Here is how to revive the economy after lockdown

As government is still contemplating the post Covid-19 economic recovery plan for the country, the Private Sector Foundation Uganda (PSF-Uganda) has proposed to government a number of proposals they believe will help resuscitate the economy.

Sectors such as manufacturing, banking, construction, tourism, trade, transport and generally the service sector are facing a recession and strategic mitigation measures are needed to rescue the situation to avoid total collapse.

About a million jobs have already been rendered redundant, thousands of workers are at more risk of being jobless as companies struggle to stay afloat.

Proposals
Among the proposals the PSF-Uganda forwarded to government for implementation include payment of all domestic arrears to increase liquidity in the economy; deferment [suspension] of payroll tax payments to ease business cash flow for the next six months.

They further propose that government expedites payment of outstanding Value Added Tax refunds and postpones the turnover tax in the current budget proposal until the next financial year.

The private sector also proposed that tax on rental properties be frozen for six months effective April and no tax should be increased on rental properties. It also suggests that government lowers taxes on products produced from local raw materials.

Mr Elly Karuhanga, the PSF-Uganda chairperson, said they have held several discussions with different key players in the economy and that if the proposals are implemented, they will help the economy recover fast.

Mr Karuhanga said government should restructure the Uganda Development Bank (UDB) to manage the new development bank dynamics and capitalise the bank to enable it effectively support the financing requirements of the Ugandan business community.

“Support the tourism sector with a line of financing through UDB, improve the administration of the Agriculture Credit Fund, recapitalise and procure more cargo aircraft for Uganda Air Cargo to ensure foreign market expansion. It is important that 50 per cent of the board positions are occupied by the private sector,” he said in the statement of post Covid-19 economic recovery proposals.

He also said to boost agricultural production, government should promote producer groups and cooperatives and an efficient Warehouse Receipt System to ensure food security.

The PSF-Uganda asked government to enhance Buy Uganda-Build Uganda initiative in order to create import substitution and attract the young population into manufacturing and value addition.

“As representatives of the business community, we thank and pledge to work with all development partners and government in ensuring that these recommendations come to pass. We look forward to working with all on developing a post-Covid-19 recovery and growth strategy,” Mr Karuhanga said.

Mr Gideon Badagawa, the PSF Uganda Executive Director, said the pandemic has disrupted businesses and the biggest victims will be the employees.

Mr Badagawa said the most affected sectors will downsize in order to either stay afloat or try to cope with the hard times as they ponder the next move.

“I can tell you that even after all this comes to pass, things will not just go back to normal immediately. Scaling down will happen and this means people are going to lose jobs because you cannot keep everybody on a payroll yet you are not making money. And this will mean less revenue for the government to draw from,” he said.

Government reveals rescue plan
However, government has indicated it has a “big stimulus package” to resuscitate the economy after the pandemic.
The Ministry of Finance said an ambitious economic stimulus plan is being worked on, adding that it will soon be rolled out.

Asked about what the plan entails, the Permanent Secretary of Ministry of Finance and Secretary to the Treasury, Mr Keith Muhakanizi, was cagey about the particulars but insisted an economic recovery package is in the offing.

“This is going to be one of the best stimulus packages. We are going to 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,” Mr Muhakanizi said.

He said Uganda Development Bank (UDB) will receive an additional funding from the government to recapitalise it.

“Value addition is also part of the plan. We are going to fund UDB and Uganda Development Corporation (UDC). And in some cases, UDC will buy equity (shares) into struggling firms, especially those badly affected by the pandemic,” he added.
Ms Evelyn Anite, the State minister for Investment and Privatisation, reinforced Mr Muhakanizi’s statements.

“These measures demonstrate our commitment to keep the economy on a growth path and address the specific needs of affected sectors within the economy. Down the line, they will lead to a robust economic recovery because together they can pursue a positive strategy of import-substitution that creates jobs, reinforces our resilience and better prepares us to deal with future external shocks,” Ms Anite said.

She added: “Support of more than $150 million to the UDB for onward lending to small and medium-sized businesses and enterprises is unprecedented but has been a key promise of the President to support local businesses with the capital it needs,” she said in her statement last week.

Ms Anite also said internal discussions are ongoing within the Finance ministry together with state and non-state actors to support job retentions and creation.

These, according to Ms Anite, include listening to enterprises looking for deferrals of their tax obligations, waivers on arrears and even Pay As You Earn deferrals in some sectors.

“The President is also supportive of strategic investment by the Uganda Development Corporation in some key industries as guided by import substitution and value addition,” Ms Anite added.

She also said in the financial sector, Bank of Uganda (BoU) is working with private banks and the government for further revision of the operating environment for banks to ensure lending to small and large businesses is uninterrupted.

“BoU intends, for example, to extend exceptional liquidity assistance to financial institutions up to a year, should they need it or waive restrictions on the restructuring of credit facilities. This will give a way for financial businesses to restructure loans, introduce relief for loan repayment and work with their clients and the government to keep enterprises affected by Covid-19 alive,” the minister said.

Recovery
Declared a pandemic by the World Health Organisation on March, 11, Covid-19 has continued to wreak havoc globally with more than 2.7 million infections worldwide and more than 200,000 deaths.

In an effort to suppress the spread of the pandemic, government resolved to lock down the country, although commended as a prudent public health and safety measure by many, this has disrupted the country’s economy.

According to Bank of Uganda, 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 June while other sources predict a slump in the national growth to a much worse level than what the central bank is estimating.

It is predicted that the labour market will remain frozen for a while, crippling the population’s purchasing power and bleeding the economy even further.

The Executive Director of Uganda Employers Federation, Mr Douglas Opio, said formal jobs are highly at risk with the exception of civil servants. Mr Opio said the most affected sectors such as hotel and tourism, horticulture subsector, aviation industry and export of labour will continue to take a hit even post Covid-19.

“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 more than one million jobs are at risk at the moment,” he said.

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