Uganda is almost out in the cold economically following an anti-gay legislation which has caused a feud between the donor-dependent country and the West, and also made global lender, World Bank delay a $90 million health loan. East African neighbours Kenya has now joined the long list of countries that may leave Uganda battling more poverty than it currently has.
The recent events have cast a dark cloud over Kenya’s business interests in the state as Uganda’s economy comes under serious attack from western nations and global financial institutions.
President Yoweri Museveni last week signed the new law that gives serious penalties for homosexuality and even knowing about homosexuals without reporting them.
With dollar inflow slowing down, government’s spending plan has gone under serious threat and the country’s currency is experiencing serious instability. The Ugandan shilling plunged by over two per cent against the dollar last Wednesday, the largest fall in two years, which had since prompted the Ugandan Central Bank to shore the market up with more dollars.
“The Central Bank of Uganda stayed in the market the whole day because news that kept coming from the donors was not helping matters,” Joshua Anene, a senior Treasury dealer at Kenya’s Commercial Bank of Africa (CBA) told online news portal Business Daily Africa.
“In 2010 we witnessed the effects of a weak Uganda shilling on our export business and we don’t want a repeat of that. Our export sales order fell by close to half and the latest developments are worrisome,” a chief executive of a Kenyan steel firm was quoted as saying by the online news platform.
Foreign investors are becoming sceptical about Uganda’s future, as do the country’s neighbour Kenya, which transacted goods and services worth Sh52.3 billion ($606 million) with Kampala last year.
Also, Kenya’s East African Breweries, KCB and Equity banks, Bidco Oil and other large corporations have established subsidiaries in Uganda and are thus exposed to local economic shocks, showing Kenya was right to worry.
“Shake-ups in the Ugandan economy are obviously a direct concern to Kenya because that is a main outlet for Kenyan goods. Everyone is watching how deep the latest problem would go,” Sanjiv Patel, a medium-scale steel dealer in Nairobi who also has interests in Uganda said.
In an editorial published in the Washington Post, which could further fuel Uganda’s economic down slope, World Bank President, Jim Yong Kim warned that legislation restricting sexual rights “could hurt a country’s competitiveness by discouraging multinational companies from investing or locating their activities in those nations”.
Already, Uganda might have lost millions of dollars in donations as several donors have expressed displeasure over the new law.
One of Kampala’s largest donors, US, which gives $400 million in aids annually, has said it would review its relationship with the East African country following the new law.
Norway said it was going to withdraw about $8 million as a result of the new legislation. Denmark disclosed it was redirecting aid programmes worth $8.64 million to civic groups and private actors. Finance minister of Sweden, Anders Borg, said the new law posed “a financial risk” for Uganda.
The economy of Uganda depends heavily on donors that Minister of Finance Maria Kiwanuka estimated would make up about 20 percent of the country’s budget for the current financial year.
If donors carry out their threats and Russia, which Museveni had said he would do business with fails to turn up, Kenyan investors who are keenly watching events in Uganda may soon pull out of Uganda, other East African countries may follow suit.
