Economist, Traders Ask Govt to Protect Businesses in Corona Virus Crisis

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A graphic of Maria’s Cargo, a shipping company that delivers goods on behalf of traders in Uganda from China, India, Vietnam, Malaysia and Indonesia.

Government needs to devise means of protecting the economy from crumbling as a result of the temporary shutdown of key businesses because of the corona virus.

Makerere University Business School-MUBS Economics Lecturer and Policy Analyst, Ramathan Ggoobi says the Coronavirus (COVID-19), which has since been declared a pandemic is economically contagious and has attacked all sectors of the economy at all fronts.

It follows the drastic measures announced by President, Yoweri Museveni on Wednesday this week to contain the corona virus threat. The measures include among others the closure of all educational institutions nationwide, a ban on public gatherings including congregational prayers, sports, seminars, parties, funerals and bars.

The lock-down according to Ggoobi is a disaster and is likely to cripple the flow of currency in a simple economy. He argues that Uganda is currently facing a reduction in the supply of first moving goods due to over reliance on China, India and Kenya, where 60 per cent of all goods consumed in the country come from.

“You find that when someone drinks beer, the bar makes money. That bar takes the money to the factory, which makes the beer. The factory is able to pay its workers and then the workers go and buy other goods. The factory also buys raw materials. There are factories using cassava while others are using sorghum to produce this beer,” Ggoobi observes.

He says a reduction in the amount of beer consumed, will have a ripple effect on the entire supply chain.

Ggoobi says the money spent in bars leads to increased consumption of fuel, food and provides survival means for many Ugandans who operate them.

According to Ggoobi, there is a likelihood of rising levels of inflation. He observes that the financial sector is being disrupted as a result of the closure of businesses, majority of which run on loans.

“These loans are likely to become nonperforming loans and this is the number one cause of financial crisis. It is what actually fails banks. God forbid, this shouldn’t happen to the banks today,” says Ggoobi.

He says Uganda acted in panic to close down businesses and institutions learning from other developed countries. “We are responding to panic, not to a real problem. And when you act under panic, you often over react and I think in this case there was a bit of overreaction from the government,” he says.

Adding that; “thankfully, on the side of economy, they didn’t over react because I have been listening to some people in government who were proposing things that would have destroyed this small economy –controlling the prices and so on. The good thing, the president didn’t talk about that.”

Ggoobi predicts worse for the economy if government doesn’t put in place serious measures. He proposes that government introduces wage subsidies for half pay to businesses that have closed, in order for them not to lay off workers.

He also proposes reduction of taxes on services such as internet and mobile money to increase capacity to maintain businesses, need to access credit by Small Scale Enterprises (SMEs) by government sharing risks.

Ggoobi has also advised Uganda Revenue Authority and National Social Security Fund- NSSF to reduce their tax expectations at least in this last quarter.

Tonny, a dealer in male garments operating Unik Traders in Nabugabo Plaza says they have been getting supplies from China but haven’t placed any order since the outbreak.

Emmanuel Ahimbisibwe is a sales manager at Maria’s Cargo, a shipping company that delivers goods on behalf of traders in Uganda from China, India, Vietnam, Malaysia and Indonesia. He says business has gone down ever since the virus broke out and movements restricted.

According to Ahimbisibwe, most of the airlines that used to bring their cargo have closed. “We cannot say businesses are okay as I speak. Businesses are down. Everyone is crying. And whatever is there in the market is costly so to be honest with you, businesses are not doing well at all,” Ahimbisibwe told URN.

He says they are currently delivering goods for traders who had made and cleared orders from China before the COVID-19 outbreak.

Closing schools, churches and other institutions has according to Ahimbisibwe set a major shock in demand of goods supplied by businessmen in town. He says this lockdown will be more painful if it goes beyond one month.

URN.