Why businesses must not be left to carry economic burden alone
Uganda's long-term answer is not permanent protection from global economic forces. It is to build an economy capable of competing in spite of them. That means producing more, exporting more, investing more efficiently, reducing unnecessary costs and creating an environment in which businesses can plan for the long term, writes Olive Kigongo
Olive Kigongo. (File)
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OPINION
By Olive Kigongo
There comes a point when economic statistics stop being numbers and become the daily reality of a business owner.
Today, that reality is the Ugandan shilling trading beyond sh4,000 to the US dollar, while the price of fuel continues to put pressure on transport, production and household incomes. The consequences are being felt across the economy—from the manufacturer buying imported raw materials, to the trader restocking merchandise, to the farmer moving produce to market and the small business paying its electricity and transport bills.
As the Uganda National Chamber of Commerce and Industry (UNCCI), we are concerned about these developments, but we also believe that this is a moment for sober action rather than panic.
The weakening shilling is not happening in isolation. Uganda remains dependent on imports for many of the inputs required by businesses, including fuel, machinery, raw materials and other intermediate goods. At the same time, global energy markets remain vulnerable to geopolitical disruptions. Official data show that Uganda's import bill rose substantially in July, while the finance ministry has attributed the pressure on the shilling partly to increased foreign-exchange demand from the energy and manufacturing sectors.
For businesses, the arithmetic is straightforward. If the dollar costs more, an imported input costs more shillings. If fuel costs more, transportation costs more. If transportation and inputs cost more, the final product becomes more expensive.
But there is a limit to how much of this can simply be passed on to the consumer.
A business that raises prices too aggressively risks losing customers. A business that absorbs every increase eventually loses its margins and working capital. For small and medium enterprises, which form such an important part of Uganda's economic fabric, there is very little room for either option.
This is why we must look at the problem as a shared responsibility.
The first priority must be macroeconomic stability. Businesses need a currency market in which exchange-rate movements are understandable and do not become an additional source of uncertainty in planning and pricing.
Government must also continue investing in the infrastructure that lowers the cost of doing business—reliable electricity, efficient transport networks, better border systems and productive public services.
Taxation is necessary to finance these investments. But taxation must not become so burdensome or unpredictable that it weakens the very businesses expected to generate the revenue. We need a tax environment that encourages businesses to formalise, invest, employ and grow.
We should also accelerate measures that reduce Uganda's structural dependence on imports. The answer to a weak shilling cannot simply be to ask the central bank to defend the currency indefinitely. We must produce more of what we consume and, more importantly, produce more of what the world wants to buy from us.
The private sector also has responsibilities.
Businesses must become more efficient. We need to examine our supply chains, reduce unnecessary costs, improve inventory management, invest in technology and become more disciplined about foreign-exchange exposure
Where possible, businesses should source inputs locally—but local suppliers must also provide the quality, quantity, consistency and reliability that modern businesses require.
We must also export more.
The international market is not sentimental. Customers do not buy from us because they feel sorry for Uganda. They buy because we provide quality at a competitive price, consistently and reliably.
This is why the present challenge should also be viewed as an opportunity. A weaker shilling makes imports more expensive, but it can make Ugandan exports more competitive. We should use this moment to deepen value addition in coffee, agriculture, minerals, manufacturing and other sectors where Uganda has a natural advantage.
We must become more conscious of efficiency and value. Where alternatives exist, consumers can support locally produced goods that meet the required standards. But we should not use patriotism as an excuse for poor quality or unjustified prices. Ugandan businesses must earn the consumer's confidence.
Finally, we need dialogue.
Government, the private sector, financial institutions, fuel suppliers, producers, traders and consumers must resist the temptation to operate in isolation. The Chamber stands ready to provide a platform for this conversation.
We should not pretend that the exchange rate or international fuel prices can be controlled by any one institution. They cannot.
What we can control is how resilient our economy becomes.
Uganda's long-term answer is not permanent protection from global economic forces. It is to build an economy capable of competing in spite of them.
That means producing more, exporting more, investing more efficiently, reducing unnecessary costs and creating an environment in which businesses can plan for the long term.
Our children should inherit an Uganda that sells to the world—not one that is permanently worrying about the price of what it buys from the world.
The present pressure is real. But so is our opportunity to respond to it by building a more productive, competitive and resilient private sector.
That is the sustainable solution.
The author is the president of the Uganda National Chamber for Commerce & Industry