Rwanda blockade having minimal impact on Uganda private sector – Stanbic report

May 6, 2019 in Business, Companies, Trade & Industry by Editor

The embargo Rwanda placed on trade with Uganda, now running into its third month, has had minimal impact on Ugandan business, according to Stanbic Bank’s Purchasing Managers Index for April.

The index reports a rise in hiring activities during April as businesses ramped up production to meet a surge in customer orders.

“The PMI continues to indicate that the private sector remains in a good place,” Jibran Qureishi, Regional Economist E.A at Stanbic Bank said in comments on the report.

“Despite unfavorable weather conditions, the PMI rose in April. Moreover, the ongoing trade dispute with Rwanda has also not hampered private sector activity that drastically, perhaps due to other markets such as South Sudan increasing demand for Uganda’s exports. This diversity in Uganda’s trade mix should underpin its resilience.”

The headline PMI rose to 54.7 from the 51.7 registered in March. This marked the twenty-seventh successive month of the PMI posting above the 50.0 no-change mark.

At the same time, increases in the input cost led to companies to raise their output prices as well.

“Both output and new orders continued to increase during April. The rises in both activity and new business were the twenty-seventh in as many months. Improved customer demand and marketing efforts subsequently contributed to higher output. In contrast to the picture for total new business, new export orders decreased amid issues on the border with Rwanda. Increases in new work was however evident from other sources,” said Benoni Okwenje Fixed Income Manager at Stanbic Uganda.

The report further indicates an increase on both purchase prices and staff costs, the former due to higher prices for materials including baking powder, cement, maize and stationery. In addition, electricity and water bills were higher in the period under survey.

“Purchasing activity rose for the fourteenth consecutive month helping to support a rise in inventories following a decline in March. This was attributed to stock building to higher workloads and positive demand forecasts,” Okwenje concluded.

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.