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• Published Sep 12, 2024

Business sentiments decline as the suspension of Uganda from the Africa Growth Opportunity (AGOA) Act eligible countries bites.

The Business Climate Index (BCI) declined by 11 points from 109 in the previous quarter (October-December 2023) to 98 in the quarter under review (January to March 2024). The drop in capacity utilization, increase in input costs, low profitability, and decline in the general business environment are the factors attributed to this decline in business environment sentiments. At the sectoral level, the sentiments for doing business in the service sector improved by 17 points from 83 in the previous quarter to 100 points in the quarter under review. In the same light, the indices for the agriculture and manufacturing sectors increased from 77 to 96 to 82 and 100 points, respectively. As expected, the major business constraints were the same as those reported in the previous quarters, including unfavourable tax policy, macroeconomic factors, insufficient demand, electricity unavailability, and access to finance. Over the quarter, there was an increase in the severity of tax policy, unfavourable macroeconomic environment, crime, theft and disorder, transport infrastructure, corruption, and insufficient demand as business constraints. The projections for the next quarter indicate that conditions for doing business are expected to decline further, with the index decreasing from 103 to 97. In particular, the service, manufacturing, and agricultural sectors are expected to experience a decline in business sentiments from 100, 100, and 82 to 95, 87, and 78 respectively. The suspension of Uganda from AGOA was cited as an issue of concern by 48 percent of businesses surveyed, of which 46 percent reported their businesses might experience a loss in the market, while 54.3 reported a loss of investment partners.

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