The economic crisis occasioned by the pandemic has bitten the entertainment sector so hard, your favorite hang out might have permanently closed shop by the time this tide turns.
For one and a half years now, bars and other entertainment spots have been closed by government in a bid to slow the spread of Covid infections. Those that didn’t close scaled down operations, resorting to a restaurant model with few guests. Yet what made the most sales for bars was the night-long activity.
As a result of this, coupled with financial obligations, some businesses have closed.
The list includes Casablanca, Wave and Deposh. Others like Bugatti, Cielo, Starbucks, Black and White, and Luxe have also shut down. These are only the popular names.
Those that are still operational continue to walk a tight rope of insolvency – un-serviced bank loans, unpaid utility bills, rent arrears. Others risk having their property seized and auctioned by their lenders.
President Yoweri Museveni insists that reopening bars makes observance of safety protocols impossible since “drunkards are a danger to themselves”.
“Bars shall remain closed until vaccination of 5.5 million people is complete,” the President said in his most recent address. So far, about 1.4 million people have been inoculated in Uganda.
In March this year, the President said government was working out a stimulus package for some of the sectors that have been hit most during the pandemic. He said businesses in the entertainment sectors including bars will be financially supported to help them recover.
However, government through its Uganda Development Bank (UDB) does not consider bar businesses eligible for credit facilities, Robert Semwogerere, the proprietor of Fusion Auto Spa Munyonyo, told Plugged.
“If I met the President, I would tell him to get us (bars) out of monster of bank loans. When our businesses approach UDB, they tell us that bars are not among the core areas – education, industrialization, agriculture, tourism and infrastructure development – that government wants to invest in,” Semwogerere told Plugged in an exclusive interview.
He also asks that government helps waiver the utility bills of water and electricity which bars still struggle with, despite low sales.
The entrepreneur adds that government’s ‘freebies model’ won’t save the entertainment industry from its current predicament. Rather, bail them out by lending to them at affordable rates and giving them a reasonable grace period according to their business plan.
Another nightlife business player told Plugged that one requires a minimum of Ushs 500m to open up a night club in Kampala, if one is to rent up a property in a prime location. Monthly rent ranges from Ushs 20m to Ushs 40m. For a night club whose rent is Shs 20m, the rent arrears have now accumulated to Ushs 360m since March 2020 when they closed.
The basic investment involves soundproof (costing about Shs 60m) and music equipment (Ushs 40m) among other things like furniture, electrical appliances, kitchen equipment, security systems etc. For all businesses in the nightlife industry who had obligations to banks or other lenders, all these assets risk seizure any moment.
“The night club business is a huge investment. It’s capital intensive. I have so far invested over Shs 1 bn. This is my whole life’s journey. It’s not like I woke up one day and had this lumpsum. It’s money that has accumulated through the many business ventures I have undertaken over the years,” George Pambason who owns two nightclubs in Kampala named Club Totez, told Plugged.
“I could lose my whole life’s worth to the banks,” he adds.
The impact of this crisis is not only economical. There are also social implications. In many cases, these businessmen attached properties where their children and family stay, as collateral for credit. These properties face the grim likelihood of foreclosure by banks, leaving these families displaced and destitute.
While government has continued to urge lenders and landlords to be lenient with borrowers and tenants respectively, Pambason says the banks and landlords have run out of patience.
“Our loan burden has doubled, and in some cases tripled due to restructuring. If you took out a loan of Ushs 500m, it’s now over a billion, because of accrued interest. Yes, the banks have restructured the loans but they have lost patience. And this restructuring comes with other cost implications,” he says.
A landlord who is owed say Ushs 200m will obtain a distress order from court and confiscate property valued at Ushs 500m.
There are over 60,000 bars in Uganda, according to figures captured by breweries which take an inventory of businesses they supply with beer. All together, they employ 1.8 million people directly. Those that are employed indirectly, including suppliers, are over 4 million.
Figures released after Uganda Bureau of Statistics (UBOS) rebased the economy, showed that the entertainment industry grew by 30 per cent in 2016/17.
