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The budget met with mixed feelings but all for greater good

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Added 2nd July 2019 10:05 AM

Tourism has huge potential but we have been failing to maximise this by being stingy on the marketing budgets

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Tourism has huge potential but we have been failing to maximise this by being stingy on the marketing budgets

By Olive Kigongo

The dust has settled after finance minister’s Matia Kasaija’s reading of his over sh40trillion budget.

The tone of the budget was the same as it has been for the last decade with heavy emphasis placed on infrastructure development and social services – education and health.

There were some eyebrow-raisers like the jump of the security budget into second position and some pleasant developments like the jump in the tourism sector budget to sh193.7b from sh32.6b.

Tourism has huge potential but we have been failing to maximise this by being stingy on the marketing budgets.

The current budgetary increase is a good start, but compared to what neighbours Kenya, Tanzania and even Rwanda are spending on marketing their natural endowments in relation to the total budget, we still have some way to go. Despite the increase in the tourism budget, it still accounted for 0.6% of the total budget.

We continue to be concerned that a quarter of the budget goes towards debt servicing, this is one of the main reasons lending rates in the economy remain uncomfortably high. We derive solace from the fact that most of the debt is being contracted to expand our infrastructure, which will increase economic activity by improving the ease of doing business in this country.

But Government needs to do more to bring down lending rates. The continued capitalisation of the Uganda Development Board (UDB) and the sh150b earmarked for women’s and youth groups are welcome as is the increase in funding to the Microfinance Support Centre to be lent out at not more than 12% to Small and Medium Enterprises (SMEs).

We want to see this increased economic activity go in parallel with efforts to widen the tax base, as too few of us are shouldering too big a portion of the current taxman’s attention.

A major initiative of this budget, which was the increase in import duties on several products will have been received with mixed feeling by the membership of the Uganda National Chamber of Commerce and Industry.

The Government raised import taxes on a whole raft of products among which were cooked potatoes, housing tiles, TV sets, processed foods, wigs and confectionaries. The increases pushed some of the import duties on these categories to as much as 60%.

This move seems to be aimed at protecting local industries from external competition. Local importers of these goods will have to pay more duty and either be content with thinner margins than before or pass on the increases to their clients. Either way they will be some initial discomfort for the importers.

But in the long run, they may very well shift their suppliers from foreign to local and we will all be happy.

The rationale for the move seems sound. If our local producers in order to meet new demand for their products are forced to bump production and therefore increase jobs, this will increase general demand in the economy and may very well keep our importers in business. It is possible that the net change from this move will be positive for the economy.

The Government should actively seek to support these industries with tax incentives, access to cheap credit, continued improved infrastructure and graduate them to exporters of our finished products.

In this line is heartening to see government is sticking to its commitment made years ago to provide sh500b of new capitalisation for the Uganda Development Bank (UDB). They committed sh103b to the bank. There is a great need for long term financing in this market and UDB’s improved financial position can go some way in helping this situation.

It should also look at the standardisation of our products. This is by ensuring that the bodies concerned are well facilitated to ensure quality and quantity deliverance.

We hope though that this initiative will not trigger a backlash from our neighbours, who could very well impose higher tariffs on our goods in retaliation. We already have a difficult time exporting some of or finished products without having aggravating the situation. Our businessmen have done well over the last decade or so to penetrate regional markets and a lot still needs to be done in bring down non-tarriff barriers and other bureaucratic impediments.

I like the budgets the above concerns notwithstanding. We have a lot of work to do in improving our infrastructure. Given the hole from which are emerging after the dark 1970s and 1980s there is no doubt in my mind that we were going to have to bite the bullet sooner than later.

It takes visionary leadership to make the tough decisions that this Government has made to bring us to where we are and the Chamber will continue to engage and support the long term vision for this country.

The writer is the president of the Uganda National Chamber of Commerce & Industry

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