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Africa Business News of Monday, 1 March 2021

Source: monitor.co.ug

Ugandans still waiting for Coronavirus stimulus package

File Photo: Coronavirus File Photo: Coronavirus

Businesses that were supposed to benefit from the government stimulus package from the Uganda Development Bank have not received any money.

In June 2020, government announced that small and medium size enterprises in agro processing, manufacturing and tourism sectors would receive about Shs1 trillion to support them during the lockdown.

The money was supposed to be channeled to eligible beneficiaries through the Uganda Development Bank (UDB).

However, many businesses have never received the money.
In January, UDB said it had disbursed up to Shs242b to vital sectors of the economy in 2020.

According to the bank, Shs192b was disbursed to support primary agriculture, agro-industrialisation, and manufacturing industries.

The bank said Kampala Metropolitan Area, which has the largest concentration of Uganda’s businesses, got the largest share of approved loans, standing at Shs109.4b.

Northern Uganda received Shs105.8b, representing 24 per cent of disbursed money, while western region received Shs77.8b, which translated into 18 per cent. Eastern region received Shs75.7b (17 per cent) while Central got Shs74.8b (17 per cent).

According to the bank records, primary agriculture received Shs151.9b, agro-industry Shs134.8b, and manufacturing got Shs100.8b. Tourism received Shs20.1b, infrastructure had Shs11.8b and health services got Shs10.6b

SMEs cry out

The small and medium size enterprises have started crying foul over the money and are claiming that “big boys” with political connections have hijacked the money leaving out the intended genuine beneficiaries.

Sources in small and medium enterprises say while the stimulus package should have benefited all businesses hit by the Covid-19 pandemic, the money provided by government only benefitted a few businesses that are well connected to the powerful people in government.

Mr John Kakungulu Walugembe, the executive director of Federation of Small and Medium size Enterprises Uganda, told Daily Monitor last week that members of the federation were stranded because none has received the money. He said they have also been told that they will not benefit from the funds.

“We have engaged the Uganda Development Bank on that. They told us the money is for those sectors involved in the real economy, those involved in agro-processing, manufacturing, tourism, and human capital development,” he said.

“They put some money in the Microfinance Support Centre but that one seems to have got finished and they were mostly targeting the informal groups, but not SMEs. But in SME, there is still a gap in financing. What exists now is not useful for SMEs,” Mr Kakungulu added.

Mr Kakungulu said SMEs were the worst hit by the pandemic and that they should have benefited from the money which attracts a lower interest compared to what commercial banks are offering. He said a number of SMEs have closed businesses because they can no longer afford the high cost of operation.

“What we would propose is a special fund or an SME stimulus package fund and we do not think UDB is the best place for it because they seem overwhelmed. They have very little footprint on the ground,” he said.

Mr Kakungulu added: “Maybe this is something that could be run either through the Microfinance Support Centre, or commercial banks should compete for it and sign a performance contract with Bank of Uganda,” Mr Everest Kayondo, chairperson of Kampala City Traders’ Association, said the money has never benefitted those who should have accessed it.

Mr Kayondo accused UDB of setting up stringent conditions that have eliminated many businesses from accessing the funds.

“Even where it was put, it was not used at all because you had to go through all the processes of a loan. If you want to rescue somebody, you do not go through a loan process. They had to go through appraisal, get your collateral, and assess your capacity to repay,” he said.

He added: “Even for the traders to think that any sector benefitted, no sector benefitted because the way they arranged it was not favourable to any business community. ,” he said.
Some actors in both tourism and manufacturing also said even after going through a rigorous process, they have not received the money.

Ms Jean Byamugisha, the executive director of Uganda Hotel Owners’ Association, told Daily Monitor that members of the sector submitted their applications after UDB advertised the funding, but have not received the money.

“To tourism, they have not yet disbursed. The communication we have from UDB is that they are in the final stages and that we should be ready by the end of this month. At least 93 firms applied and 53 qualified to move to the next stage and we have not got any additional update but they said they would be informing those who are successful by the end of this month,” Ms Byamugisha said.

Mr Daniel Birungi, the executive director of Uganda Manufacturers Association, also said he was not aware of members who have received the money.

He said the bank should explain how they are disbursing the funds.

“We have seen the advert by UDB and we forwarded it to our members. Some of the feedback we have got from them is around the complexity of the processes of accessing the money. Many are indicating that the processes are quite long and that renders many of them unable to access the money,” he said.
Mr Birungi said since the bank deals directly with individual companies, it may be difficult to know who has received the money and who has not.
UDB reacts

Ms Patricia Adongo Ojangole, the Uganda Development Bank executive director, said the process of disbursing the money is ongoing and that adverts calling for submission of applications for loans were sent out.

She, however, said small and medium size enterprises which do not deal in primary production should stop crying because they are not part of the beneficiaries of the funds.

Ms Ojangole did not name the firms that have received the funds or the amount.

“The money we received is not for businesses that are struggling. The package UDB got was for supporting production of essential goods and services in the country,” Ms Ojangole said by telephone.

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