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Biggest events that shaped business in 2018
Mobile money agents in Katwe. The mobile money tax initially charged at 1 per cent on all transactions, struck controversy after the President withdrew it saying it was erroneously passed. PHOTO BY KELVIN ATUHAIRE
What you need to know:
This year will go down in history as one that witnessed events most of which had a direct impact on peoples’ earnings and expenditure. Prosper magazine’s Ismail Musa Ladu and Christine Kasemiire bring you some of the biggest events that shaped the economy in 2018
The National Budget
While delivering the Budget Speech for financial Year 2018/19 in June, finance minister Matia Kasaija said: “Economic stability has been consistently maintained with the economy growing at an average annual rate of growth of 6.5 per cent for the last 30 years, together with fairly low inflation.”
He continued: “Madam Speaker, economic output is estimated to grow by 5.8 per cent during this financial year, higher than the performance of 3.9 last year. The size of the economy is now Shs101.8 Trillion equivalent to $ 27.9 billion.”
Recently while delivering his speech at the third NTV economic summit, Mr Kasaija said: “The economy expanded by 6.1 per cent in financial year 2017/18, higher than the 5.8 per cent estimate that I reported during my budget speech in June.”
But not many economic analysts in the room nodded in approval.
Actually, Professor Samuel Sejjaaka, one of the panelist implored the minister to recheck his figures claiming they were not in tandem with the reality on the ground.
CBR and private sector lending
To consolidate gains made in recent months, the Bank of Uganda (BoU) decided to retain the Central Bank Rate (CBR) at 10 per cent.
CBR generally means the rate of interest which a central bank charges on its loans and advances to commercial banks or a rate at which entities such as commercial banks can borrow from the central bank.
According to senior BoU technocrats, since the CBR was raised from 9 to 10 per cent in the last two to three months, slightly more than Shs18 billion were advanced to private sector as credit. To maintain the momentum and growth in private sector credit, the BoU monetary policy committee decided to maintain CBR for the month of December 2018 at 10 per cent.
“After setting CBR at 10 per cent, interest on lending hovered at between 19 and 20 per cent,” the executive director research, Adam Mugume, said in an interview after Governor Emmanuel Tumusiime-Mutebile declared the 10 per cent CBR for December 2018.
He continued: “This has been the best lending rate since 1993. Going forward, we expect to see the private sector borrowing more as the high lending rates weaken or at least remain at that rate for the first time in 25 years.”
Oover the last seven months, according to Dr Mugume, bank loans to private sector increased by Shs719.6b compared to the same period in 2017.
However, the private sector, although appreciative of the central bank gesture, through their apex body, the Private Sector Foundation Uganda (PSFU), demanded for more including curbing unnecessary government expenditure, all of which have an impact on the economy.
BuBu in Trade
During the review annual review of the sector, Trade minister Amelia Kyambadde acknowledged challenges experienced by industry players. She also insisted that her fight for better quality of Uganda’s locally produced goods will never cease, so is her support for ‘Buy Uganda, Build Uganda’ (BuBu).
This year also saw some four out of the six One Stop Border Posts (OSBPs) starting operations. These are Malaba, Busia, Mirama Hills and Mutukula. This has translated into reduced turn-around time from three days in FY 2015/16 to two hours in FY 2017/18.
This year also proved that Uganda is improving her exports in the region slowly despite several challenges. In the early 90s, consumer goods and personal care products were sourced from Kenya. This trend, according to experts, was largely driven by the effects of political turmoil that had collapsed much of Uganda’s industries.
According to BoU data, 10 years ago, Uganda sourced goods worth $375m (Shs1.3 trillion) from Kenya, a trend that peaked during 2011 to $657m (Shs2.4 trillion).
For the first time in over three decades, Uganda has exported more to Kenya than it is usually the case. According to Dr Adam Mugume, the BoU director research, in the last 11 months of 2017/18, goods from Kenya declined by 2.4 per cent, compared to the same period in 2016/17.
Battle line drawn over Digital Tax Stamps
Last week, Uganda Manufacturers Association (UMA), the Ministry of Finance and Uganda Revenue Authority (URA) were locked up in a meeting over Digital Tax Stamps (DTS) that the tax body is trying to introduce.
The manufacturers want it suspended on the grounds that it will increase the cost of doing business.
According to the manufacturers, they are already grappling with several challenges, among them the high cost of credit, power and inadequate infrastructure. They do not want to incur any extra expenses related to the technology.
The new stamps are part of URA’s efforts to combat illicit trade, seal revenue leakages, boost collections and increase efficiency in managing taxpayer compliance.
If implemented well, the tax collector says the digital tax stamp will enable manufacturers, distributors, retailers and consumers to track all goods throughout the distribution chain.
