Uganda: Uganda Breweries reduces workforce by 15 %

Squirming under the burden of the worsening power shortages, Uganda Breweries has trimmed its workforce by 15 % as an emergency measure to minimise personnel expenditure and reign in the rising production costs, The Monior reported on April 24.

The company's External Affairs Director, Ms Brenda Mbathi, said on April20 that 35 workers were served their termination letters recently, as part of broader programme to "secure the future of UBL".To cope with the electricity crunch, Mbathi said, the company has had to purchase additional generators to power the factory, which has enormously spiked fuel expenditure bills and stretched budget limits.

"The power shortages are a hardship for everyone, they impact economically and the sooner the government can resolve the power issue, the better it will be for both the public and the business and manufacturing sector," she said.

UBL's action is only a single note of a rising drumbeat of drastic cost cutting measures by dozens of companies rushing to tie down exploding expenditures on fuel with some being forced to operate generators 24 hours in the worst cases.

Fuel prices themselves have been rising torridly and a litre of diesel now stands at Shs2,220. As the prohibitive energy bills send companies into the lurch, even more gloom awaits them: the impact of the power crunch is reverberating across the entire economy and growth prospects for this Financial Year have been revised down by the ministry of Finance to 4.9 % from the last fiscal year's 6.2 %.

In effect, sluggish growth translates into lesser incomes and slower expansion or even stagnation in consumption expenditure, which adversely affects manufacturers of consumer products. The situation might even become harder for non-essentials like beer and other alcoholic products.Mbathi said UBL would struggle hard to remain on top "despite numerous economic and business challenges" and "maintain its leadership position in the country's brewing sector".

Still, the scaling down of personnel provides an insight into the growing devastation that the power supply plunge is wrecking on the nation's economy. Already a troubling inflationary bubble is sending most prices through the roof and pushing dozens of products beyond the reach of many.According to the Uganda Manufacturers Association, most companies have also been forced to halve their production while still meeting the same level of overhead costs; water, personnel, rent, communication and others.

The Executive Director of the Uganda Securities Exchange, Mr Simon Rutega, said the power-induced lethargy that is descending on the economy is expected to depress the growth of share prices, affect trading and stifle the tempo of activity on the exchange.

When companies' profitability margins recede, their share prices plunge. Uganda Breweries Limited is a subsidiary of the East African Breweries limited, which is listed on USE. Rutega explained though that the emerging descent in the broader economy has not registered on the exchange; the prices are still stable.

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