Covid-19 distress: What will Uganda’s economy look like after lockdown?

Tuesday May 19 2020

Closed retail shops in Kampala. PHOTO BY RACHEL

Closed retail shops in Kampala. PHOTO BY RACHEL MABALA 

By ISMAIL MUSA LADU

Destiny of several economic sectors, some of which create the most jobs and generate massive revenue to the treasury will struggle to hit the ground running after the lockdown and the night curfew is eventually lifted.
Economists are basing their argument on the prevailing circumstances occasioned by the Coronavirus (COVID-19) pandemic ravaging some of the key sectors of the economy.
Already economic sectors such as manufacturing, banking, construction, tourism, trade, transport and generally the services sector are experiencing slowdown as a result of the coronavirus crisis.
As a result, at least a million jobs have been rendered redundant and thousands more risk being unemployed after the shutdown occasioned by the Covid-19 pandemic is no more, according to the leadership of the Federation of Uganda Employers (FUE).
The African Union (AU) report on Impact of Coronavirus on African economies notes that invisible impacts of Covid-19 are expected in 2020 regardless of the duration of the pandemic.
The private sector apex body in the country believes that at the very least it will take another year or so before the economy begins responding to the right economic measures put in place, if any.
Technocrats at the Central Bank concur with the private sector leadership’s recovery time lag although government is yet to roll out what it describes as “the best” economic stimulus package the country has ever seen.

Economy disrupted
Declared a pandemic by the World Health Organisation (WHO) on March, 11 2020, it did not take long before Covid-19 became a national emergency, given its impact on the livelihood of the population and economy.
To suppress the spread of the pandemic, the government resolved to lockdown the country. Although commended as a prudent public health and safety measure by many, it has tremendously disrupted the economy that was beginning to pick up after years of hibernation.

Revenue collections hit
As a result, after the shutdown is suspended, economic sector players and industry analysts say the economy will struggle to immediately reconnect its value chains.
Revenue collections will also take a hit. And the shilling will struggle to stabilise against foreign currencies such as the US dollar bill.
Further, remittances from abroad will decline. Travel restrictions will continue to be a fixture, affecting imports and exports subsector, let alone tourism and hotels industry.
According to Central Bank, the country’s economic growth could fall to 3-4 per cent from 5-6 per cent growth by the time the financial year closes in two months-time while other sources predict a fall in the national growth due to the direct effects of the COVID-19 outbreak to a much worse level than what the Central Bank is estimating.
As all that plays out, the labour market will remain frozen as employers (private sector) cut back on investment until they are sure of the future and return on investments. Meanwhile this will have a direct impact on the population’s purchasing power, bleeding the economy further.
According to the executive director of Uganda Employers Federation, Mr Douglas Opio, jobs which are highly at risk are those in the formal sector with the exception of civil servants.

A woman makes face masks at Mpanga Central
A woman makes face masks at Mpanga Central Market in Fort Portal town. She said she sells about 150 masks per day with each mask costing Shs1,000. PHOTO BY SCOVIA ATUHAIRE

Most affected
Mr Opio believes that most affected sectors such as hotel and tourism, horticulture subsector, aviation industry and externalisation of labour will continue to take a hit after post-Covid-19, heavily impacting on labour.
He said: “The working age population is about 19 million although only about 16 million are in active employment. About 2.1 million are in formal employment. So over one million jobs are at risk at the moment.”
He continued: “After the crisis, I think less than 50,000 jobs will be at risk mostly in highly affected sectors.”
He is also of the view that the most secure jobs are informal sector, particularly those employed in agriculture although he was worried for those engaged in trade and commerce, saying there are job risks involved.

More to downsize
Speaking in an interview, the executive director of Private Sector Foundation Uganda (PSFU), Mr Gideon Badagawa said most economic sectors will never be the same again, thanks to the pandemic’s disruption, and some of the initial victims of Covid-19 will be employees.
Mr Badagawa,further noted that most affected economic sectors (firms/businesses) will look to down size to either stay afloat or cope with the times as they ponder the next move.

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Cashing in on misfortune
A chapter in International Labour Organisation (ILO) report regarding averting job losses and sustaining income levels in the wake of the pandemic estimates that up to 25 million jobs could be lost worldwide as a result of the Covid-19 pandemic, with Uganda being one of the countries to bear the brunt, considering it lacks strong systems to withstand shocks sparked by the outbreak of Covid-19.

What will save jobs?
Going forward, the ILO reports proposed that there is need to include selective measures to stabilise economies and address employment problems, including fiscal and monetary stimulus measures aimed at stabilising livelihoods and income as well as safeguarding business continuity.
“A phased multi-track approach to enabling recovery should include immediate social protection and employment measures promoting, among others, local economic recovery.
“In the context of an economic downturn, sustaining minimum wage levels is particularly relevant as, overall, minimum wages can protect workers in a vulnerable situation and reduce poverty, increase demand and contribute to economic stability,” reads the ILO Standards and COVID-19 response report.
As for Uganda Manufactures Association (UMA), the impact of the pandemic including on labour and employment is not only imminent but no brainer. Despite that, the manufacturers are looking to embrace import substitution provided the government plays active role. The Minister of Trade, Industry and Cooperative, Ms Amelia Kyambadde has indicated that government is going to hasten support for sector players who buy into the Buy Uganda, Build Uganda (BUBU) policy.
Already, some of the manufacturers of hand sanitizers are making a killing in profit and so will be the makers of face masks once the lockdown is suspended and the protective gear is made a requirement.

Govt plans to buy shares
When interviewed for this article, without divulging details, the Permanent Secretary as well as the Secretary to the Treasury, Mr Keith Muhakanizi, revealed that an elaborate economic stimulus plan is being finalised and that it could be rolled out anytime soon.
When pressed to give some highlights of the looming economic stimulus package, he said: “This is going to be one of the best stimulus package. We are going ensure that we take full opportunity exposed by the pandemic. Ensuring import substitution becomes a reality is a big part of the plan. Actually, import substitution is the anchor of the economic stimulus plan.”
He continued: “Value addition is also part of the plan. We are going to fund Uganda Development Bank and Uganda Development Corporation (UDC). In some cases, UDC will buy equity (shares) into struggling firms, especially those badly affected by the pandemic.”

Job losses

• 0ver one million Ugandans are at risk of losing jobs and about 50,000 jobs will be lost after the shutdown is lifted.
• Government is keeping what it describes as the ‘best economic stimulus’, close to its chest until Cabinet and President Museveni approve it.
• Government intends to buy shares into struggling companies, although this is not part of the deal with the private sector.

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