By PATRICK JARAMOGI
KAMPALA-SHIFTMEDIA- Widespread corruption is stifling access to Covid 19 stimulus package to especially the Micro Small and Medium Enterprises (MSMEs), we can reveal.
Over a trillion shillings received from International Finance Institutions and Donors like the World Bank , International Monetary Fund (IMF), the European Union (EU) and African Development Bank to support the government set in place measures to ensure provision of relief to businesses that have been most affected the pandemic and foster economic recovery, amongst others is yet to be accounted for.
The International Monetary Fund (IMF) donated Shs1.86 trillion (60%), World Bank shs1.163 trillion (37%) Africa Development Bank shs73.4 trillion (2%), and the European Union Shs26 billion (1%)
In a series of widespread supplementary budget requests to parliament, that were approved amidst controversies, the Government of Uganda announced the economic stimulus package to be implemented during financial year 2021 in the medium term in order to boost economic growth and lead the economy out of the projected economic slowdown resulting from the COVID pandemic.
But latest shocking revelations we unearthed is that the badly hit MSMEs across the country are yet to receive these funds. The majority shockingly, are dying in silent pain since they don’t even know that such packages exist, and where to get them.
In the wake of COVID 19 crisis, SEATINI Uganda started implementing a project focusing on “Rebuilding Resilient Women Entreprenuers through gender responsive post COVID 19 economic stimulus packages.”
The package seeks to restore household incomes, re-ignite business activity through; the provision of tax deferments, an increase in government spending, lowering interest rates and provision of access to credit to support Micro Small and Medium Enterprises (MSMEs), amongst others.
It is envisaged that MSMEs and other manufacturing firms affected as a result of the COVID pandemic and subsequent national lockdown and containment measures, would be able to access investment finance and improve their cash flows.
According to the Ministry of Trade and Cooperatives, 4,200 companies across the country shut down by April as a result of the ongoing COVID-19 lockdown, and only 215 industries/factories, remained operational during lock down.
How was the stimulus package to be implemented?
The economic stimulus package according to President Yoweri Museveni and cabinet, was supposed to be implemented through the Uganda Development Bank (UDB), Uganda Development Corporation (UDC), and the Microfinance Support Centre (MSC).
Scores of Women Entrepreneurs that SEATINI Uganda talked to in its survey revealed how they are writhing in pain amidst collapsing businesses.
Affected women SMEs speak out
Priscilla Ojambo from the Tourism Tripple TEE Adventures said she was forced to shift to an an finished house along Hoima road due to accumulated rent arrears, and lack of parking fees for her tour Vehicles.
Barbara Catherine Nabitimpi runs a tailoring and fashion business, she had to scale down due to low sales.
Carol Wanyana the proprietor Beauty for ashes said: “My profits fell from the initial between shs300,000-500,000 to very low levels due to covid 19.”
Olivia Amudima the proprietor Blessed Events Management in Jinja said customers dwindled after lockdown. “Many who had placed orders and paid advance for events demanded for refund that was already used up,” said told SEATINI Uganda.
Prisca Tukahira the proprietor Breaker Butcher used to sell between 30-50kgs of meat before lockdown, but meat was seen as a luxury during lockdown prompting her to shut down one butcher and start door to door delivery.
Teopista Kyomuhendo the chairperson Our Lady of Charity Womens’ Group that brings aboard 35 members, mainly former street kids, sex workers and rehabilitated drug addicts said she shut down due to Covid 19. They make crafts that they sell door to door. “We used to make a profit of shs1 million per month, but this reduced drastically due to lack of market and the restricted movements during the Covid 19 lockdown,
she said during the survey.
These are just scores of the women entrepreneurs in urgent need of the stimulus package promised by government.
Others promised support that is yet to come include: Boda Bodas, Salon Operators, Carpenters, Market Vendors, Women Entrepreneurs , Persons with Disabilities (PWDs), Taxi Operators, Restaurant and Bar Owners, Welders, Journalists, Youth Leaders, Produce Dealers, Mechanics, Tailors, Fishermen, Veterans and Performing Artists.
What is the issue?
The findings unearthed by SEATINI indicated that women led enterprises were highly affected compared to 22% of the men led business.
“The Covid 19 economic shock worsened the already existing vulnerabilities among the MSMEs especially among women led- MSMEs,” said Joanita Nasuuna the Women and Economic Justice Expert Women.
She was presenting a paper: “Making stimulus package work for SMEs” at the report launch held at Hotel Africana in Kampala on Friday.
Present were members of parliament from the Finance and Budget committee of Parliament, MSMEs from across the country and Civil Society groups.
Nasuuna said the stimulus packages need to be redesigned to address the gender gaps because they are not gender responsive. “There is need for more long term initiatives to address structural constraints and support the MSMEs to keep afloat amidst the ongoing COVID 19 pandemic,” she said.
She recommended for a flexibility for owners of well-established business entities top access the package.
“For Emyooga, 30 members are eligible to access Ugx30 million shillings which means each member gets shs1m, which we is not even one enough. This is too little money to revamp a struggling business,” she said.
