Only gov't intervention can save Ugandans from looming unemployment in Covid-19 era

The last records we have show that unemployment in Uganda stands at 1.84% in 2019 from 1.79% in 2018 (Uganda Bureau of Statistics). With 5,123 registered covid19 cases and 58 deaths, this figure is surely going to be higher when the 2020 statistics come in. According to the Bank of Uganda there is a forecasted economic shrinkage of 2.5% to 3.5% from 3% to 4%. The most affected by these economic hardships will be 90% of the low wage income earners. 

The closure of the economy in late March 2020 to curb the virus’ spread had an immense impact forcing many businesses and organizations to restructure their operational landscape. This weakened many SMEs (Small and Medium Enterprises) that had already existing underlying trouble in business continuity. The restructure for these businesses and organizations mainly happened/happening for the human resources because there was and still is a need to cut on operating expenses for "thin" sustainability thus unemployment of many people.

The lack of adequate work and opportunities is now raising concerns because low incomes amongst people only means low purchasing power for goods and services thus a plunge in the economy. Sadly it is the youth who are most affected as they are usually employed in temporary positions of organizations/businesses that usually don’t offer decent incomes. The average monthly income of a waiter in a bar in Kampala, an industry that is still on “lockdown” is between 200,000/= (Ugx) to 400,000/= (Ugx) which could push the majority of them into extreme poverty.

To allow the economy shift from the COVID19 recession, the government of Uganda and other international entities the challenge to be team players in mitigating unemployment in the boldest and sustainable ways such as; encouraging entrepreneurship in sectors with high demand, petitioning for debt relief and carefully adjusting the country’s fiscal and monetary policies.

Encouraging entrepreneurship in sectors with high demand.

Uganda is one of the most entrepreneurial countries in the world making Ugandans such great opportunists; though face systematic barriers while on this journey to entrepreneurship. In this specific COVID 19 era, many ventures especially those in high demand sectors have sprung up in different industries such as the textile to manufacture and produce face masks, social entrepreneurs especially those in the health sector and technologists who prioritizing finding solution to the pandemic.

This will only make work easier for the government to strengthen the country’s entrepreneurial ecosystem through polishing already existing skills, extensive funding and easing financial acquisition policies.  With an amount of US$491.5 million approved by the INTERNATIONAL MONETARY FUND (IMF), the Ugandan government has to use these funds to cushion the impact of COVID19 on the many sectors. With such funds, loans and grant programs have to be offered directly to entrepreneurs to stimulate already existing and springing business activity.

 

Petitioning for debt relief

The IMF and the World Bank have called upon global creditors such as China to suspend debt payment for low-income countries especially those in Africa. China is Africa’s biggest creditor with over $145billion of loans and grants income to Africa. On 18th JUNE 2020, the Chinese President, Xin Jinping pledged to cancel debts for relevant African countries. In Uganda, debt relief is really necessary for effective recovery and sustainability. From debt relief, hefty taxation policies on companies and businesses can be waivered that can lead to reemployment within organizations in the long run because of the capability to pay wages.

 

Fiscal and Monetary policies

The fiscal and monetary policies look increasingly to aggregate demand through a reduction in taxes and reduced interest rates on borrowing respectively. A lower tax paid by companies allows them to have disposable incomes thus an increment in aggregate demand. And increment in aggregate demand and a higher purchasing power by consumers thus drastic economic growth. High disposable incomes means low levels of bankruptcy among companies thus a reduction in joblessness through lay off workers.

Reduced interest rates, on the other hand, encourage borrowing in all sectors thus financial inclusivity, a phenomenon Uganda is still struggling with. However, in April 2020, the Bank of Uganda reduced its average lending rates to 17.7% from 19.9% as it had been in January 2020. When businesses are in position to access timely funds, growth is inevitable which requires more human resources thus employment of more people.

MACLEAN ATUHAIRE is a UGANDAN writer/author whose work has been published by the Nile Post. Her work focuses on socio-economic issues that she hopes is impactful and enlightening to the readers. Get in touch with her at macleanatuhaire@gmail.com and follow her on twitter at @AtuhaireMaclea.