The Effect of Using E-Procurement During the Covid-19 Pandemic on The Profitability of Small and Medium Enterprises.

Abstract

One of the main aims of any profit-oriented business is to create wealth for the owners through increased profitability, other factors remaining constant. However, different factors in the business environment affect this objective in form of opportunities and threats. Among such factors, saw the onset of the Covid-19 pandemic which affected business operations worldwide especially the small and medium enterprises. Since procurement is believed to be one of the levers of profitability of an enterprise, e-procurement is believed to play an essential role where movements of both goods/services and people were restricted and some factories were temporarily or permanently shut down. Hence, this study aimed to assess the effect of e-procurement on the profitability of Small and Medium Enterprises – sometimes classified as Micro, Small and Medium Enterprises (URT, 2002) – in Ilala District, Dar es Salaam, Tanzania during the COVID-19 pandemic. The objectives were: exploring how the COVID-19 pandemic has affected Small and Medium Enterprises; assessing the rate of adoption of Information and Communication Technology especially e-procurement by the Small and Medium Enterprises, and the factors that are responsible for its adoption; understanding the forms of e-procurement that are used by the Small and Medium Enterprises; and understanding if e-procurement has led to the improvement in the profitability of Small and Medium Enterprises in Ilala District, Dar es Salaam during the COVID-19 pandemic. The study revealed that the pandemic majorly affected SMEs negatively, the rate of adoption of e-procurement is high, different ICT devices are used for procurement which is associated with various risks and advantages. Generally, e-procurement increases the profitability of SMEs. Nonetheless, further research is required using a bigger and randomly selected sample of SMEs across the United Republic of Tanzania to study the relationship between e-procurement and business profitability. Based on the empirical evidence that has been revealed by the study, it can be concluded that the Covid-19 pandemic has indeed negatively impacted the small and medium enterprises in Ilala District, although there exist some positive effects that arose from the pandemic. More so, the rate of Information and Communication Technology adoption in Ilala District is high which increases the likelihood of ICT use in procurement (e-procurement). Despite the e-procurement associated risks, e-procurement has to a certain extent, contributed to the profitability of micro, small and medium enterprises. The study recommends that since MSMEs are the major source of employment and livelihoods for most people, the government of the Republic of Tanzania makes fiscal interventions such as reducing or suspending taxes like Value Added Tax on the major ICT tools so they can be more affordable to SMEs with modest financial resources to enhance e-procurement. Also, the government can defer income tax so that this money is re-invested to counter the effects of the pandemic.