expensive in the long term. But it’s a lesson that, in many cases, may be learned too late.
Impact on Women
While women did not report significantly greater challenges than men accessing finance as a result of the crisis, they showed signs of less financial resilience. Throughout TechnoServe’s 2020 surveys, the share of women reporting that they could not raise a certain amount of emergency funding was an average of six percentage points higher than that of men.
In many countries, women don’t have the same assets or savings as men do, and often exert much less control over household finances. Even small changes in their ability to earn an income can have a significant impact on their well-being, making them much less resilient in times of crisis.
In addition to promoting women’s access to markets, supplies, and other business resources during the pandemic, TechnoServe helped them maintain their financial stability. It supported women in forming their own savings groups or becoming financial mobile banking agents. It also worked with women to develop other sources of independent income, such as tending backyard gardens or raising small ruminants like sheep and goats.
Helping women build savings and assets is key to their ability to survive economic disaster. In order to truly recover from this economic crisis, women not only need better income generation opportunities, but a path towards sustainable financial resilience.