Informal sector to get interest free loans to stimulate businesses

By Daudi Zirimala

Business people in the informal sector have a reason to smile after White Army Poverty Eradication Uganda a local NGO has started giving out loans to them without interest to enable them stimulate their businesses.

According to the Chief executive Officer of White Army Adam Mugga, the informal sector are vulnerable because their businesses were much affected by Covid-19 pandemic and that is why they decided to come up with this stimulus package to enable them access free interest loans.

Mugga noted that initially the stimulus package was going be rolled out in eight parishes that make Lubaga South before they roll it out to areas of the country.

Experts caution SMEs on quality

By Edwin Muhumuza

Experts in business and continental trade have advised Small and Medium sized Companies to ensure quality in the wake of the African Continental Free Trade Area AfCFTA) treaty.

This during the Second Strategic Leaders’ Summit that was held at Sheraton hotel under the theme: “Digital Innovation and Corporate Governance for SMEs in the New Market Frontier,” courtesy of the Human Capital International Organization.

Last year countries except Eritrea ratified the treaty that will see them open borders to enable free trade.

However such economic trends tend to affect locally based Small and Medium sized enterprises in numerous ways following the entrance of larger corporations and much more stiffer competition amid the risk of being thrown out of business.

The tax manager at Price water house Coopers (PwC Uganda) Juliet Najjinda said that AFCFTA will become a big market and that means SMEs should start working together to produce in large quantities adding that SMEs should get cheap raw materials within the continent instead of China and ensure they produce quality products as well.

The treaty will among the objectives, eliminate tariffs and non-tariff barriers while enabling intra continental trade and movement of people, goods ,services and intellectual property rights .

Contrastingly, the Uganda Revenue Authority is concerned that the move will see a reduction in revenue by close to 50% in the next five years according to the URA assistant commissioner Public and Corporate Affairs, Ian Rumanyika.

“We have opened up these borders [under AfCFTA), there is no doubt that the goods that will be coming in our country will not be taxed. Currently, the domestic revenue collections contribute around 58 per cent, compared to international trade that brings in 42 per cent. Now the 42 per cent is going to reduce further to 20 per cent,”he said.

The Human Capital International president, Emmanuel Dei-Tumi said this year’s summit, brought together key players in digital innovation and providing them with the platform to discuss the opportunities and challenges of the agreement and exchange ideas on leveraging technology and good governance for SMEs growth.

The former UN undersecretary general and chairman of the Mo Ibrahim Foundation ,Abdoulie Janneh noted that government should facilitate the growth of SMEs as drivers of growth with over 90 per cent of all the businesses in the continent are SMEs and employ over 80 per cent of workers who are the youth.

The Ministry of Information and Communications Technology Permanent Secretary Vincent Bagiire said that government was doing everything possible, to digitalize the economy adding that the reason most companies that use technology are increasingly becoming successful is because they are harnessing data.

Delay of final investment decision affecting growth prospects

By Edwin Muhumuza

The current stalemate in the local oil and gas industry that has led to the delay in commercializing Uganda’s petroleum resources is going to have an effect on Uganda’s growth prospects.

This is according to Standard Chartered Bank ,Africa Strategist Ms. Eva Wanjiku Otieno as she was presenting the Macroeconomic & Global Geopolitical Outlook of the region.

Ms Wanjiku noted that Uganda has a mixed growth outlook supported by public investment in infrastructure but the delay of the Final Investment Decision (FID) and upcoming elections would weigh on business prospects.

Ahead of the 2021 general election, she said that Election related uncertainty may increase supply concerns going into H2 of 2020 which may pressure yields higher.

She made the remarks during a Manufacturer’s Business Forum for over 150 manufacturers and various stakeholders at Hotel Mestil, with the aim to provide a platform for market players to network, share forward-looking insights and best practices.

