Why 2019 could be good for businesses

Local traders claim foreign nationals involved in petty trade remains a headache

Kampala, Uganda | ISAAC KHISA | Following the unexpected past bad year for businesses, there is a good chance that this could be reversed sometime this year, some analysts say.

Their hope is that the economy, which has shown signs of recovery, is likely to remain sound to stimulate growth of businesses.

But the risk is that inflation, which the central bank has tried to control since last year, could make a comeback in the course of the year driven by a likely surge in food prices due to unpredictable weather conditions.

Luckily, the conditions that pushed the central bank rate to 10% as at the end of 2018, the lowest since 2011, still remain the same and the economy is seem to be still performing well, according to the latest monetary policy report from Bank of Uganda.

The Gross Domestic Product grew between 7-8% for the first 10 months of last year and is expected to sustain growth going forward supported by the ongoing investment in public infrastructure such as the Karuma and Isimba Hydropower dams.

Trade captains and analysts who spoke to The Independent showed optimism for growth of businesses in 2019 citing likely improvement in the economy.

“We are coming from periods of slow growth since 2016 but we have observed some faster growth starting 2018 because of the improvement in the agriculture sector that also feeds into our manufacturing sector,” said Gideon Badagawa, the executive director at the Private Sector Foundation of Uganda.

Data from World Bank shows that Uganda’s economy is projected to grow at 6% in 2018/19 compared with 4.5% in 2016/17 and 2.5% in 2015/16. The global bank cites increase in investments in various sectors across the country.

Badagawa said the agriculture and tourism sectors expect to grow faster this year subject to government’s involvement seeking for viable markets.

The country’s agriculture sector has been growing at about 2% per annum over the last five years, which is well below the population growth rate and below the 3-5% growth rates in other East African countries.

In the medium term, the agriculture growth rate is expected to remain around 2.5%, assuming reasonable weather conditions and no army worm infestations, according to the World Bank, even as it employs more than 70% of the population.

Badagawa, however, said there has been a hiccup in trade and commerce segment especially in the importation of capital equipment and machinery such as motor vehicles since the government came up with a law that prohibits import of motor vehicles above 15 years.

The new shift, Badagawa, says triggered a sharp decline in motor vehicle imports since the end of last year, a momentum expected to continue this year.

Everest Kayondo, the outgoing chairman for Kampala City Traders Association says though they expect businesses to thrive following projected growth in the economy this year, their worry is how the local population will participate in this growth.

“We hope that the issues surrounding foreigners engaged in petty trade especially Chinese will be resolved,” he said adding, “we engaged government last year and we hope this will be concluded this year.”

He says the government needs to come up with a policy that clearly spells out trading activities that foreign nationals can engage in as it is in the neighbouring countries such as Kenya.

“In Kenya, a foreign national cannot run a hotel that is below 3 star hotels,” Kayondo said.

Local traders have in the past two or so years protested against foreign nationals engaged in petty trade saying they are driving them out of business.

On Nov. 08, 2016, traders in the northern Uganda town of Lira refused to open their shops for business protesting what they termed as `unfair competition’ from foreign traders mainly those of Indian origin.

In 2017, Kampala traders marched around the city protesting Chinese involvement in small businesses.

It is estimated that more than 600 foreigners, mainly of Chinese and Indian origin trade in Uganda without the right work permits or documents to operate businesses, according to the ministry of trade.

Martin Okumu, the former director of communication at the Uganda National Chamber of Commerce and Industry and now the executive director of Sapientia Professional Consultants, however, says growth of local businesses is likely to remain unchanged as a result of high interest rates, high transportation and energy costs.