Many businesses in Uganda are crashing since the beginning of the pandemic. Business owners are complaining about the negative impact the pandemic has done on their businesses.
In June 2020, the Ugandan government set up some restrictions to curb the spread of coronavirus in the country, and these restrictions have caused a lot of businesses and salespersons to lose their jobs and companies. A big tailoring business located in Kampala has been shut down, due to the setbacks caused by the limitations. Richard Wambuga, the owner, complained that the coronavirus robbed him of his clientele. Fewer people were buying new clothes, including school children who had shifted to virtual learning and no longer needed school uniforms.
Wambuga, who has imported materials from France, Italy, and China throughout the previous five years, believed his business would recuperate once the public authority eased limitations. Then in July 2021, he was hit with one more obstacle. The government carried out new tax reforms as a part of Uganda's economic plan to diminish imports and promote local productions, to some extent and provide more job opportunities.
That had a counter effect on traders who rely on importation, including textile importers like Wambuga, who now have to pay a duty rate of 35% (from the previous 25%) or a charge of $3 to $3.30 per kilogram (2.2 pounds).
Merchants and traders who are essential for Uganda's private sector and contribute about 75% of the nation's GDP have discredited these tax measures, calling them counterproductive as they hurt private businesses, which presently, can't seem to recover from the financial crisis during the Covid pandemic.
“Charges are almost twice what we used to pay,” Wambuga says.
The tax reforms complement a series of other economic policies the Ugandan government has implemented to strengthen the country’s economic potential by bolstering local industries. They include the Buy Uganda, Build Uganda policy, a legal framework that outlines strategies to build Uganda’s economy through buying and selling local goods and services.
These drives are expected to lessen Uganda's wide import/export deficit. Despite gains, Uganda imports two times more than they export. In 2020, Importations were valued at $8.5 billion contrasted with $4.1 billion in exportation, as indicated by the International Monetary Fund.
The move to boost local manufacturing isn’t a bad idea, says Issa Ssekito, spokesperson for the Kampala City Traders Association, but it shouldn’t come at the expense of import traders. Instead, he says, the government could have invested in the country’s strong economic areas, such as agriculture, which employs about 68% of the population, according to government data.
“If Uganda wants to grow her economy based on industrialization, they should focus on [where] God gave us an advantage,” he says, pointing to fisheries, in addition to agricultural industries.
Although, Uganda's tax reform can be addressed as contradictory, because, a public solution should be beneficial to the public and not hurt the public. Uganda is working on boosting its economy, and promoting local production is one of the best ways to do so. Though, many Ugandans are not finding the tax reform beneficial.
The tax reforms have made a bad situation worse, Ssekito says, as import traders were already struggling with arbitrary and inconsistent tax increases at different border points. “Every other day, they tend to rise this, cut this, purposely so the government can grow the local industry,” he says. “They raise rates to frustrate importers.”
Uganda is a thriving country, and like other countries, the government aim to make the country a better place for its citizens. According to the government, the tax reforms were enacted to encourage local producers and support citizens' local businesses. But traders who import from foreign countries find it offensive. With that said, it is yet to be revealed, if the Uganda government will give any adjustments to the tax reforms. In all, economists have proven that the best way to boost the country is to boost local production.