The prospect of prolonged political gridlock caused by an unsettled general election in a few days to come, is casting a dark cloud over the outlook of Uganda’s business.
As Ugandans prepare to go to the polls on February 18, incumbent, Yoweri Museveni, hopes to win his fifth term in office; thus extending his 30-year rule by another five years. Although the election is being touted as a three-horse between Museveni, his opponent Kizza Besigye, and former ally Amama Mbabazi, Museveni will face other opponents.
It is said: “When elephants fight, the grass suffers.” Political actors have not done such speculation any favour by appearing to suggest that there is planned chaos once election results are pronounced.
Private sector players, especially foreign investors in sectors such as banking, insurance, import and export businesses plus trade and manufacturing appear to be massively concerned of what future holds as the country heads towards the general election.
Uncertainty across economic sectors is premised on the history of elections in some African countries where the civil exercise tends to end in violence, disrupting trade and investments.
Regional countries such as Uganda and Kenya have all, at one point in their history, experienced post-electoral violence and have since seemingly learnt from it except Burundi that is currently engulfed with related challenges.
Although this historical fact gives some sort of credence to such speculation, the government and private sector leadership believes the country has since evolved and investors should have no worry to lose sleep as their investments are safe here.
“So far, so good,” said Private Sector Foundation Uganda executive director Gideon Badagawa, before adding that there is no need for “negative speculation.”
He continued: “This election will be violent-free and there is no cause for alarm and investors do not have to recede on their investment as the government and all stakeholders involved will all be confident with the government of the day.”
According to the government, there is no better time for investors to “risk” their investment than now as they will be guaranteed of good returns on their investment.
“Investors, both foreign and local, do not have to worry because we are seeing (investor) confidence growing in our economy irrespective of being in the midst of political (election) season,” secretary to the Treasury Keith Muhakanizi said in an interview.
He continued: “So, this is a good time to invest more because our economy is resilient.”
Muhakanizi’s confidence seems to find solace in the projected revenue performance expected to be collected in the next six months.
When asked while releasing the half year revenue results whether the election will have an impact on revenue collection targets, Uganda Revenue Authority Commissioner General, Doris Akol said: “No.”
Explaining further, she said: “The election does not have significant impact on revenues. We do not anticipate anything wrong to happen because all will be well as we are confident that we are going to hit our target and even surpass it with a surplus.”
Addressing journalists last month, Trade minister Amelia Kyambadde, said government is going to improve the business environment and that no investor should scale down but rather accelerate investment without fear of disruption of any sort.
President of the Uganda National Chamber of Commerce and Industry Olive Kigongo, said earlier that the private sector, including the foreign ones, have no reason to be shaken by speculation but continue with business.
She said: “You don’t have to fear anything because as a country we are maturing. You don’t have to read so much into speculation. We have had several elections since and nothing wrong happened. Business should go on.”
The executive director of Uganda Manufacturers’ Association, Ssebagala Kigozi, shares Kigongo’s thoughts, saying: “This is not the first election we are having. The previous four elections all went well. And this one will also be just fine. Life and business will continue normally.”
Kigozi said some of his members (manufacturers) are not even aware that it is election period because they are busy making money.
Aly Khan Satchu, a Nairobi based equity markets analyst with focus on East Africa, shares that elections in Africa [especially closely contested ones and the Kenyan example of 2007/2008 and the Burundi election recently] always pose outsize risks to the economy.
“The first risk is one of pump-priming when government finances are essentially raided in order to lubricate the elections,” he adds.
Satchu thinks the next big risk is around contestation, when one side or the other feels robbed and in that period of ‘’contestation’’ the economy comes to a stand-still like in Kenya in 2007-2008.
On top of the Shs24 trillion budget for the 2015/16 financial year, another record $7.9b budget — a 58 per cent spending rise over the previous financial year – experts say will leave whoever wins the polls with the issue of a limited budget to lead reforms, in the context of an already deeply indebted government facing inflationary pressure.
Experts say Uganda currently owes over $6 billion and the debt to GDP ratio has grown every year since 2008. If the 2016 election is anything to go by, the generous government spending in support of the incumbent will further widen the deficit, while inflationary pressures will erode real earnings of ordinary citizens.
Satchu’s wise counsel to businesses around this period is to take precautions, to secure their supplies and to make sure they mitigate risks.
He says: “Different businesses will take different approaches but what is clear is that a Zero Precaution Strategy involves a ‘’Hail-Mary’’ Pass.”
Stephen Kaboyo, the managing partner at Alpha Capital - a forex trading company with vast knowledge on the economy, shares that it is true that in many countries around the world, election period brings about heightened anxiety and general negative sentiment about what happens next. Because of that, it is very difficult to avoid political risk.
“There will always be political risk even in periods when there are no elections; the only difference is the degree of risk,” Kaboyo observes.
His advice to Ugandan businesses is to have a better understanding about how political events could affect their investments.
Kaboyo says there are about four key principles that all businesses need to take into account when considering political risk.
“Identify your risks, measure your exposure, mitigate your risks and evaluate your options on a going basis. Realistically elections come and go, but the economy will continue running,” he notes.
He adds: “It is important that we seize business opportunities that offer profitability even when the level of risk seems high.”
In his view, therefore, he doesn’t expect a shock, but there could be a slowdown in business activity which will eventually pick up after elections.
What presidential candidates have spent so far in campaigns
Yoweri Museveni. NRM presidential candidate, Yoweri Museveni has spent Shs27 billion on his 2016 campaigns in two months, 12 times more than his two closest challengers combined, according to results of a preliminary study, funded by Democratic Governance Facility and conducted by Alliance for Campaign Finance Monitoring campaign, released recently.
In the 16 districts reviewed, Museveni spent Shs4.8b in November and Shs22.2b in December, 2015 representing 91.6 per cent of the 29.6b spent by all the candidates in total.
Amama Mbabazi. Independent presidential candidate Amama Mbabazi, who followed, in terms of spending, spent Shs1.3b or 4.6 per cent in the same period.
Kizza Besigye. Dr Kizza Besigye, the Forum for Democratic Change candidate spent a total of Shs976m or 3.3 per cent.
Other candidates. The other candidates, Dr Abed Bwanika, Prof Venansius Baryamureeba, Maureen Kyalya, Maj Gen Benon Biraro and Joseph Mabirizi spent less than 1 per cent of the Shs29.6b combined. Prof Baryamureeba spent Shs95,732,000 while Abed Bwanika used Shs34,311,000 and Joseph Mabirizi Shs26,486,000. Maureen Kyalya used Shs5,692,500.