Private sector contraction slows, PMI shows

Uganda’s private sector shrunk at a slower pace in June compared to the previous month, according to a closely watched survey of company executives.

The Stanbic Bank Uganda purchasing managers’ index, produced by IHS Markit, rose to 46.5 in June, up from 41.9 in May, but still below the 50 line that separates expansion from contraction. The reading indicates that business conditions in the private sector have contracted in each of the past four months.

The country’s private sector has been particularly hit by disruptions caused by the global Covid-19 coronavirus pandemic and measures instituted by the government — including a wide-ranging and restrictive lockdown — to contain its spread.

Some of these measures were lifted in early June, with the government allowing the re-opening of some businesses and the resumption of public transports. As a result, “the Ugandan private sector moved towards stabilisation,” but business conditions still continued to deteriorate.

IHS Markit said new orders decreased for the fourth month running in June. “Although some companies had been able to reopen during the month amid a loosening of lockdown restrictions, others remained closed or had only just reopened at the time when the survey was conducted,” the survey report said.

“The construction and services sectors posted rises in both output and new orders, but falls were recorded elsewhere.”

Surveyed companies said they were finding it difficult to pay staff due to a lack of funds, which has resulted in a reduction in salaries and job cuts.

They also reported a rise in input prices, the first time this is happening in three months, reflecting an increase in purchasing costs, particularly transport costs and prices for utilities and materials such as fertiliser and paper.

Suppliers’ delivery times continued to lengthen in the month in response to “restrictions on transportation and delays at the border due to the testing of drivers.”

Despite the rise in input costs, most respondents said they had lowered their selling prices due to low demand and spending power.