The forum was themed “Practices for Sustainable Business Growth” which brought together subject matter experts and leading manufacturing businesses to deliberate on current trends affecting business growth in Uganda as well as share the latest research on important and policy-relevant topics.

Albert Saltson the Chief Executive Officer, Standard Chartered Bank Uganda said that “This new decade presents immense opportunities for business growth. It is critical that business leaders make insight led and research-based business decisions in partnership with strong and reliable financial partners who will help them stimulate their business growth.”

The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining.

Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic drivers. And Inflation is expected to remain below 5%, strengthening the domestic economy.

The Central Bank policy rate being at a historical low level due to subdued inflation has allowed for past easing.

However Government spending continues to increase and expenditures have increased faster than domestic revenues, widening the fiscal deficit which is largely financed through external borrowing, supplemented with domestic securities.

Despite the rise in the deficit, Uganda is classified at low risk of debt distress. But, debt reached an estimated 43.6% of GDP in 2019, up from 25% in 2012, raising medium-term concerns. Lending remains within IMF limits, but risks have increased due to higher costs of debt servicing and infrastructure investments.

This engagement granted an opportunity to the Bank’s clients to learn, engage, network and be empowered to improve their operating environment.

Bank of Uganda losses worry MPs

By Edwin Muhumuza

The parliamentary Finance committee has expressed concern as to why Bank of Uganda is making losses , a trend that is affecting the national reserves.

The committee heard that the central bank had invested Uganda’s reserves in Europe ,a move which did not yield any profits following the negative interest rates.

The revelation was made by officials led by Dr. Adam Mugume, Executive Director of Research, at Bank of Uganda while appearing before legislators to account for another 450bn shillings for re-capitalization.

Mugume told the committee that currently Uganda’s reserves have been invested in the United states of America,whose market offers an interest rate of 2%.

This though did not go well with members of the committee chaired by Hon.Paul Musasizi ,Member of Parliament, Rubanda County East Kigezi Sub Region amid concerns stemming from the conservative investment approach of the central bank with eyes on overseas financial markets.

Uganda has reserves now amounting to US $32billion but these could be swept away in a blink of an eye following poor investment decisions, warned the director of research.

During the interface, Amos Lugolobi ,a member of the committee and chair of the budget committee of parliament wondered why the central bank was adding to Uganda’s debt burden with such demands even after over 200bn was advanced to the bank in the previous financial year for re-capitalization.

Among the central bank’s expenses include monitory policy infrastructure, increased use of garnish orders, and high costs of currency infrastructure.

The Auditor General’s report 2018 notes that Uganda’s debt to GDP ratio of 41 per cent is still below the International Monetary Fund (IMF) risky threshold of 50 per cent and compares well with other East African countries. However economic analysts challenge that figure stating that the country is already well above the threshold with estimates at 55% which they say is unfavourable compared to national revenue collected which is the highest in the region at 54 percent”.

Concerns have always been about the sustainability of debt, taking in more commercial loans, whose conditionalities are probably not very conducive for Uganda as a developing country.

Meanwhile Parliament has resolved to have a national dialogue with officials from Bank of Uganda and the ministry of finance about the fate of Uganda’s economy more so over the ever increasing national debt as a result of multi-year programs that need constant funding as well as supplementary expenditure.

BAT gross revenue hits shs.86.2 BN mark

By Edwin Muhumuza

British American Tobacco Uganda has posted gross revenues of Ushs 86.2 billion and a profit before tax of Ushs 9.7 billion.This in its half year results for the six months ended 30 June 2019.

BAT Uganda Managing Director, Mathu Kiunjuri said that in the first half of 2019, gross revenue increased by 17% to Ushs 86.2 billion driven by growth in volumes due to distribution efficiencies and portfolio transformation. Profit from operations increased by 11% to Ushs 9.8 billion due to the growth in revenues, partly offset by higher cost of operations.

The increase in cost of operations was in line with volume growth, inflationary increases and additional investment in the brand portfolio.

