The Ugandan private sector moved towards stabilisation during June but business conditions continued to deteriorate during the month.
Kenneth Kitungulu, Stanbic Bank Uganda Head of Global Markets
There has been a slow recovery
of business since the President eased the COVID-19 lockdown restrictions
in May, According to the Stanbic
Purchase Managers Index (PMI) for the month ending June 2020.
The index shows that there is a slow
recovery of business activities amid the coronavirus pandemic. The Headline Purchasing
Manager’s Index posted in June was 46.5, up from 41.9 in May, but still below
50.0 which signifies a positive outlook. In comparison, the PMI figure for
January 2020 reached a high of 58.8.
declined at a record low in March to due to the global coronavirus pandemic marked by a
drop in new businesses and company.
Uganda’s Head of Global Markets, Kenneth Kitungulu said both business activity
and new orders decreased for the fourth month running in June as Covid-19
continued to impact on the private sector operations.
“A PMI reading
below 50 indicates that month on month we continue to see a decline in activity
even as it's not as extreme as what we saw in April. However, 44 per cent of respondents
predict a rise in output in the next 12 months – an increase from last month,” he
some companies had been able to reopen during the month because of a loosening
of the lockdown restrictions, others remained closed or had only just reopened
at the time when the survey was conducted. The construction and services
sectors posted rises in both output and new orders, but falls were recorded
elsewhere. In fact, 14 per cent of respondents mainly from the Agricultural sector
remain pessimistic about future business activity.”
The PMI is a
composite index, calculated as a weighted average of five individual
sub-components: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’
Delivery Times (15 per cent) and Stocks of Purchases (10 per cent).
private sector moved towards stabilisation during June, but that said, business
conditions continued to deteriorate during the month.
The latest survey
sponsored by Stanbic Bank and produced by IHS Markit, shows that companies
reported difficulties in paying staff in June due to limited administrative
funds as a result of cash flow problems. This resulted in a combination of job
cuts and a reduction in salaries across the board.
prices increased for the first time in three months as purchasing costs moved
higher. Respondents highlighted rises in transportation costs as well as higher
prices for utilities and inputs such as fertiliser and paper. Despite a rise in
overall input costs, firms continued to lower their selling prices amid a lack
of demand and reduced spending power of customers.
Kitungulu said, “To
compliment the recent measures taken by the Bank of Uganda to lower lending
rates through lowering its own policy rate, a comprehensive fiscal intervention
aimed at directly putting cash in the hands of the population is key to
boosting demand and overall economic outlook.”
transportation and delays at the border due to the mandatory testing of drivers
also meant that suppliers' delivery times were lengthened during June.
However, firms are
hopeful that business activity will pick up again over the coming year as hopes
as measures to restore some sense of normality continue.