Private sector players have urged the Ugandan government to design policies that support businesses recover from two Covid-19 induced lockdowns over two years.
With the country under a 42-day lockdown that has disrupted businesses, the private sector players said the current budget and other taxation policies only add an insult to an injury.
Mr Francis Kisirinya, the acting Executive Director of the Private Sector Foundation Uganda (PSFU), said the government is yet to listen to their pleas of developing favorable policies for the sector to thrive.
“We recommended that the digital tax stamp for manufacturers be reduced in this financial year. However, this was not addressed by government. Although, Over The Top (OTT) tax on social media was removed, the government introduced a 12 per cent tax levy on internet bundles. This is a big hindrance on digital transformation, innovation and attainment of a fully digital economy,” Kisirinya said during a virtual public-private policy dialogue on Thursday, July 8, 2021.
The dialogue was organized by PSFU in partnership with The Innovation Village, Uganda Tourism Association, Uganda Healthcare Federation and Mastercard Foundation. It was held under the theme “COVID-19 implication on life, business and jobs: Reflection on the FY2021/22 National Budget.”
Mr Japheth Kawanguzi, the CEO Innovation Village, said there is a need to incorporate technology and innovation into businesses, offer financial relief to start-ups, and create policies that provide favorable environment for entrepreneurs to walk the business journey.
“Today, the Internet has become an engine for entrepreneurs to start businesses online, a platform for start-ups to market their business and a facilitator for creative and innovative ideas,” Kawanguzi said.
“By putting a 12 per cent excise duty on internet bundles, we are sacrificing long-term gains for short-term needs. The Start-up ecosystem is still young and needs full government support in form of good policies, massive funding to accelerate their businesses. A favorable investment environment can help government grow its tax base,” he added.
Ms Victoria Sekitoleko, a former agriculture minister and entrepreneur, urged the government to always listen to proposals of the private sector.
“We normally advise the government that certain taxes won’t work. This is our government, so we can never give up. All of us have a role to play. The role of government is to plan, lead and implement while the private sector has to use its intellect to make money and pay taxes,” she said.
“Last year we advised the government that there should never be importation of rice, the government went ahead and imported rice and this affected the rice industry. I am sure the government will never make that mistake again,” she added.
Mr Ramathan Ggoobi, an economics lecturer, said government must accelerate capital market developments.
“We need job retention schemes. Unemployment and underemployment existed pre-covid and with the pandemic, several livelihoods for the young especially were affected. We need to enact the competition law to regulate business to business relationships. We have talked about this several times,” he said.
Dr. Fred Muhumuza, an economist, said the budget lacks the flexibility to address emerging COVID-19 related impacts on livelihood, jobs and business.
“Domestic financing keeps interest rates high but also attracts foreign portfolio investors which strengthen the shilling hence undermining exports. External financing offers the government limited flexibility as it is mostly tied to projects but may carry extra constraints,” he said.
“We have to understand the dynamics of private sector operations and invest using the ecosystem or programme-based approaches. The size of the public sector has to be reduced to increase fiscal space as well as enhance remuneration,” he added.
However, Mr Matia Kasaija, the Minister for Finance, Planning and Economic Development, said the budget for this financial year continues to focus on interventions which counter the socio-economic recovery.
Kasaija said: “In this financial year, government is focusing on strengthening the health care system to be able to deal with future healthcare emergencies through improving health worker skills and working environment, provision of personal protective equipment. There is also a plan to increase funding to enhance the welfare of health workers and recruitment of more personnel.”
Government will also continue to support the advancement of scientific research and innovation.
“We believe that focus on digital transformation will enhance the socio-economic transformation and improve efficiency and productivity. This include the extension of the national ICT infrastructure coverage up to the sub-county level, enhance usage of ICT in national development and service delivery, and strengthen the policy, legal and regulatory framework,” he said.
Ms Patience Byaruhanga from Mastercard Foundation said the crisis is a reminder of how important concerted efforts are towards tackling the pandemic.
“In 2020, the Mastercard Foundation launched a COVID-19 Recovery and Resilience Program to support health workers and first responders with protective equipment. To enhance economic recovery, we partnered with the private sector to expand access to financial services for micro, small and medium enterprises, enable e-learning so that young people continue to study as well as supporting the adoption of digital solutions to address the urgent needs of the people. We have also purchased 12million vaccines to support governments’ vaccination programs throughout Africa,” Byaruhanga said.