Foodstuffs dominate Uganda’s exports to East African markets

Tuesday February 26 2019

Traders offload eggs from Uganda at a whole sale shop in Kakamega.

Traders offload eggs from Uganda at a whole sale shop in Kakamega. FILE PHOTO | NMG 

By BERNARD BUSUULWA
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Foodstuffs dominated Uganda’s exports to regional markets in 2018, with farmers enjoying improved yields due to favourable weather.

However, manufacturers faced weak demand for their products even as recent political developments in the Democratic Republic of Congo and South Sudan give hopes of stronger demand for industrial products this year.

According to Bank of Uganda data, total exports to Kenya rose to $719 million by the end of December 2018 compared with the $551.06 million recorded in 2017 with maize grain topping the exports.

In addition to maize, Uganda exported beans, simsim, pineapples, watermelons and eggs in the second half of 2018.

But exports to the Democratic Republic of Congo fell by 10 per cent to $450 million last year, a declined partly attributed to the prolonged Ebola epidemic and election uncertainty dating back to 2016.

Fresh conflicts, especially in eastern DRC — a traditional entry point for Ugandan products compounded the problems.

Total exports to South Sudan increased by five per cent to $405 million by close of December 2018, a trend partly attributed to slight increases in global oil prices and higher government spending in Africa’s youngest country.

The return of relative peace after signing of a pact and a symbolically significant handshake between political rivals President Salva Kiir and former vice president Dr Rieck Marchar helped reopen the market.

South Sudan relies on oil revenues to finance more than 90 per cent of its budget but current efforts aimed at diversifying its resource base are yet to yield significant results.

Exports to Rwanda increased from $180.8 million in 2017 to $212 million in 2018 while total exports to Burundi dropped from $42.94 million to $40.69 million over the same period.

Maize exports

Overall, maize exports grew from $95.91 million in 2017 to $106.81 million in 2018, while beans brought in $99 million up from $84 million during the same period.

Simsim exports rose from $17.3 million in 2017 to $26.6 million in 2018, the data shows.

“Uganda’s exports to South Sudan increased by about five per cent partly because of modest growth in oil revenues and higher government expenditure but the bulk of these exports were food items.

“Similarly, Uganda’s exports to Kenya increased to more than $700 million in 2018 due to huge volumes of maize and other cereals imported by Kenya,” said Dr Adam Mugume, BoU’s executive director for research.

Challenges

Declining demand for manufactured products in the regional markets complicated matters for Ugandan industrialists, who are struggling with falling consumer demand in the local market too.

Changing business trends that favour big, politically connected firms in key regional markets are likely to lock out small businesses seeking to exploit cross border trade opportunities.

“Much of the export volumes directed to South Sudan, DRC and Kenya were composed of food items while hardware products and other items registered low demand in those markets last year.

“But local farmers are getting cheated by Kenyan traders who are buying immature crops in the gardens instead of waiting for harvest time. Many farmers are usually cash strapped before harvest time and are willing to take any cash that comes their way.

“However, this approach to business tends to compromise the quality of our farm produce. Business conditions in Uganda are still tight and our cashflows are getting thin as we struggle to remain afloat,” said Deo Kayemba, chief executive of East African Roofing Systems Ltd, a manufacturer of iron sheets and steel bars.

“As a result, we have scaled down on our manufacturing operations and suspended new bank borrowing for two years to enable us steer the company towards recovery

“In spite of those challenges, I feel optimistic about economic recovery in South Sudan and DRC this year after the return of Riek Machar to Juba and the peaceful transfer of power from Joseph Kabila to Felix Tshisekedi in DRC,” Mr Kayemba added.

According to company records, East African Roofing Systems exported goods worth $2 million to South Sudan in 2018 while exports to DRC are estimated at $600,000 during the same period. The company exported barbed wire valued at $100,000 to Burundi last year.

“The political uncertainty in DRC, the Ebola epidemic and fresh fighting in eastern Congo severely affected our sales turnover in that market. Most of South Sudan’s imports from Uganda were made up of food items but we saw less demand for hardware products last year.

“This forced us to focus more on Rwanda but rising production of local steel products in that market has affected demand for imports. We are seeing more steel manufacturing plants being set up in Uganda this year and we believe our export volumes need to grow to about 50 per cent of total output so as to enable us contain new rivals in the industry,” argued Stuart Mwesigwa, business development manager at Roofings Group Ltd.

High lending rates also affected some manufacturers last year alongside declining consumer demand experienced in many sectors.

“The South Sudan trade window has been captured by some big political interests that have pushed most of the small traders to the sidelines in recent times. However, demand for stationery products from South Sudan has dropped sharply since 2018, largely because of the persistent war situation,” noted Edward Kigongo, chief executive of Ken Group Limited, a supplier of stationery materials.

“Trade between Uganda and Rwanda has also slowed down because of sensitive political concerns held by Rwandan traders towards Ugandan products during times of hostile bilateral relations.

“Though the exchange rate was largely stable during the second half of 2018, falling consumer demand and fairly high interest rates of more than 18 per cent have made life difficult for many of us,” added Mr Kigongo.

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