What is the impact of the elections on the economy of Uganda?
Since political stability often rhymes with economic growth, let’s discuss about the recent elections in Uganda and their potential impact on the economy. Elections on the African continent are always scrutinised by foreign investors. How the presidential elections in Uganda will affect political, social and economic stability of the country?
In the recently concluded presidential elections in Uganda there was an internet shutdown and a social media freeze. But this was partially restored after the results were announced. Let us have a look at what is the impact of Uganda’s elections on its economy.
Growth of Uganda’s economy
The Ugandan economy reported strong growth in 2019, estimated at 6.3%. This was largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew 3.8%. The Covid – 19 pandemic and the travel restrictions slowed down economic growth. The GDP was projected to be between 0.4% and 1.7%. According to a report by the international credit rating agency Fitch, the government spending and borrowing could destabilize the economy in 2020/2021.
Uganda is classified at low risk of debt distress. However, debt reached an estimated 43.6% of GDP in 2019, up from 25% in 2012, raising medium-term concerns. Lending remains within International Monetary Fund (IMF) limits. Risks have increased due to higher costs of debt servicing and infrastructure investments.
Uganda is transitioning to a service economy but faces low productivity and low job creation. The government has also empowered the youths by creating 75000 per year. Although this does not solve the unemployment problem since about 700,000 youths reach working age every year.
Uganda’s foreign trade and its contribution to the economy
Uganda is open to foreign trade, which accounts for 48.2% of its Gross Domestic Product (GDP). Uganda is a member of numerous international organizations. For example, The World Trade Organization (WTO), The Common Market for Eastern and Southern Africa ( COMESA). East African Community (EAC) and Intergovernmental Authority for the Development of the Horn of Africa States) (IGAD). The country mainly exports gold coffee, petroleum oils cane or beet sugar and fish. Its main imports are petroleum oils gold, medicines, palm oil, ferrous products, motor vehicles wheat,
Kampala was, until 2019, Uganda’s only urban city. The reclassification of nine municipalities as regional cities can promote new opportunities. This will expand infrastructure such as paved roads, power distribution, water and sanitation services, and waste management.
The poverty rate fell during the past two decades but rebounded in 2016/2017, reaching 21.4%. More than two-thirds of the working-age population is in agriculture. Four-fifths of workers are own account workers or contributing family workers, with one-fifth in paid employment or themselves employers. Youth unemployment is a challenge.
Major sectors contributing to Uganda’s economic growth
Some of the governments’ priority sectors include: agriculture which has helped reduce the poverty rate by half over the years. Information communication Technology (ICT), Transport, Tourism, pharmaceuticals and oil and gas. These sectors are looking forward to a limited impact of the elections on the economy of Uganda.
The Index of Economic Freedom ranked Uganda, the 8th freest economy out of the 47 Sub-Saharan Africa countries with a score of 59.7. Business operating environment allows the full repatriation of profits after the mandatory taxes have been paid. As well as 100% foreign ownership of private investments. The incentive regime is structurally embedded in the country’s tax laws making them non discriminatory and accessible to both domestic and foreign investment depending on the sector and level of investment.
In order to provide a conducive environment for doing business in Uganda, the government of Uganda has created a One Stop Centre (OSC) for business registration and licensing at the Uganda Investment Authority. The One Stop Centre also assists in tax advice and registration, immigration and work permit issues, land acquisition and verification, as well as environmental compliance and approvals. Accessing all these services under one roof saves the investor both time and money to have their projects licensed and implemented quickly.
Effect of elections on the economy
The internet shutdown and the social media freeze due to elections for more than 3 days is expected to have an impact on the economy. The exact figures on the losses have not been tabulated. However, this definitely had an impact seeing as most businesses were not operational for the said period. The government however restored the internet we expect smooth running and recovery of businesses henceforth.
The recently concluded elections delayed Final Investment Decision (FID). This was meant for the Oil & Gas sector that was expected in December 2020 and consequently delaying further the start of the project. Investments into oil and gas will boost other sectors such as mining, transport and hospitality.
It is a bit too early to clearly assess the impact of the Uganda elections on the economy. We hope that the political climate will stabilize and the government will focus on its priority sectors. Thus making room for investments In various sectors which will in turn create jobs in various sectors.
The current Ugandan government aims at focusing on economic growth. They wish to continue building a strong and durable economy. In line with its Ten-Point Programme, the government will further develop the economy with the following specific objectives:, Broadening the economic base by providing and creating economic opportunities in all regions of Uganda, Creating an integrated and self-sustaining economy based on import substitution and export oriented growth., Establishing a monetized and formalized economy: graduating households from the informal and subsistence levels into the commercial economy. Achieving the lower middle-income status, generating productive jobs. This will steer the country towards stability and economic growth.
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