KAMPALA — In 2018, Uganda for the first time in economic history exported more goods to Kenya than any other country in the East African region. Uganda has for long had a sizeable trade deficit with Kenya, at one time hitting the Shs500 billion mark. However in the five years running to 2018, the country decreased this deficit with East Africas largest economy.
For decades, Uganda has been the biggest consumer of Kenyan goods. But thanks to import substitution resulting from the factories springing up in and around Kampala which saw a major cut in goods coming in from Nairobi, this rate has decreased marginally in recent years.
According to the Central Bank of Kenya, Uganda exported goods worth Shs1.1 trillion (Ksh30.21b) compared with imports of Shs965b (Ksh26.08b), resulting in a trade deficit of Shs153b (Ksh4.13b) in the period under review.
Ugandas exports to Kenya in the period running between January and September 2018 stood at Shs1.5 trillion compared to Shs908.7bn in 2017. In comparison to other neighbours in the region, records show that Uganda exported goods worth Shs1.5 trillion to Kenya compared to Tanzania and Rwandas Shs820b and Shs499b respectively.
It came as no surprise that the biggest export commodity from Uganda is an agricultural product. Uganda accounted for 70.36 per cent of the nearly 419,548 tonnes of Kenyas maize imports, an equivalent of about 4.66 million 90-kilogramme bags, in the five months leading to May 2018, according to data from Kenya Revenue Authority (KRA).
Uganda also overtook South Africa as the largest seller of goods to Kenya in Africa in the review period with the latters invoice expanding to 17.07 per cent to nearly Shs1 trillion (Ksh28.37b) compared with a year earlier as reported in the East African newspaper.
In 2017, imports from Kenya fell to Shs2.28 trillion (Ksh61.82b) from Shs2.3 trillion (Ksh62.17b) in 2016 and Shs2.5 trillion (Ksh68.41b) in 2015, data from the Central Bank of Kenya indicates.
Big Kenyan brands such as OMO and other product brands has over the last couple of years been reduced in market share locally made products which swept the market and grew their sales by the billions.
Local manufacturers like Bidco Uganda launched products and invested heavily with the objective of changing the attitude of Ugandans towards imported products while placing on the market a cheaper option.
Other local giants like Mukwano also introduced products like detergent Nomi and MAMA soap, which have themselves taken leading positions in market share.
According to analysts, BIDCO Uganda must have invested in market research that pushed Magic detergent to the top. The company is said to have invested US$1million (about Shs3bn) in marketing and promotion, pundits say.
Targeting smaller households who use their products on regularly, the manufacturers used the door-to-door approach which endeared the product to the consumers.
Brand loyalty, which could have kept products such as OMO and some toothpaste brands on top of the game, seems to have given way as the customers paid more attention to price and quality.
While addressing the nation on the Covid-19 crisis in March, President Yoweri Museveni said that the crisis poses an opportunity for the country to come out as not just self-sufficient, but also as a major exporter of industrial products.
At the onset of the Covid-19 pandemic earlier this year, there was wide spread speculation across the world about the possibility of a shortage of essential products. The speculation was mostly driven by the fact that a lot of consumer products both in the developed and developing world are made in China, which is where the pandemic first hit.
There were media reports of shoppers in the US and UK scrambling for products such as toilet paper, with a video showing shoppers fighting in an American supermarket over the last rolls of toilet paper on a supermarket stand. Daily Mail in March reported that police is Sydney, Australia were forced to handout toilet paper after panic buying reached what they called dangerous levels. Police stepped in and participated in handing out rolls of toilet paper to shoppers.
Ahead of the UAE and Kenya, in second and third place respectively, China accounts for the majority of Ugandan imports, with 15% of all imported products in Uganda coming from China.
In January, Ugandas imports from China took a Shs6 billion dip, breaking a decades-long import bill. Statistics from Bank of Uganda indicate that Ugandas imports stood at Shs400 billion in January, down from Shs406 billion the previous month. This drop, according to analysts was expected to go lower due to the novel corona virus pandemic.
But even before these figures took a dip resulting from the pandemic, Mr Museveni had remained a strong proponent for import substitution. In a bid to gain ground in trade surplus with the rest of the world, Mr Museveni has preached African exports to the rest of the world, with emphasis on China. Several narratives quote the President as saying asking China to import more agricultural products from Africa, arguing that the continent and Uganda particularly imports a lot from China including goods that could be produced locally.
The government of Uganda, under the Ministry of Trade and Industry has taken steps towards institutionalizing Mr Musevenis will by introducing the Buy Uganda, Build Uganda (BUBU) model for development. Under the BUBU policy, the government encourages local entrepreneurs to produce locally and to use as many local inputs in production as possible.
As Uganda bids to become a leading exporter in the current times, there is need to address a number of issues according to a study by Linda Calabrese, a research fellow with ODI (www.set.odi.org). First the country needs to address its dependence on remittances and aid which help it cover its huge import bills. Calabrese notes that Uganda cannot look at cutting its imports at the time since the imports are important in a country that is looking at industrialization. Secondly, Calabese notes that while exporting is a wise direction to take, Uganda should look at diversifying her export basket. Uganda should not try to export the same agricultural products (as President Museveni seems to suggest). Instead, it should aim to diversify its export basket. Ugandan businesses should try to produce and export a wider range of goods, including manufactured ones.
According to the researcher, goods like garments, footwear, small electronics and packaging, which Uganda could produce at the moment are already produced efficiently elsewhere, especially in China at a lower cost. While other like furniture and construction material are too bulky and their cost would be high due to transportation costs.
One step that country needs to take as soon as yesterday in its bid to industrialization is to expand its production capacity. The President in his recent address to the nation on the Covid crisis, stated that he had allocated money to import machinery and equipment. The President has also in the past invited investors from around the world. At the same address he noted that between government and the established industries, they have struck deals to specialize in production of needed commodities.
Researcher Calabrese advises that governments strategy to transform the economy, create jobs and improve livelihoods should focus on transforming production and raising exports, aiming for European and African markets on top of the Chinese.
Uganda would need to look beyond agribusiness and extractives, and consider whether the country can be a more active participant in global and regional value chain production, she writes, adding: The government of Uganda could increase its efforts in investment and local production promotion and aftercare, as well as in building better infrastructure to attract and work with other investors from China and India.
However, we need to start somewhere and what better place to start than where we are right now. Ruling NRM party Entrepreneurs League Chairman, also the president Uganda National Chamber of Trade and Investment (UNCTI), Dr Robert Mwesigwa Rukaari recently stated that Uganda is best positioned to become Africas food basket.
Working with several departments of government including the Operation Wealth Creation Programme in the Office of the President, the Office of the Prime Minister and the UPDF, the UNCTI is mobilizing private sector players to work with government is laying strategies for food security in the country. According to Rukaari, the strategy involves building silos and food stores across the country which will ensure that beyond Covid-19 the country has enough food to feed its people and also export.
In agreement with the strategy on food security, Private Sector Foundation Uganda board chairman Dr Elly Karuhanga recently stated that the road to recovery of the countrys economy after the crisis is in ensuring food security. Our farmers have done a good job ensuring that there is continued steady supply of food even during this crisis. But what happens after the food is produced is most important. Government must work with the private sector to build silos and store this food so that it is not wasted, Dr Karuhanga said during a recently ended E-Conference on strategies to revive Uganda’s economy after the Covid-19 crisis.