Uganda: Bumpy Business Terrain Hurts Multinationals

Uganda: Bumpy Business Terrain Hurts Multinationals

Kampala — The exit of multinational companies in Uganda including South Africa’s largest grocery retailer Shoprite Holdings exposes the challenges that businesses in the country are grappling with to remain afloat.

Several Kenyan retail chains including, Uchumi, Tuskys, Nakumatt and other firms which had been in operation for decades, have exited the Ugandan market over the past decade.

Shoprite is one of the multi-national companies that has been reviewing its long-term options across Africa over the past year as lower commodity prices, high inflation and currency devaluations hit household incomes and weighed on earnings.

Shoprite has already offloaded its six stores dotted around Kampala and Entebbe to the new entrant, Majid Al Futtaim, the holder of the French licensee, Carrefour.

Currently, Majid Al Futtaim operates two stores in Kampala. Other companies including; Game stores and Africell telecom are also on their exit door owed to stiff competition and unfavorable business environment.

Economists including Fred Muhumuza, said the current effects of Covid-19 pandemic should not be blamed on the woes facing multinationals as some companies were exiting even before the pandemic hit.

He said, businesses now need to go big on innovations, practice good corporate governance principles and manage costs to improve returns on investments and keep in the market. However, other experts have attributed these closures to a weak economy.

John Walugembe, the executive director of Federation of Small and Medium Sized Enterprises Uganda said, government now needs to further improve the business environment through tax policies, enhancing human resource capabilities and fighting corruption.

"It is dangerous to attract investors and you do not keep them," he told The Independent, "It is a vote of no confidence in the economy when you see these popular brands leaving."

Bank of Uganda signal

Last month, Bank of Uganda’s decision to keep the central bank rate unchanged at 6.5% in the next three months sent a signal to the market that Covid-19 containment measures are still a challenge to the country’s economic recovery.BoU Governor Emmanuel T. Mutebile, said his decision on the CBR was based on the outlook for changes in prices, lending rates and other core indicators of the economy."The outlook for inflation is, however, uncertain and is subject to both downside and upside risks… nevertheless, we view these risks as broadly balanced," he said."This decision is consistent with meeting the inflation target of 5% sustainably in the medium term while supporting the economic recovery," he said.Mutebile’s monetary policy report for […]

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