The Coronavirus Storm
KAMPALA – Now that the lockdown has been eased (Presidential address Mon May 4). It is even more important that economic supporting measures are initiated. A large number of market vendors are now on the streets again! Boda-boda are now transporting people away from roadblocks! They are seeking survival. Unless the government can sustain distributing food, they have to get out. Government must act quickly, both on the medical and economic sides. On the medical, continuous sensitization of people making them aware of the dangers of the virus should be upped, on the economic side, decisions and actions of support must be taken. Keeping the health hazard in mind. Of course for the medical, there are measures but this is in respect of preventing the likely spread.
This discussion (the treatise) focusses on change initiative by government in the Ugandan economy. I feel it is an opportunity for government to rethink the way it does business. At the international level, there is change taking place. There is change driven by the philosophy of how we view life and the world and how we manage society. There is an apparent shift in power. The Chinese have come to a Centre stage in world affairs and poised to take global leadership, or will they? Their view of the world is different from that of the West. Technology is also pushing change. It is a complex world and the world is in turmoil. The Coronavirus appears an accelerator or an obstacle to the emerging change.
The new world order may be driven by China! If that comes to pass, the world order will change. Who calls the shots globally will change. The Italian Prime Minister talked of a changed Europe. Following Italy’s debacle in handling the Coronavirus pandemic, Italy felt it wasn’t assisted by fellow European countries. Will it leave the European Union? This comes after departure by the UK in January 2020. May be Europe may not exist in the future as we see it now and yet Europe is a key player in global affairs today. The coronavirus effect is accelerating the change, enabled by technology and leaders. And for an economy, the driver is government, supported by actions of individuals and organizations. Any measure taken to restore economic activity must be cognizant of these global challenges. This part two (2) deals with the proposed broad responses to the economic problem. It sets out what the problem is, which is the economic stoppage and emerging issues. It discusses broadly the measures and brings out only the immediate measures. These are no means exhaustive and my personal views.
The solutions to the coronavirus pandemic
The medical researchers and economists think tanks should be working overtime to generate solutions. These must be solutions that fit into or adjust to these major world happenings, the coronavirus effect, technology and power shift among others. The countries that have effective leadership, good policies and adapt or create unique technologies and exploit the unique advantage of a country will yield high impact results. Those that don’t will see poorer economic results. Already the world has numerous failed states, a new name may emerge to describe those states that don’t succeed after the Coronavirus.
The Coronavirus will not live anything untouched. People’s individual lives will be touched, families, economies, organizations will all be touched. Some economies may be destroyed completely others will be injured badly, while some will receive some minor injuries. As governments react, they will find medical solutions to the pandemic but must also provide economic solutions including a stimulus to the economy.
Medical solutions will not be easy in the midst of conspiracy theories. Viruses are man-made, I gather, solutions are vaccines. There is a controversy over vaccines allegedly proposed by the stinking rich Bill Gates. Many countries the US, UK, Israel, Australia and India are reported to have developed or in the process of developing a vaccine. The conflict between the US and WHO will make things worse. A vaccine that would be used by the world would be announced by WHO. But if the US has no confidence in the WHO, how can the world adapt such a vaccine. Of course, the Chinese have come to WHO’s aid but that may breed more conflict.
Many scientists say the medical solution is about 12 to 24 months away! Not sure who to believe, but I guess the medical problem is still with us. We should not lower our guard. We should continue with preventive and other strategies. The lockdown has been one. It cannot last on forever! But unlocking, the country is also another nightmare. We may see an escalation in infections yet our capacity to manage them is limited. Dead bodies will be the consequence! There is a Norwegian doctor who argues that it is important to build resistance by being exposed to the virus! Open up he urges. What risk is this? The solution, a cure or vaccine.
From the economic side, most economies are likely to stagnate but definitely most, if not all will have negative growth rates for some time. Recessions have set in, they may last for a year or more. Individuals and organizations have lost income. This when summed up, makes up national lost income. All nations have lost income. Recessions have been predicted for the different economies. Infact, all world economies have already reported decline in production and in GDP growth rates. The period has now been dubbed the Great Lockdown which has created the worst Economic Downturn in history. The IMF predicts a global loss of US$ 9trillion. The International Labour Organization (ILO) estimates that 1.6 billion people have lost their jobs (May 01, 2020).
