Can Uganda’s economy survive Covid-19 onslaught?

Economists and businesses are predicting hard times for Uganda as the country stares at consequences of coronavirus outbreak now ravaging several countries across the world.

Though Uganda has not registered any case of the virus, government has already moved to close schools, crowded places and put in place a number of other measures that it says will help in dealing with the pandemic.
Organisations are advising non-essential staff to either work from home, or take annual leave to reduce contact among workers.

Uganda Investment Authority (UIA), the government agency mandated to sell the country as the preferred destination for foreign investors, says they have been hit hard since the outbreak of the virus.

Mr Lawrence Byensi, the acting director general of UIA, said the number of foreign investors applying to come to Uganda has reduced since the outbreak was reported.
“At UIA, our outlook is that the disease will negatively affect investments in the short term, but dependent on how long the pandemic takes to clear, not only in Uganda but also globally,” he said.

He added: “We have registered new investors, but these are possibly people who have been in the country before the outbreak was reported. But for foreign investors, the number has reduced, probably because many of the countries where these investors come from are greatly affected and are under lockdown.”

Mr Byensi said for Uganda, headwinds are already being felt in investment priority areas such as tourism, transport and logistics, and agriculture, among others.

External labour recruitment agencies are already crying because they cannot send domestic and other workers to the Middle East. Uganda has more than 165,000 nationals, working in the Middle East as domestic workers and in different sectors, remitting up to $650m (Shs2.4 trillion).

The Uganda External Recruitment Agencies Association spokesperson, Mr Ronnie Mukundane, said the situation is dire.

“We are stuck with these people because countries we export to have closed their borders. We also have people whose contracts have run out and are supposed to come back, but they are stuck,” he said.
Mr Mukundane said the losses external recruitment agencies have suffered are in billions.

Employers speak out
The Executive Director of Federation of Employers, Mr Douglas Opio, said they are faced with a huge task of balancing their acts.
He, however, challenged employers to be considerate, saying it is an emergency.

“It’s a bit of a challenge. People don’t know exactly how to respond. The longer it takes, the more difficult it becomes for the employer. We are just hoping it doesn’t persist much longer because if it does, it will require laying off workers which is not good,” Mr Opio said.

He urged employers to be considerate, especially to working parents who may need to help their children before reporting for work.

“We are also telling them to plan for long-term issues like scaling down when necessary, redeploying employees, looking at people’s contracts and seeing what might be available and advising them to utilise their annual leave during this period.

He also urged employers to follow the law if they want to terminate workers. “The legal obligations are in force. We still have to follow the due process. You have to notify the relevant bodies and issue a month notice.”

Workers, trade unions report
Trade unions say coronavirus is a real crisis and that better measures should be put in place to handle the issue of labour force in the country.

Mr Wilson Owere, the chairperson of National Organisation of Trade Unions (Notu) said: “Already some issues have been reported and we are handling them. You know this crisis is not only for labour, but the entire economy. We need to sit down and agree as employers, different unions and government to come up with a workable solution for all.”

Mr Owere also said employers should not hide behind the coronavirus to deny employment and benefits to workers.
“They made good profits last year and should not say we are laying staff because we don’t have money to pay them. They should be able to use some of the money they made last year to pay salaries for the staff,” he added.

Economists, businesses
Mr Ramathan Ggoobi, an economist and a lecturer at Makerere University Business School, said: “Exports are definitely going to be affected because those who are buying our exports are now on the shutdown. Even those who need them, we might find it difficult to deliver because apparently the containers which the exporters use are those which come with imports, but now the imports have dropped because China has not been producing and it is the main producer.”

Mr Amos Wekesa, the CEO of Great Lakes Safaris, said government should offer incentives to the locals to set up more industries as means of import substitution.

“If we had more control over the economy, we would keep most of the money within the country,” he said.
For hoteliers, the situation is dire as a number of them are either laying of staff or paying them salaries at 50 per cent of the money they have been receiving.
Ms Jean Byamugisha, the executive director of Uganda Hotel Owners’ Association, said the impact is huge on the sector.

“The problem is bigger than we had anticipated not only for the hotel industry but for the entire economy. Many of the reservations have been cancelled. So today hotels are cancelling conferences, meetings where they make all the money,” she said.

Ministry of trade, Industry and Cooperatives officials say the impact of coronavirus cannot be underestimated.
Last year, Uganda imported goods worth $5.51b (Shs21 trillion) and exports were at about $2b (Shs7 trillion).
Ms Amelia Kyambadde, the Minister of Trade, said on average China accounts for more than 16 per cent of the country’s imports.

“Persistence of the pandemic may limit import sourcing from China, constrain sourcing of raw materials and capital goods for production sector machinery, inputs for production and final consumables for traders and general population,” she said.

Projected effect

Unemployment risks: 780, 000 will become poor in the short term and 2.6 million in the long run.

Tourism: The sector will suffer a drastic drop in tourists visiting Uganda following extensive travel restrictions in the USA, Europe and Asia.

Exports: Expected to decline in the final four months of the current financial year due to sharp reduction in global demand and travel restrictions.

Imports: Majority of Uganda’s imports come from Asia, particularly China which has been the country most hit by coronavirus outbreak. Overall, Uganda’s imports are expected to decline by 44 per cent in the final four months of this financial year (March to June).

Loan disbursements: Access to loans is projected to decline by 50 per cent in the last five months of the financial year.

Balance of payments: In 20I9/2020 is projected to worsen by $363.1m (12.7 per cent ) from the current negative Balance of Payments which stands at Shs28.5 trillion. As a result, Uganda’s foreign exchange reserves are expected to reduce from 4.2 future months of imports to about 3.5 months.

Commercial banks: Ratio of non-performing loans to total loans will worsen from 4.7 per cent to 5.9 per cent (defaulting) which has negative impact on private sector credit growth as well as economic growth.

Revenue collections: Revenue inflows will suffer an additional shortfall of about Shs82.4b for the remaining period of 20l9/2020 (March to June) and about Shs187.6b in 2020/2021.

Reported By Franklin Draku, Nobert Atukunda & Patience Ahimbisibwe

[email protected]