The year 2016 ended on a sour note. Too many businesses struggled. Many folded, others faced closure. Banks faltered, Crane bank that for years notched the prestigious bank of the year awards was taken over by BOU over low capitalisation. Giant regional retail chains like Uchumi closed while their nemesis like Nakumatt labored on limping.
Top businessmen appealed to government for bailouts to save their sinking businesses. The real estate bubble bust and lots of completed buildings remain empty.
The dollar hit a record high and inflation soared to double digits. Layoffs and downsizing became the order of the day. Newspaper circulation figures slumped and advertising budgets were slashed. Agencies lost clients and supermarket chains closed.
2017 is n0t going to be any different. The inherent reasons for a bad 2016 still prevail. We take a look at businesses that will still struggle in 2017;
Breweries;
The Alcohol business is probably one of the biggest businesses in Uganda. Market leaders Nile Breweries have two plants in Jinja and Mbarara which brew, bottle and transport hectolitres of the frothy stuff. Uganda breweries too pumps out brew from Luzira in millions of tons.
Other brands like Heineken have their clearing firms busy. Spirits are giving a UBL a big percentage of revenue.
With dwindling incomes, alcohol will lose the ground to illicit brew which will be the preference for the low end drinking class that will dump beer and spirits for ajono, kwete, tonto, muramba and even changaa.
Telecoms;
Communication is a very important aspect of human relations. But it is expensive for majority Ugandans. With the players jostling to provide the cheapest offers, Ugandans will still find affordable means of communicating.
Voice will continue to lose ground to data. That will mean telecoms will concentrate on data services. Failing revenues from voice will impact on the telecom businesses.
The average revenue per user (AVPR) will continue to go down as people will opt to load data bundles and chat rather than call. Low cost telecoms like Africell will gain ground at the expense of the big players like MTN and Airtel whose service bills are huge to serve their millions of subscribers
Beverages;
Sodas aren’t as exciting to kids as it were years ago. Weddings and parties now have more water. Families are resorting to fresh and packed juices at dinner tables. Century bottling the market leaders are grappling with increased competition from Crown Beverages.
New players like Riham and other small players are leading on the price front making it hard for the top two to match up.
Health freaks are saying sugar which is a major ingredient in the manufacture of soda is the reason kids and adults are obese. Carbonated drinks are not getting good media. It sure will be a tough year for the beverage companies
Advertising;
Corporate entities take their image seriously. To keep their reputation intact, they enlist the services of advertising agencies. These craft winning campaigns for their products, handle promotions, run their PR stories and buy their media placement spaces in print, online, digital and outdoor.
However, the budgets for acquiring such services are hinged on the companies revenue returns. With dwindling incomes from slowing consumption, ad agencies will see cuts in advertising budgets and the procurement of services like PR in preference for in-house team set up.
Already, leading agencies like Moringa Ogilvy, Fireworks, Scanad are struggling with loss of business from their top spending clients who include the breweries, beverage companies, banks, insurance and hospitality industries.
Television stations, radios, newspapers and billboard companies will in turn have to either lower their prices or struggle to find business.
Banking;
The percentage of Ugandans who hold bank accounts remains lower than 20% presently. This isn’t helped by the fact that mobile money is making it easier for people to sell, spend, send and receive money from one place to another.
Worse still, there are too many banks jostling for the few people who can ably transact. Already, leading banks like Standard chartered are reporting lower balance sheets and others like Barclays want to sell off. 2017 will continue to be a tough year.
The choice of microfinance organisations, SACCO’s, saving schemes and preference for investment in actual money making ventures than banking will make it a tough year for the banking industry.
Real estate;
2016 reported a slowdown in the real estate sector. Demand for houses and rental space continues to fall. The exorbitant cost of needed materials doesn0t make it any better. Cement and land prices remain a huge deterrent to the growth of the sector.
Banks are failing to sell mortgage financing because the populace is worried of the unstable interest rates that keep skyrocketing every the dollar takes a hit. With savings and social security funds like NSSF keeping workers at bay till the age of 55, it is still hard for the industry to get better.
Insurance;
Procurement of cover against risk is always tagged to the value of property to be safe guarded. With struggling business and increased appetite to cut costs, insurance premiums will stay stagnant.
Businesses can barely keep afloat. They definitely will not sink in money to protect their assets from calamities.
The big players like AIG-part of the American Insurance group have already notified the regulator of their intentions to exit the market. Others new players like Prudential and Alliance are struggling to break even.
The more people live in an unsteady environment, the more they become risk averse to save on costs. However, the environment is also good for insurance companies to tap into the risky business of securing insurance for economy boosts like loans and guarantees.
General manufacturing;
Households need daily inputs for their survival. Manufacturers especially ones that make fast moving consumer goods (FMCG’s) will have a slight shortfall in demand. Consumption will slump as poverty bites and incomes are diverted to the basics like food, clothing and health.
This will also affect agricultural producers who will have to cut down prices of their products to be able to attract buyers and earn some money.
Supermarket and retail outlets will see reduced inflows. This will also affect their procurement of basic goods. Suppliers will feel the harsh reality of reduced consumption
On the whole, 2017 will be the year when the economy will stabilise from the loops of election year 2016 and a smooth sailing will take off from the last quarter of 2017 all the way to 2020 before the perils of the 2021 elections kick in.
Happy NEW YEAR!