What does the Purchase Managers Index tell us about the effects of the COVID-19 pandemic?

The COVID-19 Business Info Hub spoke with Mr. Kenneth Kitungulu, Executive and Head, Global Markets at Stanbic Bank Uganda, to understand what the Purchase Managers Index can tell us about the effects of the COVID-19 pandemic and how SMEs should prepare for the future.

What is the Purchase Managers Index and why is it important?

The Purchase Managers Index is an accurate, comprehensive suite of economic indicators in Africa. It was started in 2016 in Uganda and 400 companies contribute monthly to provide updates on business and economic indicators in different sectors of the economy. It is used by Bank of Uganda and others in decision-making.

What does the Purchase Managers Index I tell us about the effects of the COVID-19 pandemic?

Over the past few months, Purchase Managers have indicated that there has been a significant drop in output. Over 90% have indicated a decline in business activities. 36% of companies have had to scale back on employment, and more than 80% have purchased less input in February and March in line with decreased demand. Delivery times have increased significantly, and there has been an overall reduction in prices. For the first time since the PMI was launched, companies are reporting that they are less optimistic about future growth.

What can SMEs do to better prepare for the future?

SMEs must adopt skills around good governance structures within the entity, including separation of ownership from management and ensuring proper accounting policies. It is also critical to ensure there is a good cash buffer, because one thing that this crisis has taught us is that you cannot always predict the future, and we need to be better prepared.