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Q&A: PSFU Boss Asiimwe Emphasizes Need For Small Businesses To Formalize To Benefit From COVID-19 Stimulus Package

PSFU Executive Director, Stephen Asiimwe

Private Sector Foundation Uganda (PSFU) acknowledges that businesses were hit hardest during the two- year  Covid-19 lockdown. However, with the recent  full reopening of the economy, PSFU Executive Director, Stephen Asiimwe (SA), says that there is hope with discussions  going on to have businesses supported.

In an exclusive interview with Business Focus (BF), Asiimwe said it’s only  formal businesses that can “have access to cleaner and cheaper credit facilities.”

Below are the excerpts of the interview;

BF: From the eyes of PSFU, how bad were Ugandan businesses hit by the Covid-19 pandemic?

SA: Of course the first one is that businesses suffered heavily because of lack of off-take. Every business sells. So, if you can’t sell, then you can’t  earn, if you can’t earn, then you can’t survive. Those are the basic rules of economics. And there’s selling in many forms; manufacturers who produce, there are those in the middle who sell. There are those who facilitate sales like transporters, banks, insurance. So, everybody in the value chain suffers and that’s the business chain. For example, you manufacture exercise books. The raw material comes from somebody who is not earning because you are not buying from them. The production line suffers because you are not making books, and making books comes with another eco-system. The people who work for you. You are not consuming electricity, water, you are not going to the bank so there are no transactions, you are not borrowing money or if you have borrowed you haven’t paid back, if you are transporting from one point to another, you have not done that, the distribution chain is suffering. So, it’s a pack of pads and so everybody along the value chain is affected…. So, two years down the road, everybody had suffered including the government which earns money in form of taxes which taxes go to the treasury which treasury spends on things like extension services, infrastructure, health, education. So, everybody in whichever way you look at it suffered.

BF: How do businesses then recover from the two-year COVID-19 induced lockdown?

SA: You need to kick start from the beginning. Every point of production needs to be re-capacitated.   The factories  and business people need to be re-capacitated. Some (businesses) had died. So, they were just postmortems really.  So, there is need for a stimulus package which is what we have been discussing with government but it’s a delicate balance because stimulus package can be in the form of waiver of taxes, can be recapitalization or it can be cheap loans which can support a business. So, those are the things we have been discussing. There are things like moratorium (that you extend my loans, waiver, easing on taxes, cheaper power, and fuel). So, all those things are some of the things we have been discussing with government, whatever they can give us, we can do with. Those are some of the things we are discussing with government.

BF: Are there any interventions (if any) following discussions with the government?

SA: Yes. There have been some interventions like on schools. Schools were asked not to charge certain fees. We have been discussing with URA not to demand for old taxes. There has been a request from government to give us cheap or free loans so that stimulus package from the IMF, Bank of Uganda, benefits businesses. There have been interventions like emyooga. So, there have been so many interventions in so many areas. Manufacturers have been asking for waivers and easing of tariffs etc. Of course UDB (Uganda Development Bank) was given money to give to businesses at very concessionary terms that are  not limited to loans but inclusive of grants.

BF: Where is the hope for the private sector amid the prevailing harsh circumstances?

SA: The good news is that some businesses just needed the reopening of the economy. The night economy just needed to be opened and it would run by itself. Like pushing the car from the top of the hill which is of advantage due to gravity, not of mechanical challenges. If I have my 10 crates of beer in a fridge, I can start a club, so people can come together and drink…When one group starts spending and another group is buying, then the ripple effect starts to move. The guy drinks, he pays then the bank is able to get some money, is able to buy chicken and goats so the farmers get some money so the thing starts to move by itself. So, we have been surviving on that and analysts are looking at 10-18% growth.

The going back to school for the kids is a big boost to the economy because you are looking at about 15 million consumers eating posho, beans, salt, water, electricity, scholastic materials. The ripple effect of an economy starts to move by itself. We are hoping that as we approach June which is the time of the budget reading, a lot will happen with many ongoing discussions.

BF: You are in Dar es Salaam (at the time we did this interview). What’s the purpose of the trip?

SA: At a broader level, we are discussing how we resuscitate economies post Covid-19 lockdowns. So, we are looking for African and regional solutions to this problem. We are not unique in ourselves. What is happening in Uganda is happening across East Africa. So, the lessons are the same. The impact is the same. Just that different interventions are cutting across different countries.

 

BF: About Three months ago, Uganda fully reopened the economy. How are businesses responding to this ‘magic bullet’?

