6 March 2014

Uganda: Same-Sex Talk Will Not Ruin Uganda's Economy


The long-held view is that the two are bedfellows - where money lies, so, usually, is the sex. Without the sex, there won't be any exchange of money.

Last week, however, European countries, Norway and Denmark, announced they would cut the amount of money they send to Uganda over the country's latest legislation on same-sex couples.

President Yoweri Museveni signed into law the Anti-Homosexuality Act, which Norway, Denmark, and lately the World Bank, believe is a violation of human rights because the legislation institutes harsh punishments for gays.

The announcement of the aid cut has had a knock-on effect on some of the markets, such as the forex. The shilling lost close to five per cent against the dollar late last week, with industry players blaming this on the aid cut announcement. It is quite possible other effects lurk elsewhere.

Yet Uganda, to a great extent, is expected to withstand the shocks brought about by the aid cuts or - in the case of the World Bank - postponement. The aid cuts mean that the economy will not grow at the six per cent to 6.5 per cent the government had anticipated. That, broadly speaking, is just about it.

The most significant effect of the Anti-Homosexuality Act is not necessarily the aid cuts - Ugandan officials continue to steal a substantial amount of that money anyway - rather the perception that it carries. Are, for example, tourists going to shun Uganda because of the legislation? Shall we see international firms stay away from Uganda because they fear their gay staff could be targeted?

These are the pertinent questions that will test the economy. To offer you a quick answer, the perception will die faster than you will notice. Any investor with half a brain knows that there is no way government officials will storm bedrooms and lodges to crack down on gays. Implementation of this law will be difficult to pull off.

Of course, an investor should know that it might be a problem displaying such sexual affection publicly on the streets of Kampala - this is not Paris or Berlin. But that should not be a reason to forgo a profitable venture at the expense of your opposition of the law.

Just like the forex market will prove in the next weeks, the movement of the shilling should be dictated by other fundamentals, like Uganda's ever increasing import bill and the undertakings in a couple of infrastructure projects like Karuma and the Entebbe Express highway.

With Uganda importing more than what it is expecting, the aid cuts will further increase Uganda's public debt. To counter the aid cuts, government will have to borrow money somewhere in order to fill the gap the donors have created. To do that, government is expected to look at the securities market, where trade in the treasury bills and bonds should get hyper.

Bank of Uganda will very likely increase the interest rate on treasury bills and bonds in order to attract more investors. Investors are to forget their sentiments over homosexuality as they target these government securities.

If there are tourists who plan to cancel their trips to Uganda because of the anti-gay law, then they probably know very little about the continent. Even in African countries where anti-gay laws do not exist, the act of doing it in public will get you a caution. Africa remains conservative.

This is the time for the authorities in charge of Uganda's tourism industry to deal with the issues that affect the sector. Challenges such as the poor road network, high hospitality charges, and exorbitant charges for adventures like gorilla tracking and white water rafting, need to be looked at urgently.

This should help the country promote domestic tourism ahead of the seasonal foreign clientele. In the end, the fear that the anti-gay law has created will find an economy that continues to promise a lot but is only held back by the high level of bureaucracy and the deeply-rooted corruption in government corridors.

We should only get worried if companies decide to pack up and leave because of the law. There is a lot that could influence an exodus of that nature, and an anti-gay law cannot be one of them. Norway has Norwegian firms like Tronder Power, which is in charge of a power plant at Bugoye in western Uganda.

France, which says it is concerned by Uganda's legislation on homosexuals, has Total E&P, one of the biggest multinational firms in the country, exploring for oil in Albertine grabben.

So, let's all relax and wait for this anti-gay hullabaloo to simply pass on. Whichever side you are on, there are surely more urgent matters to fix within the economy than worry about sex of whatever nature.

Twitter: @jeff_mbanga

The author is the business editor at The Observer


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