By Timothy Sibasi, timothy.sabasi@alleastafrica.com
KAMPALA – The status of Uganda’s national economy continues to stumble, with government efforts to stabilize the economy not yet fully actualized.
In this state, nothing is more telling of the hard times than the number of companies that have either folded, quit the market or are in distress in recent years.
So far, at least 2o companies, mainly multinationals and major investors, were at various stages of the cycle, with many more projects to join the list, giving the signal that investors are losing patience with an economy that has failed to transform adequately to provide the necessary demand for goods and services.
Defenders of Uganda’s economy, however, point out that some of the exits or business failures were caused by a change in global strategies of companies or outright mismanagement.
The most disturbing development started with Bank of Uganda’s takeover in October of Crane Bank, the fourth largest commercial bank by assets and fifth by deposits in the country, because the lender had become “insignificantly undercapitalized.”
BoU Governor, Emanuel TumusiimeMutebile startled the country when he said that after taking over Crane Bank, the Central Bank was now, “watching another one or two banks” although the governors slip followed a disclaimer that Uganda’s banking sector was, “stable, sound and profitable”. The statement was quickly withdrawn or “corrected” by his public relations team.
Crane Bank was the third financial institution to go under in recent years; BoU closed Global Trust Bank in 2014 and National Bank of Commerce in 2012. Exim Bank (Uganda) Limited took over Imperial Bank (Uganda) Limited in March 2016.
As a sign of low economic activity, since beginning of this financial year in July, the Uganda government has recorded a shortfall of UGX98 billion which is equivalent to ($28.5 million) after collecting only UGX2.9 trillion which is ($843.1 million).
“Yes we are struggling, but we are not desperate. The situation is under control. As government, we are ready to listen and learn”, Finance Minister Matia Kasaija told a joint press briefing with the International Monetary Fund.
However, economist have argued that while some of the shocks like currency depreciation, decline in global demand and low prices for commodities have affected many Sub-Saharan African countries, the country has long backed a strategy to pull itself out of this hole to achieve structural transformation.
Indeed the writing was on the wall when airlines like British Airways stopped fights to Entebbe in 2015, while private equity fund Actis sold its stake in power utility to UMEME in 2014 to invest in markets with better prospects like Cameroon. Insurance company AIG, ‘after careful consideration and depth review, ‘has also quit the Ugandan market. The insurer will not issue new policies for 2017.
Global brand Barclays Bank, which has had a presence in Uganda for decades, is exiting Uganda and other African operations.
However, AIG’s exit has been prompted by its global strategy to move out of weaker markets. It’s important to note that Barclays is selling its majority stake in Barclays’s Africa and therefore not affecting Uganda.
Meanwhile, Oil firm Shell and Caltex exited Uganda and their other operations in Africa; South Africa’s Engen did the opposite-left only Uganda but maintained its presence in other African countries.
Kenya Supermarket chain Uchumi closed its operations in Uganda last year, while Kenya retailing giant Nakumatt is also stressed and some of its branches across the country have closed as some of its stores in Uganda sport empty shelves. The two supermarkets woes can be attributed to mismanagement.
Economists argue that these current hard times are a result of Uganda’s failure to achieve structural transformation. Isaac Shinyekwa, a senior research fellow at the Economic Policy Research Center, says Uganda’s economy is dominated by the services sector, which enjoys a small market share ofr about 5 per cent, too low to keep multinationals interested.
For years, “Uganda had some of the most impressive economic growth on continent, at seven per cent for over a decade, but achieve 10 per cent growth,” said Adam Mugume, director of research at Bank of Uganda.
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