Proposed stimulus is not deep enough

Sunday June 7 2020

A street vendor sells tomatoes on a deserte

A street vendor sells tomatoes on a deserted Kampala street days after a national total lockdown was announced on March 30. 

By Editor

President Museveni, in his State-of-the-Nation address on Thursday, outlined measures that his government intends to implement in response to the debilitating effects of the anti-coronavirus lockdown on the economy.
The measures, read together, aim to put more money in the bank accounts of formal businesses, which is a good thing. It is for such entities that deferral of corporation tax, PAYE and contributions to the National Social Security Fund apply. The other measures, including renegotiation of loan repayment schedules and access to cheaper loans from the recapitalised Uganda Development Bank, also benefit formal businesses, almost to the exclusion of informal businesses, which make up the bulk of Uganda’s economy.
In the lead up to the overly delayed announcement of the package, snippets of which the President revealed on Thursday with a more detailed plan expected to be unveiled by the Finance minister, the debate about saving the economy was dominated by big private sector players, with small scale players, including smallholder farmers and informal traders, crowded out.

This is despite verifiable reports that the small scale players were virtually crushed by the lockdown. For instance, poultry farmers sold their eggs and birds at about 60 per cent of the pre-Covid-19 prices, while the farm-gate price for products like matooke collapsed by an estimated 65 per cent.

Small informal sector players who work in non-food sectors like textiles stayed home for more than two months, and many have yet to resume work. They have consumed their little working capital and are looking to start all over again.

For those who work in malls and arcades, there is the issue of rent for the months during which they have not worked. The landlords are demanding for the rent and the traders rightly say they don’t have the money. The government said this week that negotiations on how to resolve this issue are still underway.

If we stay with the issue of the rent for a while, it goes to show that the thinking regarding the stimulus package was not comprehensive enough to cover the whole economy, with those who were worst hit kept on the fore. It focused on those with the ability to make their voice heard.

And if the process will be ad hoc, with each group handled as its need becomes most apparent, it will be hard to cover all. The debate should have been comprehensive and insulated from potential capture.