Ugandan private sector activity slumps, hurt political risks in Kenya

Growth in Uganda’s private sector slowed for a third consecutive month in October, hurt by a weak industrial backdrop as political tensions in a key trading partner curbed new orders, a survey showed on Friday.

The Markit Stanbic Bank Uganda Purchasing Managers’ Index (PMI) slipped to 52.8 from 53.8 in September. A reading above 50 indicates activity is expanding, while below that shows contraction.

According to the survey report, activity in the industry sub-sector declined due to “a challenging political environment in key export destinations.”

Jibran Qureishi, East African economist at Stanbic Bank, said “enhanced and prolonged political risks” in Kenya had slowed its trading with Uganda.

Kenya, gripped by political tensions and sporadic violence since August, is Uganda’s biggest trading partner and its gateway to the sea.

“As political risks subside in neighbouring Kenya over the coming months…growth in Uganda will probably continue to remain on an upward trajectory,” Qureishi said.

Uganda’s economy, which is gearing up to start producing crude oil in 2020, is projected by the central bank to expand 5 to 5.5 percent in the fiscal year 2017/18, a rate the bank says is below its potential.

During October, business activity expanded in agriculture, services, construction, wholesale and retail.