Ugandan economy suffers as second lockdown bites

Thursday July 15 2021
A lone trader with his merchandise

A lone trader with his merchandise at what used to be Kampala’s busiest Kikuubo market. The 42-day lockdown is affecting businesses in Uganda. PHOTO | MORGAN MBABAZI


Last January, 28-year-old Andrew Lutaaya, after a few years of unsuccessful job searching ventured into small business, selling second-hand jeans in downtown Kampala, in a shop he co-rented with a friend.

Two months later as his business was starting to pick up, the government announced a total lockdown when the country recorded its first coronavirus case, banning public transport, non-essential work among other restrictions.

By the time the restrictions were relaxed to allow Lutaaya and other non-essential workers resume work, he was choking under four months’ rent arrears and the landlord threatened to confiscate his wares. He resorted to taking a loan from his community Sacco to save his business.

But before his business took off a few months later, the country was hit by a second wave and a lockdown ensued. He now has a loan, rent to pay but no longer trades. Even getting food, he said, is a struggle.

“The government announced that it will be giving us a relief package but we haven’t received it. It went to a few big businesses and with the new lockdown, I am sure many of us will be forced to close shop,” Lutaaya said.

Mr Lutaaya is just one of the millions of Ugandans who run smallscale businesses and SMEs and are now grappling with the ripple effects of the lockdown.


Last month, President Yoweri Museveni announced another 42 days restrictions, that will possibly be extended given the country’s slow vaccination rates. Schools, social gatherings, non-food markets shut and all transport is banned.

This second lockdown is poised to throw the economy, especially small-scale further into uncertainty. Several of these have already closed shop while others have been forced to run to loan sharks.

While the government during the first lockdown committed to capitalise the Uganda Development Bank with Ush1 trillion ($279m) to support mainly production and processing businesses, just about Ush455 billion ($124m) has been released and has gone just to a specific of companies, most of them with connections to the powers that be.

Key sectors in the country like tourism are continuing to be battered even when the government still allows international tourists to come in but retains a ban on domestic tourism. The tourism sector contributes approximately 10 percent of the GDP and over $1.6 billion in foreign exchange annually.

There were immediate losses by hotels and tour companies after the announcement of the lockdown and the increasing cases. Many have registered several cancellations as countries in Europe, Uganda’s biggest tourism source market, continue to issue travel advisories against coming to Uganda.

“We had just rebranded, changed our business model and felt things were falling in place until the lockdown which meant we cannot travel. We are back to square one,” Baker Masheta head of product development at Makutano Safaris said.

Uganda Hotel Owners Association says nearly 90 percent of hotel bookings were cancelled and occupancy rates fallen below 15 percent.

Job losses

Since March last year, several people, especially in the informal sector have lost jobs and livelihoods. According to the National labour force survey 2016/17, Uganda’s informal economy employs 84.9 percent of the population 90 percent of whom are youths between 10 to 30 years.

According to Ramadhan Ggoobi, an economist, earlier studies done showed that if the country underwent a second lockdown, its GDP will fall by 10 percent with wholesale and retail trade being affected the most.

“The second impact of the lockdown will be on both the macro and micro economy and it is going to affect the livelihoods of the people more especially those in the informal sector,” he said.

About 60 percent of the population is self-employed and this explains the level of vulnerability to shocks like a lockdown and for that matter, about 100,000 people are projected to lose their jobs.

A new household survey, shows that in the last lockdown, about 300,000 people slipped back into absolute poverty and the second one is poised to increase this.

According to the Trade ministry, the second lockdown is affecting the country’s international trade which accounts to 42 percent of revenue with key exports like coffee registering a decline.

The lockdown is also projected to bring down tax collections. Uganda Revenue Authority spokesperson, Ian Rumanyika, says there is optimism this year but a clear picture of the effect will be known by the end of July.

For the previous financial year, the tax collector had a shortfall of Ush3.5 trillion ($978m) and this year, it is projected at Ush2 trillion ($558 million).

The office of Prime Minister Robinah Nabanjja announced that some vulnerable groups will be given Ush100,000 ($28) for each household to tide them over the lockdown but the criteria on choosing who and how many the vulnerable are is still not clear.