Traders in Kampala, Uganda began a three-day strike Wednesday over high interest rates that they say are crippling their businesses.
Many shops in central Kampala are closed, and the Ugandan capital’s normally bustling streets are eerily quiet. Wednesday was the first day of a planned three-day strike by the Kampala City Traders’ Association, or KACITA, over a recent hike in interest rates that they say is making it difficult for them to pay off their loans.
In November the Ugandan Central Bank raised interest rates by 10 percentage points - up to 23 percent - in an effort to curb inflation. Now commercial banks are charging upwards of 30 percent interest on both new and existing loans, making it more difficult for borrowers to service their debts.
“It is unfortunate that this is what we are resorting to today," said KACITA spokesman Issa Sekitto. "The issue is, if we can bear with the deeply high interest rates on the new loans, we might not be able to bear the same on the running loans because of the negative impact that it is going to have on our businesses tomorrow, today and currently.”
The trade organization, which boasts over 40,000 members in the Ugandan capital, is demanding both that interest rates fall, and that banks return the money they have already collected from borrowers paying the higher rates. KACITA is urging its members to withdraw all their money from commercial banks starting on Monday, a move intended to cripple the banking sector and force it to capitulate.
“In the banking sector we are stakeholders, because we need their services and they need our money," he said. "If we remove this money we think banks can come to their senses, and they know that things might not run.”
The Central Bank has argued that higher interest rates are necessary to control the rampant inflation that has been driving up prices over the past year. The inflation rate peaked at over 30 percent last October, although by December it had fallen to 27 percent. Some economists credit this drop to the Central Bank’s tight monetary policy, including higher interest rates.
KACITA members met with government officials and the governor of the Central Bank, Emmanuel Tumusiime Mutebile, earlier this week. But the talks failed to produce an agreement.
At the meeting, Mutebile assured traders that interest rates would fall once inflation drops. Trade Minister Amelia Kyambadde pleaded with KACITA to choose continued dialogue over industrial action.
“I appeal to KACITA, I appeal to everybody to go in for dialogue and consultations, because I think that it is our recommended option,” said Kyambadde.
But one small business owner, whose shop rents out audio equipment in Kampala, says she is striking because she is afraid that the new interest rate on her loan will drive her out of business.
“Us businessmen, we know that if I had a loan, and I am paying, let’s say, 500 a month, now I will be forced to pay one million because of inflation and because of the rate that is increased," she said. "So that’s why we are asking 'Why, really why?' Me, by the time I got money I knew the rate, and I knew that I would afford [it]. But now I can fail to afford it because of that high rate they have brought. It affects us all.”
The striking traders have the support of teachers, some parliamentarians and even the mayor of Kampala. KACITA’s leaders have said that if their demands are not met after the three-day strike, they will meet on Saturday to decide on their next course of action.