Kenya's political crisis affects Uganda's private sector growth

The report says the private sector has for the third consecutive month slowed down due to weak activity in industries.

According to the survey report, activity in the industry sub-sector declined due to a challenging political environment in key export destinations.

The survey indicates that the Purchasing Managers' Index (PMI) slipped to 52.8 from 53.8 in September. It says there were increases in output, new orders, employment numbers and stock purchases.

Jibran Qureishi, Stanbic Bank's Regional Economist for East Africa, said there has been a gradual improvement in business conditions within the private sector in Uganda.

But he observed that the pace of improvement has slowed down since August. He attributed the slowdown to the prolonged political impasse in Kenya which is by far Uganda's leading trade partner.

There has been tension n Kenya since August when the Supreme Court nullified the August 8 presidential elections and ordered for fresh elections in 60 days.

The repeat election held on October 26 was, however, shunned by the main opposition party, the National Super Alliance (NASA) whose leader, Raila Odinga, accused the electoral commission of being compromised.

Qureishi said growth will most likely return to a much faster upward trajectory as political unrest in Kenya subsides in the coming months following the conclusion of the repeat presidential elections and public expenditure on infrastructure in Uganda starts rising.

Uganda is currently undertaking the construction of a number of large scale infrastructure projects with many more in the pipeline.

Key to their successful execution is the port of Mombasa which accounts for about 70% of all imports.

Political instability in Kenya tends to slow down processing times considerably at the port, leading to project delays with many contractors lacking the much needed raw materials and equipment necessary to carry out construction.

Benoni Okwenje, Stanbic Bank's Fixed Income Manager, said agriculture, services, construction, wholesale & retail registered significant increases in output.

He said companies attempted to cope with higher demand by increasing capacity and expanding employment which resulted in higher job figures.

The survey found that inflationary pressure was evident again as overall input costs rose for the 17th consecutive month.

The input price inflation was driven by both higher purchase costs and rising salary payments.