What you need to know:
Reason. Private sector credit growth by commercial banks partly led to the improved environment.
The latest survey by Bank of Uganda shows that Uganda’s business confidence remained optimistic in September, signalling good times ahead.
The Confidence Index (CI) increased slightly by 0.5 points from 62.3 points in Aug 13 to 62.8 points.
The executive director of research at Bank of Uganda, Dr Adam Mugume, says the positive outlook in Uganda’s business environment is on account of stability in Uganda’s in macroeconomic indicators, leading to pick up in the growth of private sector credit by the commercial banks and overall economic activities.
The positive business environment has also been boosted by the government’s increased investments in the infrastructure project which is a key ingredient driving the country’s economic activities. Beyond the inside factors, brighter outlook in Uganda’s business confidence is also being supported by stability in Uganda’s sister economies of East Africa.
Dr Mugume says on quarterly basis, the business confidence was positive at a level of 61.5 points in the three months to Sept 13 compared to 60.4 points recorded for the three months to June.
Despite the outlook in Uganda’s business environment, the Bank of Uganda report indicates that the competition, high cost of finance, low demand, high cost of inputs and delays in payments were cited by businesses in all sectors as major factors limiting business activity.
The executive director of Uganda Manufactures Association, Mr Ssebagala Kigozi, told the Daily Monitor in an interview that competition has been cited by the business leaders because of the opening up in the tradable in goods following the Common Market for Eastern and Southern Africa (COMESA) tripartite trade agreement that came into force on July1, 2013.
He said that opening up have seen domestic goods especially confectionaries and beverages, which is quite large coming from the COMESA member states like Egypt and as far as India and Malaysia.
“The goods coming in large quantity are causing a lot of competition for the domestically produced goods. At the same time, government has continued importing foreign produced goods in high percentages,” he said.
High electricity tariffs
Citing other constraints being faced by the business communities in Uganda, Mr Ssebagala said power tariffs are still high. But the Electricity Regulatory Authority’s (ERA) pre-paid meter system has not simplified the matter.
“Much as there has been some stability in electricity supply these days compared to the old days, the tariffs are still high, the manufacture and the business community at large have not agreed with ERA on quarterly review of the Automatic Electricity Tariff, we want it to be reviewed yearly basis not quarterly basis because it allow us to stabilise,” he argued.
Mr Ssebagala also pointed out the issue of the increase in the Central Bank Rate in September to 12 per cent from 11 per cent, also led to the high cost of finance for the private sector in terms of paying back the loans.