SA: There are different levels of analysis. It’s like patients in hospitals. There are those who are in ICU. There are those who are in HDU (not fatal). There are those in close observation (doctor checks on you every two hours) and then there are those who are sick but in outpatient. Then there are those who are just beginning to catch the symptoms. So, it’s pretty much like body organism. There are businesses that died completely. Forget them. They are not coming back. There are those that went from worse to worst. Bad to very bad. At each stage, everybody suffered depending on their level of capacity. Businesses are also about individuals. Now, there are people who had invested in a variety of businesses. Take the example of people who were in the alcohol business. They now transformed into sanitizers and they really took off. They were lucky. The young generation who went into IT. Online shopping. Those ones just took off completely. There are those who went into Covid-19 testing. Those ones made a killing. So, there are different levels. My analysis is that there are different levels of the impact of the Covid-19 pandemic and therefore, they demand different interventions but one thing that came out very clearly from the PSFU is that the companies or businesses that were more formal, the interventions are much easier because they are traceable. They have an address, they have accounts, audit trails, and they are easily supported that’s why for instance UDB had problems. Say you are in business but we can’t trace you. There are no books of accounts. No records. So, you are a high risk borrower. So, people are strained to lend you money because if you disappear, they say but you, didn’t you follow the ‘SOPs’ of giving someone a loan. Are they traceable? So, the more informal, the harder it is to trace and help. The more formal businesses are easier to deal with. They have bank accounts, they have address, some form of corporate governance, and for me that’s the point I am really thinking that if we are going to grow our businesses, even if you are a micro company, please register. Have a number, a TIN, an ID etc. Now people fear formal business because they think that taxation is going to come. Yes, but it’s also easier to help you. The problem with informal businesses, they may need to borrow. They go to a moneylender. Moneylender asks you for unbearable collateral. It’s either a land title or a vehicle. If it’s a land cruiser worth 100 million, the man values it at 50. He is lending you 10m. He is telling you, if in 5 months you haven’t paid me, the car will be taken yet you have borrowed 10 million. The man is hammering you 15% per month on the available balance. Before you know it, you have paid the man 45 million, you haven’t cleared him in 5 months and he is taking your car. So, you have lost 45 million. You have lost your vehicle and by extension, you have lost your business. In a formal business, you are able to go to the bank, you negotiate the interest rate, you have long term, you can actually come to another bank and you schedule the loan and the terms of business are easier. You can now go to UDB and get a grant. So, for me at a personal level, I really think that we need to professionalize our businesses, go formal and have access to cleaner and cheaper credit facilities which have much bigger range and once you are organized, you have opportunity to draw money at association or organization level. That’s my personal opinion.

BF: The talk of the stimulus package has been on for some time. How far?

SA: Where it stands, I work with associations. PSFU is a member based organization and therefore at the immediate level we deal with people who are our members. Although we relate with the private sector in general, my personal responsibility is towards my members. Now, a lot of that money was sent to the micro and small businesses which to the largest extent were by the association members and therefore sometimes I don’t cover but I know that there was money that was sent at different levels but I think there is also a push and then the government now launched its Parish Development Model. A lot of the resources have been going in that direction – in SACCOs, which inadvertently are private sector. I can’t speak for them but I know quite a bit but I also think that there should be much more money coming in.

BF: You have a tourism background. At your level now, are there initiatives that you are exploring to support each other?

SA: Absolutely. PSFU oversee Tourism Sector. So, you have manufacturing, agriculture, ICT, construction and real estate, education, health. Those are private sector. You have oil and gas, minerals and extractives, you have trade and financial services. The two that come in very strongly is tourism and hospitality and the creative sector (entertainment, events managers, and sports) as part of the private sector. In tourism which is very critical, we are supporting them through a couple of programmes; the government under the CEDP (Competitiveness, Enterprise Development Program). We are supporting UTB (Uganda Tourism Board) in marketing, UWA (Uganda Wildlife Authority) in conservation, UWEC (Uganda Wildlife Education Centre) in conservation and Hotel, Tourism and Training Institute in Jinja so that we have a professional facility that trains professionals in tourism. Just this weekend (about 3 weeks ago), we started pushing domestic tourism. No government, no economy in the world can run a successful tourism industry if you don’t  have a vibrant domestic tourism sector.

So, if you look at entertainment and leisure sector, it’s doing very well and that is why if you go to any brewery, the guy is making money now. The day they opened up the night economy, those guys moved 18% overnight. Just in one night, sales hit 18%. So, Ugandans like to party but the thing is that the more adventure tourism has been largely foreign centric (in bound). For instance, you average Ugandan will not go to a lodge in Queen, Murchison, Kidepo, why? Me and you, we see monkeys every day. So, we are not excited. We see birds. So, that’s not our thing. Culturally, we are not for that. If you look at the numbers, the big volumes are now around water – the beach. But then, how do you create a serious move for people? When I was still in Tourism (Uganda Tourism Board Executive Director), we started something that would encourage people to go on a holiday especially around big events like Easter and Christmas. I will tell you, right now you can’t enter a lodge of any good repute in Murchison, Queen Kidepo because they will be full  on Christmas and Easter. That one is sold. It has worked. Now, the young generation is beginning to pick up. The problem is that the fees are high, the room is 100, 150, 250 dollars, that’s a bit prohibitive. 100 dollars, I go to the beach, I have my muchomo for three days, I will be good instead of bed and breakfast and then what? So, now we are having more wedding, parties.

One area which can really make business move is by ensuring that people, especially the corporates start doing retreats in those places.…Usually you see a high appetite especially towards the end of the budget cycle because guys are trying to spend money so it doesn’t go back to the treasury.

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