The Independent Uganda: You get the Truth we Pay the Price
“Interest rates of about 18-25% per annum are relatively high to borrow, import goods, sell and make a break-even,” he said.
“Most countries including whose nationals are in Uganda – Chinese and Europeans –are lending at 2-5% per annum. They buy goods from their own countries and bring them to the Ugandan market at a lower price because they borrow their capital from their financial institutions at low interest rates. This benefit, unfortunately, is not there for the local traders fighting for a share of the same market.”
This comes as private sector credit, though on a recovery path, remains below its historical trend, and its contribution to economic growth could be weighed down by increased borrowing requirements and the associated further increase in lending rates.
Private sector credit was recorded at 10.5% as at the end of June 2018 compared with 5.6% in the previous year due to improving economic conditions.
Agriculture, personal and household loans, and trade, together constituted 50% of the total private sector credit.
Okumu says realisation of Buy Uganda Build Uganda (BUBU) policy could cushion local traders and manufacturers against cheaper imported foreign commodities.
“If all government entities could buy commodities in Uganda such as stationery from Picfare, we would save the country from foreign currency woes and help boost manufacturers capacity,” Okumu said.
This, however, also faces a hurdle given that the Bank of Uganda has persistently opposed BUBU arguing that it contravenes the East African Community free market protocol.
Going forward
Badagawa says there is need for government to come up with stabilisation fund to help farmers remain in business in periods of decline in commodity prices as it has been with the recent case in Tanzania.
In November last year, the Tanzanian government deployed military to buy cashew nuts from farmers to solve a row over prices.
President John Pombe Magufuli had a month earlier ordered for a 94% increase of the crop prices to Tshs3, 000 per kilogramme to encourage farmers to grow the crop.
However, traders were reluctant to purchase the commodity at the government prescribed price as farmers halted the sale of their crop for weeks, arguing that the offers from private traders could not meet the production costs.
“Someone (government) needs to plan ahead on the quantities of crops that will be produced so that farmers do not make losses as prices falls,” Badagawa said, in reference to government’s spontaneous response to save farmers plight in declining maize prices last year.
Patrick Mweheire, the Stanbic Bank Chief Executive told The Independent last month that the New Year is expected to be good for businesses including the banking industry, carrying on momentum from 2018.
He said the growth in businesses is likely to be driven by the expected US$15-20bn investment in the oil and gas industry ahead of production slated for the next three-four years.
