bank of uganda remarks by louis kasekende ( phd ) deputy governor, bank of uganda at the 9th annual uganda top 100 mid - sized companies ’ awards - gala dinner hotel africana, kampala november 10, 2017 executive director, uganda investment authority country leader, kpmg uganda md of monitor publications md of dfcu bank ceos / mds of icea general insurance, vodafone & south african airways invited guests, ladies and gentlemen, let me begin by thanking kpmg for inviting me to this gala award dinner for the top 100 mid - sized companies in uganda and also to commend both kpmg east africa and the nation media group / monitor publications for this laudable initiative. it is laudable because this section of the business community – the mid - sized companies – is crucial for the future growth and development of our economy, as i will explain in my remarks tonight. the top 100 mid - sized companies will not only offer recognition to outstanding corporate achievements but also provide valuable information about this section of our economy. the main reason why mid - sized companies are so important for economic development is their productivity. sustainable increases in the per capita incomes of a country require sustained growth in labour productivity. uganda cannot hope to reach middle income status without a very substantial rise in labour productivity. in a developing country like uganda, the main source of labour productivity growth is the modern business sector, for reasons i will discuss shortly. the modern business sector in many respects is conterminous with medium sized and large companies. in uganda, there are few large companies, so the modern business sector of our economy mainly comprises mid - sized companies. the bank of uganda ’ s annual private sector investment survey ( psis ) provides valuable information on this sector of our economy. the 2016 psis ( which is available on our website – www. bou. or. ug ) provides data derived from 630 companies which responded to a questionnaire ; and these companies comprise the majority of the largest companies in uganda. more than 70 percent of the companies covered by the psis had an annual turnover within the thresholds for defining a mid - size company for the purposes of the kpmg gala awards ; i. e. a turnover of between shs 360 million and shs 25 billion. the data in the psis enables us to estimate the average labour productivity, defined as value added per worker, of the sampled 630 companies. in 2015 this amounted to shs 38

represented the lowest annual average rate of inflation in south africa for the past 24 years. ominous signs developed over the past two years, however, with the rate of increase in bank credit extension escalating again to 18. 7 per cent in june 1996. the rate of increase in the m3 money supply also rose to 16 per cent in october 1996, while inflation gradually crept up from a low of 5. 5 per cent over the twelve months up to april 1996, to 9. 4 per cent over the twelve months up to december 1996. the current stimulus for inflation emanated mainly from the depreciation of the rand last year, but there is a danger that, if not checked at this stage, it could easily be converted into a new cycle of a continuous rise in the rate of inflation. the reserve bank was therefore forced once again during the past year to pursue a more restrictive monetary policy that led to an increase of approximately 3 percentage points in the level of interest rates. towards the end of 1996, the more restrictive policies began to produce results when both the rates of increase in bank credit extension and in the money supply slowed down. over the twelve months up to december 1996, bank credit extension to the private sector rose by 15. 7 per cent, and the m3 money supply by 13. 7 per cent, both marginally down from the peaks established earlier in the year. inflation is, however, still creeping upwards and it will take some time before the full effect of the depreciation of the rand will work itself out. in the meantime, it is of great importance that all other inflationary impulses in the economy, such as excessive rises in government expenditure or real wage rises in excess of productivity increases, and of course, a continuation of the excessive rates of increase in the monetary aggregates, must be avoided. the depreciation of the rand can bring many benefits for economic growth and development, provided the advantages for international competitiveness will not be dissipated very quickly by rising costs of production and a rising rate of inflation in the domestic economy. the year 1997 is indeed a testing period for the reserve bank and for the monetary policy applied by the bank. should the bank fail in its efforts to protect the value of the currency at this stage, the goals set by government for economic reconstruction and development, and the implementation of the government ’ s strategy for growth, employment and redistribution will not be attainable.