KAMPALA – In the first two write-up on the strategies to cushion Ugandan against the Covid19 effects, I focused on measures to ensure basic survival for Ugandans under lock-down [short-term] including activities around food distribution for the low-income people, preparing hospitals to deal with the likely surge in numbers from Cobid19 and other illnesses; and a remuneration package for medical professionals who are now our frontline soldiers in the Covidd19 fight. In the second part and direct response to my brother Morrison Rwakakamba’ s proposals – I advised that other-than push for a 10% members savings payout, NSSF suspends monthly contributions to allow employees more disposable income during this period. Today, NSSF announced that companies would re-schedule monthly contributions for three months without accumulating penalties. NSSF should instead allow for these funds to be paid to employees and increase disposable income for spending during this period. In this final piece, I would like to focus on long-term measures [9-18] months post Covid19 and I emphasize recovery and restoration of stability to get the economy and private sector back on track.
- Ugx200B Fund to support SME recovery efforts: There will be many companies that might go under completely following this Covid19 pandemic. Some of the hardest-hit sectors such as Tourism, Services e.t.c will need stimulus measures to recover. A Ugx200b fund needs to be set up to provide interest-free, long-term loans to these companies. Historically, such schemes have been hijacked by the mafias and therefore a clear criterion must be set-up to ensure the rightful beneficiaries access these funds. Here are a few ideas on how to identify the potential beneficiaries;
- Identify sectors that have been hit hard as a result of this pandemic. Tourism, Services e.t.c and give these priorities.
- Companies that have had a clean record of paying taxes spanning five years or more.
- Companies that employ many people and have the potential to employ more
- Companies producing essential services helping Uganda save on its import bill.
The funds should be allocated to select private commercial banks with administration fees covered by the government. The banks can be given a set of guidelines to follow while disbursing the funds to companies under the categories identified and approved. This approach would guard against capture by the mafias and reduce the red-tape likely to be associated with institutions run by the government. All benefiting companies would be subjected to an audit by any of the big4/5 audit firms to ascertain the level of loss and size of debt needed to ensure a full recovery.
This scheme should eventually be transformed into a fund to help companies in distress during uncertain times and established permanently for these causes.
- CBR rate at 5%: Most companies are going to be coming from a slump and access to cheap credit to build businesses up will be critical. The Central should move to lower the CBR to 5% and maintain it for a year or two until the economy starts to show signs of recovery. This will enable small businesses that would not have tapped into the 200b fund access debt and get back on the road. Bank of Uganda can work with the Financial Service providers to structure flexible terms for borrowers including grace periods, periodic repayment, extended repayment term targeting priority sectors. These measures will enable small businesses to recover and quickly start to absorb people.
- Clear domestic arrears: Uganda’s domestic debt is more than $3b currently with over Shs 2trillion owed by local suppliers. With most companies going to suffer cash flow challenges, the government can step-in to prioritize settlement of these domestic arrears. These funds will enable SMEs to settle loan obligations, provide working capital to kick-start operations and pay employee arrears – all of which can help stimulate demand and help the economy recover.
- Don’t pull the plug on mass sensitization and testing: It is possible that even after 18 months, the Coronavirus will not have a vaccine or doses will take longer to reach Africa. The government must therefore not pull the plug on mass sensitization and testing. People need to continue with proper hygiene standards, social distancing and self-confinement should they notice any signs and symptoms of Covid19. This will also help guard against other sanitation and hygiene-related illnesses and reduce the burden on the health system.
Finally, all Ugandans should pray and pray without ceasing. The effects of Covid19 in Europe have been devastating even for countries with first-class health care systems. In Africa, the scale of Covid19 spread such as that of Italy and Spain would certainly leave countries with more grave-yards than people.
Nathan Were is the President of The Nathan and Christine Were Foundation: A charity with causes in Education, Health and Social Welfare of the poor.