Profit before tax increased by 9% to Ushs 9.7 billion in line with growth in revenues, offset by finance lease costs recognised in line with revised accounting standards said Kiunjuri.

BAT Uganda Chairman, Hon. Elly Karuhanga said in as much as contribution to Government revenues in the form of Excise Duty, Value Added Tax and Corporation Tax increased by 19% to Ushs 50.2 billion, illicit trade in tax- evaded tobacco products continues to pose a threat to Government revenues and shareholder value.

According to third party research findings, the market saw an increase in illicit tax-evaded cigarette sales in the first quarter of this year, standing at 22.2%,translating into an estimated loss in Government revenue of UShs 30 billion annually.

“Whilst we applaud the Government of Uganda for steps taken to address the cost of doing business in this market, we reiterate that the trade in illicit tax-evaded cigarettes continues to pose a threat to the legitimate tobacco industry and sustainability of Government revenues,” He noted.

Karuhanga also expressed confidence in the exceptional quality of talent within the Company and partnerships with over 30,000 business partners, as the right strategy to deliver business growth and continued value to all stakeholders.

Kasaija warns against giving government officials unpaid trips on Uganda Airlines

By Deo Waswa

Minister for Finance, Matia Kasaijja has warned the management of Uganda airlines to avoid doing any mistakes that may lead the company to collapse.

Kasaija cited incidents where some government officials may use their position to influence the company to fly them on half payments or on loans.

Once such habits are allowed by the Uganda airlines management, the company will start to operate in debts and eventually collapse.

He has asked them that once such incident happen where any government official want to travel with Uganda airline before paying, the management should immediately inform the ministry of finance and find the solution which will include cutting their salaries.

Kasaija made the remarks while receiving the certificate of air operating license that Uganda airline acquired last Friday to start conducting regional flight.

Absence of quality standard hurting Uganda companies

By Edwin Muhumuza

The lack of standards is affecting delivery of goods and services by Ugandan companies. The trend cuts across all sectors such manufacturing ,agriculture ,transport ,health among others.This concern came to the fore during a breakfast meeting on the impact of standards in the delivery of products and services.

This was revealed by AG Quality consultants, a leading quality consulting firm during a quality management systems dialogue with several business stakeholders in Kampala as part of the world accreditation day activities.

It emerged that Ugandan Health Care continues to suffer setbacks in regard to the quality of diagnostics and laboratory services which are not internationally accepted.

Chief Executive Officer ,Kilian Songwe speaking at the event noted that standards are what leverage businesses in the fast changing world.

For a long time government and business experts have decried the informal nature of businesses and the lack of willingness to adopt corporate governance in majority of them by owners. Relatedly,it is a common concern for consumers to complain about varying quality of specific products on the market.

Songwe noted that “compliance is the price you pay for admission”adding that accreditation ensures impartiality,competence and consistence.He said continuous improvement is a must and that risk management was becoming an element of standards.

Patricia Bageine Ejalu, the Deputy Executive Director for Technical Operations Uganda National Bureau of Standards said there is need for companies to adopt technical committees to ensure quality requirements are observed adding that ,” the Implementation of standards is not rocket science”.

Amid the urge and the push to do global business by Ugandan companies,the demand for quality is high and some of them have failed to penetrate the international market further worsening the country’s trade balance.

Uganda’s economic backbone is agriculture but the sector too is faced with many challenges that stem from High cost of investment/finance,Inadequate physical infrastructure to support the sector, Poor farming techniques,Limited access to quality farm inputs, Too much relying on rain,Lack of marketing data and information,Inadequate production and post harvest technologies all which are linked to a lack of quality management systems at production level all through the value chain.

Stanbic Bank head of Agri-business,Richard Wangwe,said that the excessive wastage of Ugandan produce which normally is perishable is as a result of a lack of quality standards and thus continues to lead to has led to loss of food and vegetables,further calling for Good Agricultural Practices (GAP) and Good Handling Practices.