The stimulus packages and the policies that are initiated during and immediately after the pandemic should enable the countries to restart and restore economic vitality. But this is not guaranteed because it cannot be predicted. If it does, the growth will come out of new opportunities, recognizing those opportunities and taking advantage of the new technologies (innovations) that are being developed especially in the 4IR changes that are being introduced in the world. But government must be alert because there is no right formula or right way of doing things. Governments are going to do extraordinary things to save their people from starving and death and save their economies from economic ruin.
The Uganda economy may decline by 30% in the current year 2019/2020. Even the subsequent year 2020/2021, may see negative growth. To avoid worse economic performance, government must initiate an economic stimulus package. But it must decide on what the problem is, what the goals of stimulus and how to achieve intended goals.
The Government Action Plan
To achieve the intended goals, the government has to take numerous decisions and actions. Some are immediate to ease the lockdown and restart the economy others may be short to medium term, again to stimulate economic activity in and stabilize the economy, the decisions to be taken are not ordinary, they are drastic and maybe painful. But the decisions should not ignore health considerations until when the pandemic is safely resolved in whatever way, cure or vaccine. Government must also take long term decisions to resolve the challenges it has had over the years that have caused the continued poverty among Ugandans. These are fundamental policy rethinks or calibrations that government must do to grow and develop the economy and ensure it gets the desired results in both medium and long term.
Current thinking and strategies are now obsolete! Continuing with them is fatal. The foundation of previous decisions should be questioned. Previous decisions did not remove poverty. They are indeed in question. They have been discredited. We either change or sink into further misery. There are also specific decisions, fundamental or technical decisions that government must take to lead to social-economic transformation. This is a duty of every government and responsibility of leadership.
But what is the government dealing with? It is dealing with the current stoppage of the economy and its consequences. Government can also take advantage of the combination of changes around the world to tackle those challenges the country has faced in the past that appear not to have solutions. It is possible that policies of the past were not entirely appropriate. Government put the best selection of macro-economic policies, they yielded results, but did not remove the problem of poverty! The coronavirus has led to a stoppage of the economy. What has that revealed to us about weaknesses in our policies? The fact is that, a large number of urban people live hand to mouth and have no savings. They must be fed! It has also shown that Ugandans have no food, even when they can afford. Some will want free food from the government. We must revisit the policies for the economy to quick start. How do you get factories to reopen? How do you get markets, schools to re-open? How do you get shops and other businesses to re-open? How do you restore normalcy? Or how do you get to a new normal. And what is that new normal?
The Current Economic Problem and the goal of the stimulus
Where is the economy now? The above issues are indication of a problem. There is need define the problem. The problem on our hand now is that the economy has grounded to a halt. It needs to be re-started. This forced halt has led to maiming and or death of business. If business dies, government has no locus to operate! If government announces opening up (easing already started), how do businesses restart. But as we define the problem we must have our national goals in mind. What do we want to achieve by these measures government will take? I believe the overall goals of the economic measures that should be taken now and immediately during the post-Covid 19 should be; to restart and restore economic activity and stability of the economy, to ensure recovery of the economy, to ensure growth of the economy among many others. These are global issues that every country must deal with.
Like other countries we have some challenges unique to Uganda that need to be addressed. These are some dysfunctional activities and policies at play. These include: Building in wetlands, farming in forest reserves, location of markets, boda-boda “operations” in downtown, small roads, planlessness of towns, illegal structures, the pandemic corruption, population explosion, growth of slums in undesignated areas, disposal of plastics, importation of unskilled labour among others. This is probably the time for the country to re-think and re design those economic activities for the benefit of the country. Some of the unique activities may have developed because of poor implementation of policy or the lack of it. These have actually been affected very much by the coronavirus. It also includes Agriculture. While it may not be affected negatively, it is possible that it’s now time for agriculture to be restructured in the economy in a very unique way. Besides the above, we also have this challenge of development not reaching the ordinary people. We have been able to identify the vulnerable communities and how the economy works. But this has been brought down by the virus. How do we end the endemic poverty? How do we involve the bottom of the pyramid in wealth celebration?
The writer, Prof. Waswa Balunywa, is the Principal of Makerere University Business School