The economic problem arising from the coronavirus effect.
KAMPALA – In this write-up, I pen my thoughts on how to respond to the economic challenge. This is the most difficult assignment any politician, economist, thinkers or business person can do at the moment. We now need to define the economic problem on our hands. As i write now, the shutdown, its causes and its consequences is the problem. There are various economic issues that have emerged and continue to emerge as a result of the pandemic and the shutdown. Some have an immediate impact, others medium term, while others are long term. What are they? What is the current economic malaise in-country? We see that the Coronavirus has led to loss of jobs, shut down most of every activity. Business and non-business. We cannot even go to Church to pray. Save for the food and medical suppliers industry the rest of the economy is supposed to have halted. In a peasants dominated informal economy, only the formal sector appears to have closed down. Agriculture farmers never shutdown. Some factories also remained open.
The shutdown is affecting everybody. Schools have closed, markets have closed, streets are deserted, offices are closed, football matches stopped, malls closed, most construction sites are at a standstill, theaters closed and so are hotels generally. Tourist have dried up, airlines are grounded, taxi is off the street. Most factories are closed too. Though as indicated some remained open. How do we respond to this? The exception and unique ones are peasant farmers. With these rains, most farmers are in the fields! Agricultural producers in rural areas are in their farms planting their usual crops maize, beans, cassava as is usually the case. For them, their lives have not been disrupted much yet. They haven’t seen the effect of the virus on them personally so they continue to live their unsophisticated life. By the time the lockdown officially ends, many of these seasonal plants would have shown progress.
We also have the challenge of those people, the informal business person, the street vendors who live hand to mouth. What they earn is what they use for their day to day activities. They have forced themselves back on the streets in desperation. They have a small amount of capital they use for business may be Shs 100,000 and have meagre or no saving at all. During the lockdown they used it to feed themselves, they also “ate” the capital! And now they don’t have money. But most of their good customers are off the street! What a dilemma?
Many people have lost their jobs as a result of the lockdown and its causes. We may see, maybe already seen, a high level of unemployment in the country, especially the category of hand to mouth. The lockdown forced many categories of people from work, the taxi drivers, the boda bodas, the non-food market vendors, garage, shop-keepers other than those that sell food items. Of course, those who operate tourism facilities like hotels, transporters, restaurants. These were made redundant by the lockdown. Many, especially employed in small businesses may never regain the pre-lockdown employment status.
For the organizations especially business, some have already been “infected” and are dead and buried. Others may be dead and awaiting burial. Others may limp on, open and collapse. While some other will open and struggle to survive. There is really no formula for them. We might see bankruptcies i.e., companies that failed to meet their obligations over time. The Bank of Uganda has requested commercial banks to reschedule loans as a relief to borrowers.
What is driving the Change?
As a nation, we must acknowledge that there is change and there is need for change. Life has been disrupted. The economic activities have been disrupted. It cannot be business as usual in the way we manage our economic affairs. If a country, in fact the whole world shuts down because of something you cannot even see, it must be a serious issue! If people stay home for more than a week, the matter must be serious. Our response cannot be ordinary. I remember something like this happened when the NRA took Kampala in 1986. For about a week people didn’t leave homes. While we did not move we knew the cause and knew what was going on. It is now a month! This is a major change in our lives and our economy. We, therefore, need to change the way we do business. We must innovate. Find new ways of doing things. What we have been using has been rendered obsolete. But what change is it (what innovations). Who is to drive it? What are the key success factors? The change the Coronavirus is demanding is not easy to define. Already we have personal change involving social distancing, washing hands as a culture that has developed more is yet to come. There must be innovations to simplify this. Organizations and nations must also change. This is coming in the midst of a major technological breakthrough, 5G. It is coming with the 4th Industrial Revolution (4thIR). What are these technologies we must adapt to change and survive?
The key players are government, organizations and individuals in the context of the Coronavirus and the economy. In this article we have singled out the government. The change will be influenced by the virus effect driven largely by technology but led by the government and those organizations that will survive and of course individuals and leaders. It is those countries that will innovate and or adapt to changing conditions that will prosper. Indeed, even those organizations that can innovate and or adapt to changing conditions, they too may emerge successful. It is the ability to recognize the need for change, innovate and or adapt the emerging technologies that will lead to success.
Technology has been a driver and enabler of change. The world has seen various Industrial Revolutions that have brought new products and new processes. Every new revolution makes life easier and advances technology. The first Revolution was about mechanization using steam engine. The second gave us electricity and mass manufacturing. The third gave us computers and automation and digitization. The fourth is about extending digitization. It focuses on artificial intelligence, Robotics and bioengineering among others. While the developed world is implementing the 4th Industrial Revolution technologies, Uganda is struggling with the hoe and is yet to perfect the first Revolution. The Coronavirus has exposed our vulnerability and unreadiness to respond to challenges of current technologies. Can Uganda cope? We are all (countries) on a stage in the global economic affairs, we must act and cope somehow. It is the results that will define us.
……………to be continued
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The writer, Prof. Waswa Balunywa, is the Principal of Makerere University Business School