Additionally he noted that exporters do not earn much from their exported produce due to absence of standards.‘Hazards occur at all stages of the food chain and there it becomes important to address food safety and production at firm level.’

Chief Guest Dr. Elly Karuhanga, Chairman Uganda Chamber of Mines and Petroleum tipped participants on the importance of Oil & Gas Standards in the delivery of products and services noting that the sector is driven by standards and nothing else.This as government urges Ugandans to produce local content for the sector whilst the industry demand s for standards.

Nelson Ofwono,a local content development expert advised the business community to bench mark all their systems be it management,operations,production among others on the oil and gas sector.

Metropol introduces new reference for borrowers and Banks

By Moses Kidandi

Metropol introduces new reference for borrowers and Banks/Financial institutions.

Metropol Credit reference Bureau has launched a new products delivery platform,the first of its kind in Uganda that will enable borrowers have control of their credit information by having direct access to Bureau products conveniently at their disposal via their mobile phones.

Sam Omukoko-Managing Director Metropol says with the use of Metropol Crystobol, borrowers will no longer have to save for 6 months to be able to get a loan because the bureau will already have your financial and Credit profile.

He adds that by the public using the facility,they will also have instant access to their credit profile before seeking a loan from the Bank or financial Institution.

Metropol Crystobol will help users have easy access to finances,employment and markets as it will have detailed account of one’s lifetime borrowing with all current credit providers and their performance in terms of repayment.

Sam Omukoko says the information on the Metropol Cystobol platform will also enable lenders determine loan approvals to customers.The Official launch will be in November this year.

Central bank hopes new regulations will improve digital banking

By Alice Lubwama

The central bank is working on regulations that will improve digital banking in the country.

While speaking at the launch of Brac Uganda bank limited,the director in charge of national payments in the central bank, Mackey Aumo said that the regulations will enable to stream line the business and also allow different players to participate in money transfer and lending .

Uganda is the first county in Africa to have Brac bank.

Brac has been operating in Uganda as micro finance institution since 2006,providing financial services to low income communities.

The institution has 163 branches in 84 districts of Uganda with over 200,000 customers.

The executive director of Brac Uganda Jimmy Adiga said that they will target the house holds through women and youth because they are committed to work.

Adiga adds that they will also provide micro insurance to all it’s customers.

Adiga also said that they have upgraded 32 out of their 163 outlets in Uganda to meet the required bank of Uganda standards for tier2 institutions.

According to bank of Uganda rating tier2 are credit institutions but not fully fledged commercial banks.

Brac is the 4th tier2 credit institution in Uganda joining mercantile credit bank,post bank, and opportunity bank .

New banker’s partnership to strengthen agency banking

By Daudi Zirimala

The Uganda Bankers Association (UBA) has signed a partnership with International Financial Cooperation (IFC) intended to drive financial inclusion in the country through agency banking.

According to the Managing Director UBA Wilbrod Owor Hamphrey, in this partnership IFC has injected in 1.9 million Us dollars in supporting Agent banking system, enhancing product proposition by enabling citizens access their bank accounts.

He noted that currently financial inclusion is the way to go and achieving this, Uganda bankers Association has registered 8805 approved agents across the country who can help Ugandans to open up bank accounts at anytime and starting giving out mobile money loans using bank agents in the country.

“The shared agent platform is a leading concept in the region in terms of reducing cost of doing business in the banking sector,” says Wilbrod.

Speaking at the signing of the partnership the IFC Regional Director East Africa Jumoke Jagun Dokunmu said that a third of the Ugandan population have access to bank accounts ,which is not good enough to reach financial inclusion.

She said that financial inclusion practices have a positive trajectory in Africa due to the development of digital financial services and innovations like agent banking system.

IFC will continue supporting various developments in Uganda through innovations like this to enable government achieve its goal of private sector development and prosperity to the people of Uganda said Jumoke.