Good year. 2019, according to some of Uganda’s top business executives, is likely to be a good year because of numerous infrastructure projects, writes Dorothy Nakaweesi.
Projections have put Uganda in a good economic stead, predicting that the country’s economy will continue to benefit from new and ongoing infrastructure projects.
According to a report from Standard Chartered Bank, although oil production has been pushed beyond earlier commitments, Uganda is expected to experience robust medium-term economic growth.
This will be on the back of massive infrastructure spending.
Government had hoped to start oil production in 2019 but there are indications this will not be realised. A mixture of new deadlines including 2021 and 2023 have been announced in the last 12 months
Similarly, a report authored by the Institute of Chartered Accountants indicates that economic growth is expected to ease slightly to 6.8 per cent in 2018, from 6.3 per cent in 2019.
This, the report says, will be a result of increased accessibility to private sector credit as well as improvement in the investment climate. Improvement in the performance of the agriculture sector will also influence growth in 2019.
However, the projected growth will have to overcome the increasing debt burden that currently takes about Shs3.9 trillion in repayment.
As an allocation, paying debt was one of the largest budget sector allocations in the 2018/19 budget.
Some experts have argued that while infrastructure development is important to the economic development, mobilising funding for massive infrastructure has created a debt overhang, with most of the expensive loans coming from China in exchange for project contracts.
In this edition, we speak to experts across the divide to tell us their view on what lies ahead as Ugandans relax into the New Year.
Razia Khan, Stan Chartered Bank
According to the Standard Chartered Bank chief economist for Africa and Middle East, whereas there have been efforts to widen the tax base, Uganda continues to collect low revenue, thus forcing government to rely on debt to fund different projects.
To make it worse, she says: “Uganda has avoided to borrow from international capital markets and reliance on more short-term commercial borrowing is increasing.”
This in the long run, experts say, might not be suitable because government is deploying expensive loans on long-term projects.
Therefore, Khan believes, with such a business environment there could be a possibility that the growth might be dampened by inflation, which she expects to exceed the Central Bank’s 5 per cent target.
Maggie Kigozi, director Crown Beverages
According to Kigozi, the fact that Uganda experienced good rains, the country will experience a bumper harvest.
“Politicking is over, so in 2019 we can peacefully do business until 2020 when they start again before elections in 2021,” she says.
However, she is quick to add that peace in the region, especially in South Sudan, Burundi, DR Congo and some non-tariff barriers in Tanzania, are expected to influence economic growth in 2019.
Beyond this, she says, there should be speedy implementation of the Standard Gauge Railway project to help reduce traffic jam in Kampala.
Patrick Bitature, Private Sector Foundation Uganda chairman
Bitature is optimistic and believes the economy will sail through the New Year because the foundation on which the it is built is not artificial.
However, he says, Uganda’s procurement system continues to be a big challenge, which has slowed down the economy.
“Many good things are going to happen but they are happening too slowly.
“Look at the Northern Bypass, the Jinja Expressway, the Busega-Mpigi Highway. They are all too little too late. These are massive infrastructure projects and will have high redistribution level,” he says.
Bitature also believes that such projects will reduce traffic gridlocks that impact economic productivity and growth.
“The pace of execution must be upped across the board,” he says, arguing that there is need for government to put in place proper procurement structures to manage large scale procurement.
V G Somasekhar, Airtel Uganda managing director
The economic outlook appears to be good and 2019, according to Somasekhar, the Airtel managing director.
Government, he says, has taken deliberate steps to enhance infrastructural development through road network and rural electrification, which will bolster economic and social development.
“Uganda has enjoyed stability and peace. This will open up more market for Uganda’s goods and services to enhance existing economic relations,” he says.
Somasekhar believes that major economic drivers in 2019 will be telecoms, ICT, tourism and agriculture.
However, the stability of the shilling, he adds, and the movement of inflation will determine how the year closes.
Maintaining peace and stability, Somasekhar says, will be a key factor in the New Year, therefore government must do all it can in this direction.
Uganda has one of the youngest populations in the world and this, he argues, must inform government’s decisions and planning.
Jacqueline Muna Musiitwa, FSDU
Deepening financial understanding has been a major factor that has propelled 2018 and, according to the Financial Sector Deepening Uganda (FSDU) executive director, this is expected to continue into the New Year.
Musiitwa is also optimistic that Parliament will pass the National Payment Bill 2018 that will close gaps related to digital payments.
Financial inclusion, she says, has been a key growth factor and there have been positive growth, according to the Bank of Uganda Composite Index of Economic Activity report.
“We hope that there will be a trickledown effect and that more Ugandans will be able to improve their livelihoods and protect their financial vulnerability by using the increased number of financial services available such as agency banking, mobile money, insurance and pension plans,” Musiitwa says.
Fabian Kasi, Centenary Bank MD
The banking sector, according to Kasi, hopes to register growth in private sector credit, a key facet in development.
In 2018, private sector credit grew to 10 per cent.
The banking sector, Kasi says, will also engage more to enhance financial inclusion through increased agent banking and leveraging on mobile banking to create linkages.
Agent banking, which was launched in the second quarter of 2018, has been one of the new innovations in the banking sector introducing about 500,000 agent representatives in the sector.
“We also expect quality of loans to be better than before. We expect more people to open accounts,” he says.
Elly Twineyo, UEPB
The prospects for 2019, according to the Uganda Export Promotions Board executive director, are promising and the New Year is likely to build on the gains reached in 2018. Uganda grew its export performance, recording more exports to Kenya than it imported from East Africa’s largest economy. Tourism receipts also registered growth. According to Twineyo, there is need to assist organisation such Uganda Registration Services Bureau and Uganda Investment Authority to formalise businesses.
“Formalisation will improve doing businesses and will attract and keep serious investors. If a business is not formally registered, it becomes difficult to reach and advise on how to become profitable,” he says. Trading within the region, Twineyo says, must also be boosted and focus must be put on expanding the export market beyond the European Union, US, UAE and China.
Uganda Export Promotion Board also plans to increase its promotional works as it seeks to open up Uganda to new market.
This, Twineyo says, will be key influencing factors for Ugandans to have a better 2019.