Government has launched an investigations into the mass exodus of foreign big companies from the country, the latest being telecommunication provider Africell.
“We are studying this. I assigned my team to find answers to why each of these companies has exited, the likely impact of their exit today and in the medium term, the Ministry of Finance Permanent Secretary, Ramathan Ggoobi said on Thursday.
The probe will also aim at finding out whether there is something government can do to avert any other similar exits and whether there are any other regional markets that are taking advantage of the situation.
“My team will find answers on whether this is a common trend elsewhere, and there is a remedy to it that we are not doing,”Ggoobi added.
The mass exodus of foreign companies started last year with the announcement by GEMS Cambridge International School, Kampala that said it had been forced out of business by the onset of the pandemic.
As a result of these circumstances, we have been forced to make some very difficult decisions, and it is with great sadness that I am writing to advise you that CIK will close after the first term of the new academic year, with 31 December 2020 as a tentative closure date,” a statement by Riz Ahmed, the Chief Executive Officer, GEMS Africa in August 2020 said.
Last month, South African retail giant Massmart, the parent company of Game Stores announced plans to exit the Ugandan market.
“The performance and the complexity in running those businesses is something that frankly we needed to address. We’ve commenced a formal sales process, we’re currently in discussions with potential purchasers to take on those stores,” said Massmart Chief Executive, Mitchell Slape.
“But that is not enough. Achieving break-even performance isn’t going to be sufficient for us to be satisfied, we’ve got to really get Game back to a healthy level of profitability and performance,” he added.
However, the Games Stores exit didn’t only affect Uganda but 13 other stores outside South Africa will feel the pinch.
Consequently, Game will close other stores in Kenya, Tanzania, Nigeria and Ghana .
Another company and one of Africa’s largest retail stores, Shoprite announced it is set to quit the Ugandan market after 21 years.
“In line with the group’s non-RSA review process, our operations in Madagascar and Uganda have been classified as discontinued,” a statement by Shoprite said.
Not all is lost
However, experts recently said that despite the problems the country has faced and the Coronavirus pandemic, Uganda is still a preferred destination for foreign investors.
“The real estate sector has registered new entrants into the market in 2020 with Carrefour growing its presence in Uganda at Metroplex Mall store, Shoprite set up to expand its store number six with an anticipated opening of the Arena Mall(at Nsambya traffic rights) in March 2021 and LC Waikiki a Turkish based international fashion chain opening its 2000 Africa flagship store at Acacia Mall in December 2020,”Marc Du Toit, the head of retail at Knight Frank Uganda said in February.
“Uganda has historically been seen as a safe destination regardless of the current situation. What attracts people to Uganda are the demographics unlike other neighbouring countries. For example Rwanda is a small fraction of the economy of Uganda. When investors look for the market, they look for the future and can’t put infrastructure is the consumer spending and the size of the economy,” Du Toit told journalists.
In January last year, Carrefour, one of the largest hypermarket and supermarket chains in the world officially launched its operations in Uganda marking the company’s entry into the Sub-Saharan African country.
In December, 2020 Turkish fashion retail company, LC Waikiki extended its wings to Uganda as the second country in East Africa to host their shops.
Whereas many say something might be wrong with the Ugandan economy, others insist that the exodus is not registered in only Uganda but in many other countries.