The manufacturers are, however, concerned about who will pay the bill due to this technology.
Uganda Airlines
Many thought this would be an early festive season present. A report carried by Aviation24.be, and comments by the Works Minister, Ms Monica Azuba had indicated that four jets which government ordered from Bombardier and Airbus will take to the skies in December—about now.
But this hasn’t happened yet.
Innovation
The year 2018 has also seen more banks move towards innovation to catch up mainly with financial technology. Banks have embraced the digital movement by creating mobile applications, credit, debit and visa cards as well as competitive products and services to attract and retain their customers.
Taxation
The tax man had a very busy year. The new tax amendments implemented in July (FY2018/19) saw introduction of mobile money and social media taxes. This caused massive brouhaha. To date it is still an issue that attracts emotion.
The mobile money tax initially charged at 1 per cent on all transactions, struck controversy after the President withdrew it saying it was erroneously passed. He said the law ought to have been 0.5 per cent only on withdrawals and asked Parliament to revisit it.
While the process took longer than expected, Parliament in November changed the law to 0.5 per cent chargeable on withdrawals only. But damage had already been done. The mobile money tax pushed some mobile money agents out of employment as Ugandans shunned the service.
Industry statistics indicate that more than half of mobile money transaction values had been lost from Shs866b in June to Shs475b in July when the tax was implemented.
Despite public outcry, the Shs200 tax daily tax charged on using social media platforms has left many Ugandans unhappy.
Withholding VAT
Part of the amendments in the Value Added Tax required designated withholding agents selected by the minister of Finance to retain 100 per cent of VAT on transactions. The law was resisted by the business community saying it would limit cash flow. The cries came to fruition in September after the Minister of Finance halted the law pending engagements with stakeholders.
Technology
Government declared that Uganda would start making her own smartphones.
Bank of Uganda revealed that a national payments policy would be drafted and sent to Parliament to regulate financial innovations and create a cashless Uganda. Telecom firm MTN saw its licence extended for another 10 years. This was after the approval of the National Broadband Policy which among others requires telecoms to list on the Uganda’s securities exchange prior to receiving a licence.
Standards
The country was awash with shock after Uganda National Bureau of Standards revealed findings of a baseline study indicating that 54 per cent of goods on the market are substandard. While the government body was proud of the drop from 80 per cent to 54 per cent, Ugandans were devastated at the news. Toilet paper, cosmetics, mattresses, electric gadgets, beverages topped the list of the substandard.
Controversy brewed over alleged fake eggs which the standards body disputed as sweets. Digital quality marks, the standards body said could save Uganda’s market from substandard products. A law making the quality mark mandatory for all manufacturers before distribution was introduced in July and the deadline is set for January 2019.
Insurance
The insurance continues to grow albeit the current low penetration of less than 1 percent. The sector has this year recorded gross written premiums of Shs658b as at the quarter ending September.
Despite being critically crucial, medical insurance is yet to be adopted nationally.
New players such AIG Uganda limited and MayFair Insurance Company Limited opened shop.
The sector also hosted reforms in the legal framework with the most controversial being the Cash and Carry regulation that is expected to be implemented next year. The regulation is envisaged to overturn the insurance industry as premiums will be paid on cash basis. Players are also optimistic that it will boost their performance.
Innovations in financial technology to extend insurance services such as motor third party payments reigned side by side the regulator’s fight against fraud through the new Anti-fraud unit.
Central Bank woes
Currently, Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) is investigating Bank of Uganda (BoU) over alleged irregularities in the closure of seven commercial banks some of which were shut down 20 years ago. Central bank senior technocrat flouted laws while trying to execute their mandate.
In a report to Parliament, the Auditor General, Mr John Muwanga, queried BoU officials on the flaws in the closure of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), The Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Ltd (CBL) to dfcu (2016).
Trade information portal
As the year closed, the trade information portal was launched. With this portal, Uganda finally ticked one of the key boxes requiring member states to avail the necessary information pertaining to procedures, documentation, fees and other related charges relating to exportation, importation and transit of goods in an easily accessible platform.
So exporters and importers, now have no reason to complain about limited information to engage in cross border business.
Uganda Trade Portal is essentially an electronic platform developed by the ministry of trade, industry and cooperative with support from development partners such as the Trade Mark East Africa. These partners draw their funding from DFID among other partners, to provide all necessary trade information by the click of a button.
Financial markets
About three months ago, Cipla share price were on the high, recording an increase of 1.2 percent just days after its listing on the Uganda Securities Exchange (USE).
Cipla, which trades under the QCIL symbol, is the latest company to list on the USE six years after Umeme did so.
But last week, was terrible for CiplaQCIL after its share price dipped since it went public in August. The CQCIL share price dropped by 6.12 per cent to close the week at Shs230, the lowest price since listing.
