Fatima’s Café in Dili, the capital of tiny half-island nation of Timor-Leste, is one of a growing number of cafés meeting local consumer demand for one of the country’s most prominent industries – speciality coffee. Having opened in 2019 however, owner Fatima Moniz Soares has faced huge challenges in establishing her micro enterprise in the midst of the COVID-19 pandemic – moreover she did so as a mother and female entrepreneur in a male-dominated business environment.

After working in another specialty cafe since 2014, in 2019 Fatima decided to open her own café. “As a female entrepreneur there are more challenges because men are more trusted. Additional to running the business, I also have to take care of all domestic work such as cleaning, taking care of the children, and cooking. All the time cooking…,” Fatima told interviewers for the second joint UNDP – Government micro, small and medium enterprises (MSMEs) survey of the second Socio-Economic Impact Assessment (SEIA 2.0).

Fatima gave information to aspects of the survey focusing on the impact of the COVID-19 pandemic and government response measures on the health and status of MSMEs. Her responses – one of over 1000 interviews conducted with formal and informal businesses nationwide – provided data on the challenges faced by Timor-Leste’s private sector.

Since March 2020, customer demand at Fatima’s Café has decreased by 60%, and their income has dropped to below break-even levels according to Fatima. Supply chain disruptions and reduced consumer spending nearly saw Fatima’s Café close in the first half of 2020.

Like one in four Timorese, Fatima was forced to borrow money to survive the downturn in income. To keep the business going she became more active on social media – a move nearly one in ten businesses made to continue reaching out to customers. However, MSME’s ability to adapt to the challenges of the pandemic were limited by weak access to technology and digital infrastructure such as electronic payment facilities. Over 44% of the MSMEs reported that they did not use any technology for their business and only 27.2% of informal businesses reported they had digital capabilities. Most of the digital capabilities used by businesses were limited to telephone order taking, the use of internet, social media and smartphones. 

Fatima’s Café was also forced to reduce staff hours to cope with the downturn. Nationwide employment in MSMEs dropped by 15.9% for full-time workers and 23.3% for part-time workers – mostly in cases where business closed. SEIA 2.0 also found that even for businesses that remained open employment for women fell, and the average income for all employees decreased.

Even with such a drastic decline in her income, Fatima shared her sympathies for those worse off than her, particularly informal workers who were impacted more harshly than formal sector workers and larger businesses.

“Why does the government only give money to the businesses, and not to the aunties and children that sell food on the streets? I used to interview the street vendors, how much do they get? They said they get 3 dollars a day. How can they survive?”, she said.

The challenges faced by businesses also differed geographically. Being on the border with Indonesia, municipalities like Bobonaro were affected by different durations and severity of COVID-19 restrictions than municipalities that were more distant from transmission areas for the first year of the pandemic. The nuances in differences between previously existing vulnerabilities and the impact of pandemic response measures between municipalities were also captured in the data.

In her interview owner of the Kiki Rey kiosk at the Batugade border crossing, Noviana Filomena Marques reflected one of the most common findings among MSMEs, which showed that outside of the capital Dili, only 39.4% of MSMEs were aware of government support measures, while in Dili awareness rose to 65.9%. Micro and small enterprises were also less resilient than medium sized businesses – with 68% and 33% reporting decreased income respectively.

The information provided by Marques and hundreds of others across the nation shines light on numerous aspects of the government’s response, including awareness of and access to COVID-19 support measures, the most significant obstacles for businesses, and crucially, households and enterprises’ own response and resilience measures.

On most measures, informal businesses fared worse than formal businesses in adapting to the pandemic and government restrictions. Seventy percent of informal businesses reported loss in income, compared to 64% of formal businesses. Around 30% of enterprises in Timor-Leste are informal, meaning they have less financial security, and access to official programs, loans or other support mechanisms.

Fatima’s Café also witnessed the impacts of worsening climate change in 2020 and 2021. Coffee harvests supplying the cafe were irregular, with farmers in certain areas reporting reduced yields due to unexpected weather patterns. While Fatima was able to find high-quality coffee from other areas, like the whole nation she was not to avoid the impacts of Cyclone Seroja – a one in 50-year event that hit Timor-Leste on April 4. Escaping relatively unscathed, the café lost two freezers and suffered electrical system damage.

However after a rapid learning curve and tests of her business’ resilience, Fatima remains open and positive about the future of Timor-Leste’s pandemic recovery. Employment statistics gathered in SEIA 2.0 MSMEs Survey seem to reflect this optimism, with 75% of 2020’s full time job losses recovered in 2021 employment figures. “We are not planning for this year and next year, but hopefully in 2023, we will see what opportunities there are for us, for farmers, and the café,” said Fatima.

The impact of COVID-19 on Timor-Leste’s MSMEs do not end with the findings of the SEIA 2.0 MSMEs Survey, which analysed the period to March 2021 only. The ongoing pandemic and long-term effects of business closures, reduced employment hours and other factors will continue to ripple through the Timorese economy. Now is the time however to foster an attractive environment for investment into the private sector and to enhance economic resilience through the expansion of digital capabilities accessible to both formal and informal businesses in the coming stages of recovery.

SEIA MSME Full Report can be found here

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