KAMPALA – Before the Ugandan government imposed a total lockdown in March 2020, Mr Kamukama Zephania, a retail shop owner in Makyindye, Kampala, used to make up to Shs700,000 daily. Alongside the lockdown, the government also implemented a number of measures to mitigate the spread of COVID-19 including social distancing, curfew and closure of ‘non-essential’ work
Kamukama, just like any other businessmen, registered losses and is still facing staggering losses due to the interruption of his business operations. He says today he can’t go back to business because he used most of his capital during the lockdown and he has now accumulated rent arrears of Shs900,000.
“I have no work to go to because my capital is used up and I can’t go back to the shop because I can’t afford the rent. This is what COVID 19 has done to me. I now have no business!” said Kamukama in an interview.
This is not alone, there are many businessmen across the country whose businesses have crumbled due to COVID 19 lockdown and sent the owners out of business.
World Health Organisation (WHO) defines Coronavirus disease (COVID-19) as an infectious disease caused by a newly discovered coronavirus. The organisation says most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment.
COVID-19 outbreak started in Wuhan in December 2019 and later spread across every corner of the world including low-income countries.
In Uganda, COVID-19 pandemic and the subsequent lockdown has reduced business activity by more than 50 percentage points.
This could be largely attributed to COVID-19 containment measures such as transport restrictions, quarantine, social distancing and ban on weekly markets, which hindered farmers’ access to input and output markets, thus undermining their productive capacities. Micro and small businesses reported experiencing a larger decline in business activity compared to medium and large firms. This is not surprising since most of the micro and small businesses halted operation due to inability to implement Standard Operating Procedures (SOPs) such as the provision of on-site accommodation for employees. In addition, employees of SMEs use public transport—which President Museveni announced banned on March 25, 2020.
A research done by Elsevier, a Netherlands-based information and analytics group shows that most developing countries’ economies are projected to have slowed down by nearly half of the financial year 2019–2020 with further uncertainties for FY2020/21.
The Uganda Revenue Authority (URA) already registered a shortfall of UGX 858.1 billion in domestic revenue in the period from July to October 2019 and is expected to register further shortfalls as a result of the impact of Covid-19.
The ministry of finance warned that revenue collection could register a further shortfall of UGX 82.4 billion shillings (US$21.5 million) in the last quarter of 2020 and another UGX 187.6 billion in the coming financial year, even if the virus is quickly contained. This means that shortfalls in revenue collection could significantly exceed projections if the spread of Covid-19 continues necessitating the implementation of restrictive control measures.
This, according to research increases the likelihood of a rise in poverty during and after the Covid-19 pandemic.
“Many people face a reduction in their income due to job and livelihood losses, reduced flow of remittances, loss of market and demand for domestic products,” indicates the research.
The nationwide lockdown imposed to curb the spread of the coronavirus in March 2020 has greatly affected small and medium-sized enterprises where 70% of Ugandans earn their livelihood.
The survey shows that developing countries will have their revenue collection affected by the pandemic.
The data also indicates major shortfalls in revenue collection pushed African governments into high levels of borrowing to cover their fiscal deficit for both FY2019/20 and FY2020/21.
Major shortfalls in revenue and tax collection could result from a prolonged freeze in economic activity, as many Uganda’s taxpayers will not be able to work or pay taxes under an extended lockdown or restrictive response measures.
International Monetary Fund (IMF) growth projections reveal that Uganda could experience between US$0.86 billion (UGX 1,368.8 trillion) and $1.77 billion (UGX 6.522 trillion) shortfall in projected revenue for 2021.
Dr Fred Muhumuza, an economist says that at least 43 percent (18million people) of Ugandans are economically vulnerable which implies that a huge fraction of these will easily fall back into poverty.
According to him, as many as 15 to 17 million Ugandans will likely fall into poverty as the coronavirus (COVID -19) blockade takes a toll on the economy with their day-to-day income sources shut down, analysts have said.
“And those most likely to fall into poverty are the vulnerable Ugandans that have been sitting on the cliff – occasionally falling below and above the poverty line whenever there is a small shock,” said Dr Muhumuza.
Data from United Nations Development Programme (UNDP) shows that trade networks have been disrupted, causing shortages of consumer goods.
The data indicate that hundreds of jobs, particularly in travel, tourism, and events, have been lost. The job loss multiplier effect is large and increasing as supply chains come to a halt and people stay home.
Pointers
A likely increase in poverty as the economy slows down: A clear government response strategy is needed, to ensure adequate attention and protection for the poorest and most vulnerable sections of the population.
Rising public debt as government resorts to borrowing to cover revenue shortfalls: The government needs to pay close attention to its rising fiscal deficit and the increase in public debt towards unsustainable levels.
The shortfall in revenue collection: While total revenue is expected to grow, Uganda’s revenue collection will be affected by the pandemic. Major shortfalls have already been registered in FY2019/20. There are also projections for declines in FY2020/21 targets.
This article was made possible with the support of Ultimate Media Consult