This puts the contribution of the entertainment industry pre-Covid at Shs 141.5bn equivalent to 0.3 per cent of the entire contribution of the services sector to Uganda’s GDP. Collectively, the services sector, where entertainment belongs, contributed Shs 47.1 trillion to Uganda’s economy.
Fusion Auto Spa and some other big businesses employ over 100 people – several DJs, entertainers, waiters, cleaners, salon attendants, health club staff, gym staff, gardeners, security, managers, media personnel among others.
In addition, there is a long chain of service and product providers – hotels, boda bodas, cab drivers, market vendors, cutlery businesses, sorghum and millet farmers.
“All these businesses are now curtailed. Unfortunately, when the President speaks, he sounds like the bar business is uncoordinated and full of drunkards. It’s a sector that can be managed, supported and bring out best practices,” Semwogerere said.
Totez which employed 70 people had to lay all of them off. Their livelihoods and those of their other beneficiaries have been affected. Some were thrown out of the houses they rented and others can no longer afford a meal. This on top of other potential risks like falling sick.
Pambason says none of his staff received the Shs 100,000 cash relief from government even when people who worked in bars were among the targeted beneficiaries.
His plea to government is for the President to issue an Executive order that bars evictions and foreclosures, and also waives utility bills for their businesses. According to him, a pandemic is a natural occurrence which bar owners have no control over and government must treat their plight as such.
In addition, he proposes that government avails soft loans to affected businesses to enable them diversify into relatively active sectors.
“I have spoken to the head of UDB twice but he said that their money is for people in agriculture, tourism and agro-processing. And that one must have a company which has been existent, tied to these sectors. They also need cash flows. How can I have clash flows when I have been closed two years?” Pambason who doubles as the secretary general of Legit Bar Owners Association said.
Other players think it is time government began viewing the nightlife activities through the prism of tourism. When foreign tourists visit Uganda, one of the aspects they are looking to experience is the nightlife, which represents culture – the people, local cuisines and music. It is shallow to talk about tourism without culture.
“Also, government must start to look at us as investors because that’s what we are. If I have invested Ushs 2bn without any support from government, I am employing 70 people and indirectly providing a livelihood to other people, I am an investor. But they only consider Indians whom they give all kinds of incentives,” said Pambason.
Similarly, Semwogerere makes an argument for a tailored capital intervention that would allow these businesses venture in less risky areas.
“Allow me draw a proposal that will enable me service my outstanding loan. If my mortgage was Ushs 5bn, allow me to pay the Ushs 5bn. Give me an interest of say 8 to 10 percent, not 21 percent. You have already lifted burden off me. Then give me one or two years to invest in another sector. I’ll be able to pay off my bigger loan for one or two years and still be able to start off a new business,” he says.
Government on the other hand maintains its cash strapped.
Finance Minister, Matia Kasaija, has no conclusive plan yet, for the affected businesses and they will have to wait longer.
“There’s something we are working on for all those entertainment people. But we have not yet completed. So, I cannot disclose details because I have not finished my consultations. We are calling them artistes, innovators, singers and I think that’s where bar owners also fall,” Kasaija told Plugged in a telephone interview on Friday.
“The problem is that there is no revenue coming in. You should know that. So, should I go to borrow in order to bail out people really? I don’t know,” the Minister added.
Kasaija says these businesses should be patient like anybody else.
He however added that the Ministry of Finance is ready to write to UDB advising that such businesses be considered as players in the tourism sector.
In order to cope, different businesses have devised different mechanisms to adapt to the new normal.
For Fusion Auto Spa, the business has metamorphosed into food delivery, car washing, kids play center, gardens for photo and video shoots, as well as accommodation for local tourists.
It has also evolved into farming. There is a garden for spice used in the restaurant as well as a poultry farm where chicken and eggs are sourced.
Semwogerere says the farm will in the long run reduce costs of operation.
However, Pambason says the notion of repurposing businesses does not apply to everyone. Panicking to adjust a business to serve a completely different purpose is both unsustainable and has other costs attached to it, he says.
