TRALAC - Trade Law Centre

Uganda: exports now seen as key to growth

Tuesday, 02 October 2007

Source: The Monitor (Kampala)

The Ugandan government has identified rapid growth of exports as key to lifting the country's flagging economic fortunes.

And for the last two years it has devoted profound energy to catalysing the nation's export trade; free land has been doled out, tax breaks lavished on investors, cheap loans dangled, and a whole gamut of other incentives rolled out to get businesspeople to export and bring in more foreign exchange receipts.

Those efforts, for now, appear to have been rewarded generously. Uganda's export earnings are currently edging towards a $2 billion mark, a terrific rise from a couple of years ago when earnings totalled just under a million dollars.

"The growth of our export sector," remarked the Finance Minister, Dr Ezra Suruma in his 2007/08 budget speech in June this year "is truly remarkable."

In the last financial year alone the value of our exports increased by 22 per cent to $1.7 billion from $1.4 billion the previous one.

Exports are exceptionally crucial to an economy like Uganda's that has an extremely weak domestic market. They also generate the biggest chunk of tax revenues and help in soaking up our exploding import bill.

And yet even as the nation's export trade is growing robust, vital aspects of it remain worryingly tenuous.

It is important to note for instance that although Uganda's export earnings have been on a steady upswing, it's largely because of the general world boom in commodities that has heated up prices and fattened the coffers of producers.

And although Uganda has taken steps to diversify her exports in the last half a decade, it still has a heavy dependence on a narrow basket of primary commodities: coffee, cotton, Tea and Tobacco.

In 2006, these four crops constituted more than a third of the total export receipts. A stark illustration of the superficial nature of the soaring fortunes of Uganda's export sector is tea. According to statistics compiled by www.ugandaexportsonline.com, the country shipped 30 tonnes of tea in 2002, fetching $31 million.

Four years later, in 2006, the country still exported the same 30 tonnes but, thanks to the sky-high prices, fetched a whopping $50 million.

The scenario is typical of all the other items. It was even grimmer for coffee. In 2006, Uganda exported 126,000 tonnes, which is much less than 2002 production levels, but earned $189 million, more than double what it earned in 2002.

But as is certain of such commodity bubbles, they are bound to bust and when they do Uganda's export earnings may come crushing like a meteorite.

President Yoweri Museveni has in the past stressed value addition as an imperative to push up earnings from exports and keep them competitive in the global marketplace.

But his efforts there have not yielded much success.

The African Growth and Opportunity Act (Agoa), which had offered a precious chance to Uganda to turn its much sought-after organic cotton into garments for export to the American market was upended when Tri Star collapsed suddenly.

Tri Star was the firm set up with enormous government subsidies to make apparels for the tariff and quota free Agoa market.

Nearly all the coffee shipped out, too, is in bean form. A couple of firms are producing instant coffee in Uganda but it's preponderantly sold in the domestic market with only a little sold in Kenya and Tanzania.

"We know there's that challenge. We need to do a lot more to move up the value chain but the task is overwhelming us. It involves multiple difficulties," said Ms Florence Kata, the executive director of the Uganda Exports Promotion Board.

With the value addition struggle foundering, Uganda will continue to export primary commodities whose prices are controlled by Western buyers and which are doomed to suffer cyclical booms and bursts.

Even where we have a fairly good competitive advantage-fruits, bananas, hide and skins, and beef- performance has been unimpressive, stymied by dysfunctional economic infrastructure like roads, waterways, and inland ports.

Craterous roads slow down the movement of cargo to the coast, an awfully long distance for landlocked Uganda, multiplying several times over the transportation costs and driving up the prices of the country's exports.

For Uganda, this hurdle is not easy to solve because the government can only work on roads on its territory.

But its cargo has to pass through Kenya whose roads (particularly in the Western part of the country) have deteriorated badly.

Ms Kata pointed out that the energy crunch, too, has hobbled export trade although its impact has been limited since most of the key exports have little need for power.

The manufacturers however have been reeling since the power shortages escalated at the beginning of 2006. Uganda exports a range of finished products mainly to Rwanda, Burundi, DRC and Sudan and to a limited extent Tanzania and Kenya.

Faced with frequent outages, Ugandan manufacturers bought generators but have had to bear exploding fuel bills, which ultimately show up in the final consumer prices.

That makes Ugandan goods more expensive than those from Kenya, which has a greater and more sophisticated industrial, might and has a more regular and cheaper supply of electricity.

Exports of services though are fairing much better. Uganda for example is emerging as one of the biggest sources of inexpensive labour, popularly called Kyeyo. Remittances from Ugandan labour émigrés are now estimated at over $700 million annually.

"This is so inspiring and we are embarking on massive, spirited efforts to market our educational services to the regional students," she said.

Across Kenya and Tanzania, youngsters are said to yearn for studying in Uganda largely on account of cheap private education and the lingering perception that the country offers the best quality university education in the region, a record that stems from the glory days of Makerere University.

If the government intensifies its focus on education and the marketing of Ugandan labour abroad-skilled and unskilled-Uganda's export sector may sustain its current vitality.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Uganda’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.