The findings revealed that many MSMEs continue to face a number of challenges such as reduced productivity and sales, high rent, and limited access to short and long term finances.
“We discovered that most women Entrepreneurs still have little knowledge regarding the stimulus packages, an indicator that many hadn’t benefited,” said Nasuuna. She called upon government to translate the information about stimulus package in a number of language that can easily be understood by MSMEs.
She also noted that the finance package should be inform of grants rather than loans.
M/s Justine Ayebare from the Ministry of Finance said Government has so far released over a trillion shillings in form of stimulus package.
Hon. Charles Ilukor (Kumi County MP) and member of the Finance and Budget committee of Parliament said when these SMEs go to UDB they are sent away to Uganda Micro Finance Support Center.”Why are they being tossed around?” he asked.
Adding, “We (parliament) passed over a trillion shillings as stimulus package to support Covid 19 pandemic where has all this money gone? Many people haven’t accessed these funds. Government must explain. He said parliament had finally got the list of the beneficiaries of the stimulus package that is going to be strictly scrutinized.
“We realized that whatever was passed was dumped into UDB that makes it tricky to access for especially MSMEs,” said Ilukor
According to Hon. Matia Kasaija the Minister for Finance shs1.045 trillion (82%) was allocated to Uganda Development Bank, Shs138 billion (11%) to Uganda Development Corporation (UDC), and Shs 94b (7) to the Uganda Micro Finance Support Center.
But the MPS have warned that unless these public funds are accounted for, they will not approve any more supplementary.
Hon. Avur Jane Pacuto the Woman MP for Packwach said if this Emyooga is well utilized it can help address poverty but it needs recapitalization because shs30m for a group of 30 isn’t enough. “Why clamp people in a group, the 25 out of the 30 may just be some lazy chaps who after getting money. Rather give the serious ones money and they pay some interest,” said Avur.
Hassan Mbaziira from the Ministry of Gender and Labor said the focus should be on the one trillion stimulus package. “Who are the beneficiaries? Now that parliament has that list, let’s see who the real beneficiaries of these funds are,” said Mbaziira
He said if there is a group that can access shs50m why restrict them to shs12.5m. He however said that an allocation is different from a release. “Has this one trillion been released yet? The people who are demanding this money should get it, and It should be felt.
Mbaziira said many people are still not aware about these stimulus packages. “But according to research, peoples’ well being doesn’t change with grants. It is very dangerous to give people money without any training,” he warned.
He said most projects don’t fail because they don’t have money, but because they lack training. He said that grants for recovery should be short term.
The real issues regarding accessing the stimulus
A chat with UDB revealed that they only offer short, medium- and long-term financing, equity financing, and project preparation and business advisory services to SMEs and large-scale development projects in the key priority sectors; agriculture, agro-industrialization, and manufacturing.
According to M/s Patricia Ojangole, the Managing Director, Uganda Development Bank (UDB), 50% of Ugandan business, MSMEs included, fail to access funding from UDB due to failure to meet lending requirements, chief among them being the provision of collateral security.
The above requirements present various challenges when applied to the COVID19 economic stimulus program according to the women entrepreneurs.
A leading rice grower explained how he was frustrated when he sought financial help
“They ask for business plans, a well laid out feasibility and viability of the business, asd well as a demonstration that it will create job creation, tax revenue generation and import substitution,” he said. He said such demands has only forced many away from UDB.
Similarly, he said the credit approval processes and high minimum lending thresholds are biased towards large corporate borrowers, who provide better business plans, have credit ratings, more reliable financial information, better chances of success, and higher profitability.
“The lack of detailed credit information by MSMEs closes access to finance. According to the IFC, MSMEs often lack the necessary technical knowledge to keep, let alone prepare the kind of sound financial statements needed for loan applications,” he said.
To qualify for financial services from UDB, MSMEs must have undergone the legal process of forming a corporate entity with the Uganda Registration Services Bureau (URSB) or registered as a Co-operatives or registered farmer groups.
The reliance on land titles as collateral excludes many otherwise creditworthy small-scale borrowers. According to the SEATINI Uganda study, access to finance represents one of the most significant challenges for entrepreneurs and the creation, survival, and growth of small businesses in Uganda.
Where are the Emyooga Funds?
President Musveni had stated that the Emyooga Funds would provide support to the most affected businesses like; the boda-boda riders, the salon operators, the bars and the nightclubs.
The Emyooga initiative targets Ugandans from clusters mentioned above and aims to avail each cluster with shs30 million as seed capital. Each constituency, apart from Wakiso district, is entitled to Shs560m. Wakiso will be given Shs4.4b because it has eight constituencies.
But according to Justine Ayebare (Finance Minstry), even Emyooga got more additional funds in form of stimulus package.
But our findings revealed that deep rooted corruption among corrupt officials is hurting this government initiative.
“Even the shs30m they promise per group doesn’t come all. We fill in requests for Shs30m, but at the end of it all only shs20m is paid to be shared among 30 members due to issues of kickbacks,” said one Women Entrepreneur.
These allegations were however rubbished by the MicroFinance Support Center.