How Coronavirus could plunge Uganda’s economy into crisis

Issa Ssekito, the spokesperson for the Kampala City Traders Association (KACITA) anticipates product prices to skyrocket in the coming months. “The economy is going to be bad; the cost of living is going to be high because those with stock have increased prices and they should,” he said.

Mutebile and the numbers

Trade volumes between Uganda and the Asian nations have been growing at a terrific speed in the past decade; with China being the second leading exporter just behind India to the East African nation.

Statistics from Bank of Uganda show that while the country’s imports from Asia increased from US$1.4bn in 2009 to US$2.7bn in 2019, Uganda’s imports from China alone stood at US$335million in 2009 and US$1bn in 2019.

Uganda imports a wide variety of products from China including construction materials, electrical machinery and equipment and their parts, clothing, kitchenware, furniture as well as raw materials.

On the other hand, Uganda’s exports to China – mainly agricultural products – have increased from US$15.45million to US$40million during the same period under review.  Still, Uganda exports most of its products to the European Union and the Middle East, whose export earnings have also tremendously increased from US$415million and US$101million in 2009 to US$496million and US$1.2billion in 2019, respectively.

However, industry followers say life will get  tougher starting next month as stocks that traders imported in December last year ahead of the festive season get finished.

Emmanuel Tumusiime-Mutebile, the Governor, Bank of Uganda, said in his February Monetary Policy Statement that businesses are likely to slow down due to the Coronavirus outbreak in China.

“There is considerable uncertainty regarding the duration and severity of the Coronavirus outbreak. If it persists to an extended period, the effect on global economic activity is likely to be larger than currently projected,” Mutebile said.

The Uganda Revenue Authority (URA) has already confirmed that whereas they are yet to witness a decline in import volumes owed to the fact that majority of the goods were already in transit at the time of the Coronavirus outbreak, the taxman expects a sharp drop in cargo clearances starting next month.

By press time, reports indicated that four big cargo ships that supply goods from China had failed to dock at Mombasa port for the second month in a row following the Coronavirus outbreak. Mombasa is the gateway through which Kenya, Uganda, South Sudan, Rwanda and parts of Tanzania, Ethiopia and the Democratic Republic of Congo import their goods.

“The port of Mombasa receives three big dischargers (imports) from China under Evergreen Line and one COSCO ship on a monthly basis. These four ships have not called since the Coronavirus effect in China,” Kenya Ports Authority Managing Director, Daniel Manduku told The East African newspaper.

The tourism sector, too, has not been spared either as the prospective tourists cancel trips. “ITB Berlin was cancelled last week and last minute because of the Coronavirus. It’s the first time it has been cancelled in 50 years.

That’s a big blow to the tourism industry because that is the time of sealing deals between wholesalers and destination management companies like Great Lakes Safaris, said Amos Wekesa, the chief executive officer of Great Lakes Safaris.

“Even without a confirmed Coronavirus case in Uganda, people are scared of boarding planes to destinations,” he said.

Uganda has in the past two years recorded a surge in tourism arrivals in the past two years from 1.2million in 2017 to 1.5million in 2018.  Consequently, the foreign exchange earnings grew from US$1.45billion to US$1.6bn during the same period under review.

At the same time, various African carriers including RwandAir, Kenya Airways, Royal Air Maroc, Egypt Air, Air Madagascar and Air Mauritius have cancelled flights to China.

Tanzania’s national carrier, Air Tanzania, has been forced to postpone its maiden flight to China. Elsewhere in the world, Virgin Atlantic, Germany’s Lufthansa, Air France and KLM SA, cancelled their flights to the Asian nation.

Museveni speaks out

It now appears the government is taking the pandemic more seriously. President Yoweri Museveni said on March.01 that the coronavirus is an inconvenience and that could jeopardize the economy once confirmed in any country.

“It undermines economies because it is disruptive and inconvenient. If a country records a case of coronavirus, people will be quarantined, movements limited, businesses, schools, leisure parks closed,” he said.

Museveni, however, said the government will take all measures to safeguard Ugandans against the deadly disease. On March 03, the state minister for primary healthcare, Dr Joyce Moriku Kaducu, said 722 travelers including Ugandans, Chinese and other nationals were being isolated to contain the virus.

Of this number, 41% of the individuals have completed the 14 days of self-isolation. To prevent the importation of the virus, the health ministry has also enhanced surveillance measures for all travelers from all countries battling COVID-19 especially in Europe, Asia and US.

The government has also banned public meetings without the clearance from the health ministry and the police.