Economy not recovering soon, says Bank of Uganda

Focus on tourism

The report focused a lot on the tourism sector, which is a major Industry Without Smokestacks (IWOSS). Here, the report projected a missed recovery path with some sub-sectors such as leisure visitors, who represent about 20 percent of all international visitors to Uganda, being not likely to return soon.

It said this would impact particular entities such as tour operators and safari lodges that rely on the leisure market.

“As such, many tour operators who have sound driving and interpersonal skills have looked to alternative jobs,” it said.

But the study said business travelers from within the East African Community, who constitute about 70 percent of all international visitors, are expected to resume faster.  The cities where such business visitors stay were also expected to recover faster, the study said.

But the latest BoU statement dampens any such Pollyannaish.

“Tourism is unlikely to return to normal levels any time soon,” it says bluntly while blaming the on and off lockdown and easing regime seen so far.

The tourism sector is a key driver of socio-economic development in Uganda. It is a major foreign exchange earner and provides avenues for investment and employment. In FY 2018/19, tourism contributed about US$1.1 billion or Shs4.2 trillion to the Ugandan economy corresponding to about 3.2% of GDP.  In 2017, it contributed about 229,000 jobs or 2.4% of total employment including employment by hotels, travel agents, airlines and related services. Its total contribution to employment rises to 605,500 jobs or 6.3% of total employment.  In  addition,  the  local  communities  living  adjacent  to  tourist  attractions  also have suffered since their source of livelihood was closed.

Uganda’s average economic growth of 5.3% in the five years to 2018/19 has been driven mainly by developments in the services sector which includes tourism and many other Industries Without Smokestacks.

Industries Without Smokestacks (IWSS) include high-value agriculture, post-crop harvest processing, mining services, tourism, business services and other tradable services like cut flowers, transport, mobile money, telecommunications, and finance. The services sector share of GDP stands at 44%, followed by industry at 26%, and industry at 23%. Exports of industries without smokestacks have been growing more rapidly than traditional non-mineral exports in many African countries, Including Uganda.

But even before outbreak of the COVID-19 pandemic, experts including from the World Bank were warning of the risks of relying on the services sector and urging a shift to higher productivity activities such and industry and manufacturing that are resilient to shocks. The pandemic effects on the tourism sector hit women far worse than men given their much higher participation in hospitality-related activities like hotels and restaurants.

E-commerce boom

But the Brookings study makes a major finding; that the  rise  of  technology  during  the  pandemic  will  also  have  long-lasting  effects. It points at how, during  a launch  of  the  e-commerce  partnership  between  the  United  Nations  Capital  Development  Fund (UNCDF) and Safeboda; a mobile phone-assisted motorcycle taxi hailing service, the Ugandan Minister of Trade, Industry and Cooperatives reported that  the pandemic has paved the way for e-commerce and this would never be reversed.

Some agribusiness activities were compelled to go digital, which in many cases resulted in more profits than in the pre-COVID era—suggesting that such agribusinesses mighty be unlikely to look back.

The study points at the online grocery platform Bringo Fresh said to have experienced a 150% increase in online orders immediately after the first COVID-19 case was reported in Uganda. The increase could have  been  triggered  by  increased  demand  for  fresh fruit and vegetables (FFV),  which  are  believed  to  enhance  immunity.

During the launch, one of the first partnership market FFV vendors to embrace e-commerce mentioned that her daily sales were higher than they were before lockdown, and she attributed this to e-commerce.

“Some  jobs  will  never  be  recovered  given  the  adoption  of different  working  modalities like working  online  and  from  home,” a key informant to the study is quoted to have said.

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