When Profit Takes a Cut, Can Ugandan Businesses Grow by Selling for Less?

What the report says

Nile Post reports that Ugandan businesses are weighing whether to lower prices and accept slimmer margins as the shilling’s depreciation pushes up import costs. The piece frames the issue as a trade-off: firms can try to protect profit on each sale, or keep goods affordable in hopes of retaining customers and selling more volume. The discussion is centered on comments from Dr Adam Mugume, the Bank of Uganda’s executive director of research, who said some businesses may need to reduce margins to stay competitive.

The article says the pressure is especially acute for importers whose foreign-currency liabilities and future plans have been disrupted by a weaker shilling. It explains that raising prices can preserve margins but may reduce demand, while absorbing some of the cost increase can help businesses hold onto customers in a competitive market. However, the report stresses that this only works if higher sales are enough to offset the lower return per item.

Using a simplified example, Nile Post illustrates that a business cutting its gross profit per item would need to increase sales volume substantially just to match previous earnings. It notes that lower prices can also help companies win market share, improve supplier leverage and spread fixed costs, but warns that absorbing too much cost pressure can leave firms unable to restock or pay workers.

The broader context is Uganda’s wider economic adjustment to exchange-rate pressure and inflation risks. The article also mentions, as separate background, that tighter monetary policy can make local investments more attractive. Overall, the piece presents pricing as a survival and growth decision for businesses facing higher import costs, rather than a simple choice between raising or lowering prices.