How lockdown forced city traders to vacate arcades

A number of traders operating in downtown Kampala are ditching arcades for low-cost working spaces in the city suburbs to salvage their businesses, leaving landlords stuck with empty buildings.

Traders who spoke to this newspaper on Tuesday explained that they can no longer meet the high operational costs amid the biting Covid-19 pandemic, whose end they said remains uncertain.

The chairperson of Kampala Arcades Advocacy Forum (Kaafo), Mr Hussein Kato, said at least 32 traders (members) of the association, who formerly worked in city arcades, left between May and June, and took their businesses to the surrounding suburbs.  

However, he said there are hundreds of unregistered traders who have since left the city arcades due to the hard economic times occasioned by the Covid-19 pandemic.

 “The numbers of traders leaving the city is likely to increase because some of them already have rental arrears, which might affect their operations. Therefore, they are weighing their options between remaining in the arcades and shifting to suburbs with low-cost working spaces,” he said.

By Tuesday, some traders were still locked outside by their landlords because they hadn’t cleared rental arrears for the two months they have been in lockdown.

Mr Kato said the cumulative rental arrears, coupled with high taxes, will compel many traders to leave the arcades.
Although government asked landlords to reschedule payment for arrears after lifting the first lockdown, many of them defied the directive, which left several traders cash-strapped. 

In downtown Kampala, rental fees vary according to location and floor of the building on which the shop is located. 
 A 9 x 9 square metre shop in downtown Kampala goes for between Shs2.5m and Shs4m a month, and landlords ask for payment four months in advance before a tenant can start using it.

Besides, traders pay trading license of between Shs2.6m and Shs300,000, depending on the type of business, to Kampala Capital City Authority (KCCA), Value Added Tax (Vat) to Uganda Revenue Authority (URA), and certification fees to Uganda National Bureau of Standards (UNBS).

Other operational costs include power, water and garbage fees. Traders argue that it is hard to meet all these costs during this pandemic because they have not been working.

The high operational costs are worsened by the high bank interest rates, which leave many borrowers stressed. To salvage their collapsing businesses, they resort to shifting them to city suburbs where the costs are minimal.

When the first lockdown was lifted last year, traders were hopeful to reorganise themselves, only their hopes to be shattered when the President imposed a second lockdown on the country in June, with the city centre being the most affected.

Rental arrears
Mr Peterson Lumansi formerly operated an electronics shop at Temoseo Mpoza Plaza on Luwum Street in the city centre, where he paid monthly rental fees of Shs2m.

However, after the first lockdown, he in October last year decided to shift to Kasubi, a city suburb, because he couldn’t keep his business afloat in the city centre due to the high rental arrears.

“After the first lockdown, my landlord demanded Shs6m for the three months we were in lockdown and I really struggled to pay this money because I wasn’t working. These arrears drained me so much. I decided to salvage the business by shifting it to Kasubi where I now pay Shs700,000 in monthly rent,” he said. 

Whereas Kasubi is not as busy as the city centre, Mr Lumansi says he still makes some small profits to sustain his business.

He also says when the second lockdown was imposed, city suburbs were not much affected because all categories of shops remained operational.

“Once you put your business in a strategic place in the suburbs, you can be assured of good returns just like someone in the city centre because there are very many people now staying and working around these areas.

He currently spends only Shs100, 000 on power per month at his current workplace on Kawaala Road, unlike his former workplace in the city where his landlord charged him Shs250,000 for power per month, something he says has made a very big difference in his business.     

He advised fellow traders to find alternative working spaces outside the city centre instead of chocking on debts in monthly rent arrears.

In January, Ms Charlotte Musiime, who formerly worked on Wilson Road, relocated to Ntinda suburb, on Ntinda-Kiwatule Road due to the effects of the pandemic.

Although she shared the space and rent with a colleague then, Ms Musiime said her business did not pick up even after the first lockdown was lifted because the demand for grooms’ suits, which she deals in, had drastically dropped as many people suspended weddings.

“It was a very tough moment and the only option I had was to look for a low-cost shop so as to keep my business afloat. I used to pay rental fees of Shs1m per month but when I relocated to Ntinda, I met another colleague and we got a shop at Shs800,000. This means each one of us contributes Shs400,000 every month,” she said.

Although still new in the area, Ms Musiime noted that there is hope for a breakthrough because the place is very busy.

Mr Kato said at a critical time like this, government would be giving tax waivers to landlords so that they could also waive off rental arrears for traders, which accumulated during lockdown.

Although government promised a stimulus package to all people whose businesses were affected by the pandemic, Mr Kato said no trader or landlord has ever received this package.

“The biggest challenge is rent and that is what is stressing most traders. But landlords also have a valid point because they have loans and taxes to clear. This is where we expect government to come in and save traders because when landlords are affected, the burden is passed on to their tenants,” he advised.

Cheating landlords
Apart from the pandemic, traders also expressed concern over alleged cheating by landlords. For instance, they claim some city landlords don’t give them tenancy agreements, a void that gives the former powers to manipulate the latter.

With this loophole, traders say landlords have powers to either evict them when they get a tenant willing to pay a higher rent, or increase rental fees at any time.

An investigation conducted by this newspaper in 2019 also revealed how city landlords cheat their tenants by giving them rental receipts with less amount compared to what they actually paid. The investigation revealed they do this to evade taxes. 

Landlords, KCCA speak out

Some of the landlords who spoke to this newspaper acknowledged the crisis occasioned by the pandemic, but noted that they too have been affected.

Mr Sandiep Patel, the site manager of Mukwano Arcade, said when the first lockdown was lifted, they designed a payment plan for arrears which traders owed them and also gave them discounts.

He said this time round, a decision like this will be reached by the top management after assessing the situation. 
He asked their tenants to remain calm and be cooperative as they forge a way forward.

Mr Mansoor Matovu, alias Yanga, a landlord, said just like the first lockdown, landlords will meet under their association, Bagaga Kwagalana, and make a decision regarding rescheduling of rental arrears. 

Mr Matovu said just like traders, landlords too have been affected by the pandemic because they owe banks and taxes to government.

KCCA deputy executive director David Luyimbazi, said in an interview yesterday that the ministers for Kampala have engaged city landlords and asked them to give relief to their tenants, and that some landlords have complied. 

For instance, he referred to Mr Hamis Kiggundu, the proprietor of Ham Enterprises, whom he said had given a three-month waiver to all his tenants.

However, by press time, we could not get a comment from Mr Kiggundu in regards to this claim.
 Asked whether KCCA is considering traders request to have taxes paid in form of trade licences relaxed, Mr Luyimbazi said it might not be possible since this tax is paid annually.

“Trade licenses are paid annually and it is quite hard to waive it unlike a monthly tax. However, we will continue engaging government as far as the stimulus package for such categories of people is concerned,” he said.