Report projects fall in tourism fortunes

Uganda is expected to witness a significant decline in both foreign direct investment (FDI) and domestic direct investment (DDI), particularly in tourism, transport and construction sectors due to the economic crisis induced by the Covid-19 pandemic and shutdown, a new report by Uganda Investment Authority (UIA) indicates.

The report, an outcome of a quick survey UIA conducted on the impact of the Covid-19 lockdown on investments, attributes the projected decline on the economies of FDI source countries such as China, India, and the European Union.

This has caused disruptions in supply chains, slowed economic activity, reduced foreign remittances and slowed investment decisions.

The online survey had 780 respondents out of 2,847 that had been contacted. Uganda currently has 7,483 investors in different sectors across the country.

The report findings released on Sunday titled; “UIA Policy Paper on Boosting Investments during and post-Covid-19 Period”, show that while the value of planned FDI projects in 2019/20 financial year was $1.2b (Shs4.4 trillion) with projected growth of 28 per cent, the investment is projected to decrease in 2019/20 and 2020/21 financial years, and will begin to rebound in 2021/22 financial year.

Decline in domestic investment
The report states that the DDI, which declined from $441.1m (Shs1.6 trillion) the previous year to $328.7m (Shs1.2 trillion) in 2018/19 financial year is forecast to decline by 50 per cent in this ending 2019/20 financial year, rising gradually through 2020/21 financial and rebounding between 25 per cent to 30 per cent in 2021/22 financial year.

The report states that foreign remittances into Uganda are projected to decline impacting negatively on, especially the real estate sector.

Bank of Uganda notes that foreign remittances are projected to decline to $238.8m (Shs889b) in 2020/21 financial year down from $955.6m (Shs3.5 trillion) in 2019/20 financial year, attributed to a fall in wages and decline in employment of Ugandan Diaspora.

World Bank says global remittances are projected to decline sharply by about 20 per cent this year due to the economic crisis induced by the Covid-19 pandemic and shutdown.

According to the report, the prevalent uncertainty in the global economy has triggered a decline in the FDI inflows, low remittances from the Diaspora to Uganda, low performance of DDI and numerous micro small and medium enterprises faced with closure.

“The containment measures imposed by government to prevent the spread of the infection generated negative outcomes, including significant downturns and disruptions in the tourism, transport, manufacturing sectors due to disruptions in the supply chain, failure by borrowers to meet their loan obligations, failure of the tax agency to meet the projected targets and a fall in consumer demand,” the report states.

The results also showed that the workforce has been adversely affected with the biggest number of companies (23.8 per cent) reporting that they had asked workers to stay home, but supported them with some minimal allowances, while 21.8 per cent of the companies said they had decreased the number of working hours.

On the impact on business continuity measures, the report states that 56 per cent of the respondents had temporarily closed business or production.

The report adds that the top most concern for most businesses (145) during and after the pandemic is uncertainty, accounting for 22.4 per cent of all businesses that responded to the survey.

Other top concerns are loss of revenue, reduced productivity and/or demand for services, business closure, cash flow issues, inability to pay taxes, staff wages, utility, rent and internet costs, and inability to service debt, among others.

The policy paper, which has been presented to the Executive and Parliament, calls for policies and interventions formulated on the basis of evidence generated in order to mitigate the negative impact of the pandemic on private investments in Uganda.

According to the report, at organisational level, UIA has embarked on interventions that will ease the current burden and make the businesses bounce back.

Interventions
Some of the interventions include developing bankable projects to ease setup of investment projects and access to affordable investment finance, establishing regional one stop centres to take government service delivery closer to the business communities.

These will further lower the cost of business for the investors and enable faster investment uptake away from the urban areas and hasten the creation and sustainability of the upcoming cities.

Others are create business development centres to enable potential and existing investors access relevant and up to date investment information as well as business advisory services in order to facilitate faster and informed investment decisions, and serve companies looking to diversify, seek partnership or funding to stabilise/expand operations.

Mr Lawrence Byensi, the acting director general of UIA, said the authority will set up incubation centres and work spaces for SMEs in the industrial parks.

“The centres will be used to support SMEs to enhance their business skills, connect them to markets and introduce them to ICT4Business, as well as incubate youth apprenticeships by allocating them to the SMEs,” Mr Byensi said.

He said in line with the requirement for maintaining social distance, the authority will leverage use of ICT in its operations by harnessing the use of information technologies such as teleconferencing, remote working, analytics and digitisation, virtual reality solutions, SME online platform and call centres.

Mr Byensi said they will establish four science, technology and innovation parks in Kyankwanzi (for Buganda), Kamuli (Busoga), Pakwach/Nebbi (West Nile) and Rubirizi (Ankole); and develop five new industrial and business parks under the Forum for China-Africa Cooperation arrangement namely Koboko–Oraba, Nwoya, Kaweweta, Kabarole and Kasese.

He added that infrastructure in the industrial parks will include tarmac roads, industrial power and water supply, central sewerage treatment plants, solid waste management systems and security systems, among others.

The report states that UIA, working with the private sector under the backing of the Presidential Investor Roundtable, has made a raft of policy and intervention proposals to government.

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