Streets in the usually bustling downtown Kampala have been empty since the stay-home directives. The Stanbic Bank index that tracks Uganda’s private sector business activity on a monthly basis has recorded the first decline in activity.
The Purchase Managers Index (PMI) for March reported the first decline in the 3 years that the Stanbic has been making Index reports, attributing it to the global coronavirus pandemic which has led to fall in new business, company shutdowns and issues with the supply of materials in, pushing the Ugandan private sector into contraction.
The headline PMI posted below the 50.0 no-change mark at 45.3 in March, following a reading of 56.2 in February. This marked the first deterioration in business conditions in the private sector since January 2017.
Kenneth Kitungulu Stanbic Bank Uganda Head of Global Markets said, “COVID-19 caused issues in supply chains, with difficulties securing materials mentioned, particularly from China”.
“Lower activity also contributed to declines in both purchasing and inventories, while suppliers’ delivery times lengthened in part due to border closures. In fact a number of our customers in manufacturing say that they had to source inputs from alternative countries prior to the more global broad based shut down while telecoms and pharmaceuticals noted an increase in data and call traffic and drugs respectively”.
He said companies are concerned that continued shut down will have a marked impact on employment and demand for outputs going forward.
In a similar survey report for Kenya, Uganda’s largest regional trading partner, the PMI report indicated an even highest drop in activity for March.
Jibran Qureishi, Regional Economist E.A., Global Markets at Stanbic Bank said the first sub-50 reading since 2017 was not a surprise, given the on-going concerns associated with Covid-19.
“The impact is likely to be broad based across the economy. Sectors such as tourism and manufacturing are already feeling the pain as global supply chains are disrupted and cross border travel is restricted. But of course, diaspora remittances could also decline as global growth slows,” he said.
Jibran added, “Furthermore, given the sharp fall in international oil prices, it’s quite likely that the Final Investment Decision on oil will also be postponed into next year. Admittedly, the impact of Covid-19 and the possible delay in the FID, will materially weigh on economic growth this year.”
According to the survey, sponsored by Stanbic Bank and produced by IHS Markit, central to the decline in business conditions were reductions in both […]
