Second lockdown lashes stronger whip for economy

Prominent figures such as the executive director of Private Sector Foundation, the late Gideon Badagawa and Kampala City Traders Association (Kacita) chairman, the late Everest Kayondo lost the battle to Covid-19 last week.  About 846 people have so far died due to Covid-19.

The rising death toll ploughing through the country’s workforce, a highly burdened banking industry drowning in trillions of restructured loans with razor- thin hope of timely repayments.

A peaking debt burden with an arguably blindly optimistic taxman hoping to collect Shs22.2 trillion from decrepit businesses struggling to remain afloat. A frustrated, sick and tired population.

The more-transmissible and potentially deadlier variants of Covid-19 that have sent the country into another lockdown are likely to set the economy back.  In short, economic recovery is going to take a big setback.

Hopeless transport sector

Angry, frustrated and disappointed Ricky Rappa Thomson, chief executive officer Safeboda Uganda will not lift a finger of action during these 42 days of lockdown.

The transport sector especially Boda boda riders are one of those prohibited from travelling unless they are carrying cargo.

They also fell victim to the first lockdown. Safeboda last year forced by the economic conditions occasioned by the virus laid off over 50 per cent of their staff. Some were told to go for unpaid leave.

Only months after resumption of operations following the easing of lockdown last year, the company was still struggling to find its footing.

Initially at about 400 workers globally, Safeboda had trimmed its staff to 200 employees and that has been the story since March 2020.

Today, the story repeats itself but this time, Mr Thomson will not lay off his staff.

“I receive about 50 phone calls a day and more than half of those are stranded riders with no hope, no food yet many mouths to feed. They ask me for money because they do not have anything to eat and I send it as long as I have something to offer,” he narrates.

That is no long-term solution

Ricky recalls that whereas people had some savings in the first lockdown, this second lockdown has found many high and dry as they were just starting to recover.

“I cannot lay off any staff because they will be stranded. They will not have what to do. We instead decided that those with annual leave take it during these 42 days as we await hopefully news of opening up the economy,” he says.

Mr Thomson fears for a grim and uncertain future for the ride hailing company in Uganda if the situation is not overturned. There lies no hope in government’s economic bailout plan to distribute money through mobile money.

Safeboda employs more than 10,000 riders in Uganda, most of whom are youth.

Scared informal sector

Youthful Shakira Mastula, a saloonist in downtown Kampala, is also at a loss of words during this lockdown. During the first lockdown, she would move to her customers’ houses where she plaited their hair for just enough money to feed herself and pay her expenses.

Now, the movement even on foot is too restrained that she fears to walk long distances; but what she fears the most is death!

“The virus this time is real, people are dying everywhere. I fear to step outside to other people because you do not know if they have Covid-19 and might spread it to you. Hospital bills are enormous, I would not be able to afford them,” she says adding she will continue nibbling at her savings until the situation relaxes.

Even Mr Gordon Katimbo, Hilton Highschool headteacher, one of the sectors that called for the opening of the economy is now reluctant. He says everyone is scared to physically engage in fear of contracting the virus.

The school resorted to online teaching but as a consequence had to cut 31 teachers out the 54 because not all of them could be absorbed.

Hustling hospitality industry

Ms Jean Byamugisha, on the other hand is grateful that during this second lockdown, hotels have been left to operate under strict Standard Operating Procedures which has enabled them to keep earning some revenue.

The mood is so somber in the country. As the private sector cries for relief, those in the public sector, especially decision makers are disoriented.

Disoriented country leaders

The second lockdown has in many ways thrown off balance even the planners of the economy at the Ministry of Finance whose primary role includes formulating policies that enhance overall economic stability and development of the country.

When the second lockdown was instituted, the National Budget for the financial year 2021/2022 had already been delivered. And therein was no mention, let alone planned anticipation for a second lockdown of the economy as a result of another wave of the coronavirus disease. 

During a sideline interview of a post budget dialogue organised by Ministry of Finance, Uganda Revenue Authority, SEATINI-Uganda and Civil Society Budget Advocacy Group among other stakeholders, Mr Patrick Ocailap, the Deputy Secretary to the Treasury describes the second shutdown as  an“interruption”.

He said: “The second lockdown is an interruption because it will disrupt the growth of the economy, something we did not plan for. Our hope is that this lockdown will not last long.”

He continued: “Measures to open the economy after the 42 days should be put in place so that the population returns to work otherwise where we will get money to treat the Covid-19 patients because that needs resources?”

Importantly, he stressed the need to have the economy open up again once the 42 days are up, saying measures must be instituted to allow the population resume normal economic activities while observing standard operating procedures for as long as the pandemic exists.  

He also disclosed that Shs1billion has been earmarked for specifically the micro and small enterprises, majority of whom according to Mr Julius Mukunda, the executive director of CSBAG, have had their businesses ravaged for far too long even in the last one and half years of the pandemic.

According to Mr Mukunda, Uganda Development Bank (UDB) caters for the interest of the “industry big boys and girls”, leaving the micro, small and even some medium enterprises to bleed to death. This is well corroborated in several surveys some of which have been conducted by SEATINI – Uganda, Economic Policy Research Centre (EPRC) and Private Sector Foundation, the private sector apex body in the country. 

But before the micro and small business are handed part of the Shs1billion, Mr Ocailap said they will have to learn to eventually formalize and form groups to have access to the funds because this is not a grant but a revolving fund.       

In a presentation at the Post Budget virtual meeting, deputy Governor of the Bank of Uganda, Dr Michael Atingi-Ego, noted that although the government didn’t think about the second lockdown, there is nothing much to be done now that it is already upon us. 

He described it (second shutdown) as downside risk, implying there will be certainly a loss in investment as a result of the action. He was also afraid that should the wave fail to be contained, then the economy’s capacity to soldier on will eventually be stretched to the limit, a situation whose outcome can only be one way—caving in.

Although he supervises commercial banks, he says the solution for businesses lies in the financial market where they should be able to raise patient capital rather than accruing it from the commercial bank whose design is not meant for such nature of transactions.

 As for the National Planning Authority, executive director, Dr Joseph Muvawala, the second lockdown has simply intensified their frustration as planners. This is because the available resources could be channeled towards dealing with containment measures of the pandemic, leaving nothing for the implementation of the National Development Plan III. Already, lack of funds to implement the country’s blue print has been a fixture that he says frustrates their agenda.   

Possible solutions

But with wails from even those supposed to steer the country into recovery, what is next for Uganda, in this quagmire expected to span years?

Dr Fred Muhumuza, an economist and Makerere University lecturer, says this is not the time to panic. The country ought to slow down.

“This is a medium to long term thing. The virus is not going to go away in the next six months or one year and its impact is not going to go away in the next two to three years. We need to slow down and ascertain whether we need money and for what. Are there things we can avoid? Government needs to get into that mood and cancel most of the long term ambitious projects so they do not put a strain on the revenues that are not there. Otherwise, they will be forced to excessively borrow which will also cause destabilisation. We should manage with what we have and know that recovery is not around the corner,” he advises.