Twelve months since Uganda emerged from a restrictive Covid-19 control regime, the results for the country’s lenders remain mixed.
Against the optimism earlier this year, banking industry insiders have hinted at modest earnings growth for 2022 amid low economic growth, high inflation and tightening lending rates due to tightening monetary policy measures.
Patrick Mweweire, Stanbic Group’s regional chief executive officer for East Africa, warns that credit growth has fallen from 16 percent before the pandemic to less than 10 percent now, leading to lower asset growth and earnings growth.
Already, most top-tier banks saw less than $20 billion ($5.4 million) in pre-tax profit growth in the first six months of 2022. This can be taken as a sign of slow sales growth across the industry.
This was attributed to the government’s credit easing measures for the education, leisure and hospitality sectors amid the severe negative impact of the pandemic lockdowns, which manipulated lenders’ profitability patterns amid concerns about cybercrime risks and a tough economy.
economic uncertainty
With the economy reopening, it was hoped that large annual events such as the annual Uganda Martyrs Festival in June, the Nyege Nyege Cultural Festival in September and the MTN Uganda Marathon in November would create a windfall for small businesses selling food, Drinks and luxury items to the participants.
However, some companies have struggled to recover due to uncertainty over the eventual phasing out of the expanded credit easing measures. Under the credit easing measures, borrowers were eligible for credit restructuring options that could result in improved cash flows for companies, reduced risks of property seizure and improved business survival. The credit easing measures were introduced in April 2020 but were ended by the Bank of Uganda in September this year.
But rebates on outstanding principal and interest charges due on its own credit facility were not included in the loan restructuring packages.
Also, the continued school closures and suspension of large gatherings choked many private schools and hotels, leading to closure and bankruptcy.
Five years waiting time
“The Covid-19 pandemic and related challenges such as the current Ebola outbreak are likely to impact the recovery in the leisure and hospitality industry. We expect to wait five years before the sector can achieve pre-lockdown growth momentum,” said Stephen Wanyama, a former hotel manager.
He argued that some hotels may need as much as $800 million (US$215,697) to recapitalize operations and reach full operating capacity.
Mweweire suggested the measures being offered to the education sector should be kept in place for longer as the sector will likely take longer to recover.
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