Businessmen more confident in economy

By Samuel Sanya

A six month survey has indicated that business leaders are more confident in Uganda’s economic prospects and are planning to invest more in sales and marketing.

The 8th Regus Business Confidence Index report indicates that the business confidence index has increased by one point to 132 points in the last six months following a prolonged period of recovery in Uganda’s economy.

Prof. Emmanuel Mutebile, the Bank of Uganda (BoU) governor, recently noted that the gap between actual and projected output has narrowed partly due to a reduction in the benchmark Central Bank Rate (CBR) to 12%, from 23%, bringing lending rates down.

Uganda’s real Gross Domestic Product (GDP) growth for the financial year 2012/13 is now projected at 5.3%, from 3.2% previously. The underlying economic momentum is expected to remain positive over the medium term.

The Central Bank has projected growth of between 6% and 7% in the 2013/14 financial year as lending rates continue to decline with falling inflation.

Headline inflation dipped to 3.4% at the end of April, from 4%, increasing the purchasing power of most Ugandans. Core inflation, which leaves out volatile items, also reduced to 5.8% from 6.8%.

As a result, the Central Bank has maintained the CBR at 12% for May. While announcing the rate, Mutebile said: “Lending rates have continued to decline but I believe that there is still room for further reductions.”

Commercial bank rates have hit an average of 24%, from highs of 26%, two months ago.

The Central Bank is rooting for lower lending rates to spur private sector activity and bolster effective demand in the economy.

Razia Khan, the Africa regional head of research Standard Chartered Bank, noted that the current levels of headline inflation are better than expected.

She added that this signals yet another month when inflation has surprised positively.

“Although the BoU had struck an overall cautious tone in recent Monetary Policy statements, the better-than-expected inflation performance year-to-date, a more favourable oil price backdrop compared with last year and recent shilling strength are all positive developments,” she said.

Peter Vieira, the Regus area director for East Africa and Zambia, said the positive outlook will enable businesses recruit more sales and marketing staff.

The survey of more than 26,000 businesses across 90 countries indicates that 58% of East African businesses have reported rising revenues and 46% have reported increased profits over the past 12 months.

“The stand out figures are not just that firms are looking to recruit, but that their plan is to invest in sales and marketing. This shows that companies feel it’s the right time to go out there and sell,” Vieira said.

“These results suggest that sales and marketing professional will be in high demand in the coming months. Businesses need to consider how to recruit and retain the best in the field, ensuring they can remain competitive in their market,” he added.

Globally, 85% of businesses are planning to increase or maintain headcount in 2013, with one in four going for an expansion of more than 5%.

Meanwhile, the shilling strengthened by close of business on Friday, trading at 2,562/2,572 at most commercial banks, from 2,569/2,579 at the start of the day.

Analysts project that the shilling will maintain a similar range to the dollar this week. A stronger shilling reduces the country’s import bill and keeps inflation stable.