Afro Kai, a grain exporting firm, located 18 kilometres north of Kampala, has demand from all neighbouring markets and beyond, to supply food items.
On the shores of Lake Victoria in Entebbe, Africa Gold Refinery’s refining and export volumes have shrunk to about 10 percent of normal capacity.
The two companies represent the reality in the Common Market for Eastern and Southern Africa (Comesa) that is reeling from the effects of Covid-19.
According to a new report, Comesa has experienced contraction in economic growth, with only six countries out of 21 expected to post positive growth for 2020.
The pandemic has wiped out 4.6 percentage points from Comesa’s economic growth this year, and see the bloc slump to a 0.6 percent growth, just 12 months after it grew 5.2 percent in 2019.
In fact, except for Uganda, Kenya, Rwanda, Ethiopia, Malawi and Egypt, all other countries are projected to have negative growth rates post Covid-19 pandemic, according to the report presented during the bloc’s policy organs meetings from November 26-27.
The report titled Socio-economic impacts of the Covid-19 pandemic: Evidence from Comesa region echoes the International Monetary Fund’s October 2020 regional economic outlook for sub Saharan Africa.
Both note that Covid-19 will see contraction cut across all countries and sectors, but countries that are oil, resource and tourism dependent are the most hit, while more diverse non-resource economies like Rwanda, will be more resilient.
It agrees with the assessment that agriculture based businesses have only experienced a marginal impact of Covid-related restrictions.
“Uganda is largely an agricultural economy, and even for us as a company, we have been able to continue producing and exporting. Soon we are likely to have a surplus in maize and rice,” said Chris Kaijuka, managing director of Afro-Kai.
For Africa Gold Refinery (AGR), on the other hand, exports, refining and other services slumped 60 to 70 percent, a source at the company told The EastAfrican.
“Most of the gold we refine is transit gold from outside. Given the travel restrictions, transit gold stopped coming in. But that’s not all. There are other services we offer, and this means if gold wasn’t coming in we were not earning an income on those services,” he said.
Before Covid-19 restrictions, AGR, whose main export market is Dubai, received 100kg per day of gold from transit sources — translating into about 30,000kg a month, with internal sources bringing in only 10 percent of the gold for refining.
The reversal of fortunes between gold and cash crop exports is a blow for Uganda which in recent years has seen earnings from gold surpass those of traditional agricultural exports including coffee, according to the Ministry of Finance and Bank of Uganda.
In 2019, gold exports fetched $1.36 billion, compared to $494 million earned from coffee.
But for countries that are dependent on resource exports like gold and oil, the slump in exports of such commodities, according to the IMF economic outlook for October 2020, will see regional economies will contract by -3 percent, representing almost 7 percentage points below the Fund’s forecast 12 months ago.
Dried up remittances
Speaking at a virtual meeting with international financial partners and risk analysts, Director of Economic Affairs in Uganda’s Ministry of Finance Moses Kaggwa admitted that the country is expected to grow by 2.9 per cent this year and 3.5-4 percent in 2021 — and even then it will be one of Africa’s top performers, with a focus on generating jobs within the agriculture sector.
In addition, there has been cut down in remittance inflows in the region, as a result of shut down in economic activities in key source countries in Europe, United States, the Middle East and China which account for a quarter of total remittances to the region, the Comesa report says.
Executives also note that Comesa has suffered steep declines in foreign direct investment, delays in approved development projects linked to external financing mechanisms, and an increasingly high risk of financial sector contagion due to the decreased ability of businesses and individuals to meet their financial obligations.