LAST week, Ugandans were jolted to the hard reality that comes with living from hand to mouth.

The street-running battles and smouldering scenes in Kenya brought home to Ugandans the realisation that unlike having chaos in Rwanda, DRC or southern Sudan, any minimum instability in its eastern neighbour brings catastrophic economic tremors.

And as Business Power reporters ELIAS BIRYABAREMA, ISMAIL MUSA LADU & DOROTHY NAKAWEESI found out, Kenya's own losses could be riding way into millions of dollars from violent disruptions across the country; Uganda however almost came to a standstill by the end of last week as the crisis exposed the fragility of the nation's economic foundations.

The immediate eye opener was the scarcity of fuel leading to skyrocketing of fuel pump prices by more than 300 per cent at the peak of the scarcity last week as the government frantically tried to explain away the situation as temporary.

Local airlines operating internal flights were ordered to halt business to save on jet fuel, buses plying across the boarder into Kenya stopped operations, thousands of tonnes of goods destined to Uganda remain trapped in Kenya and transport fairs have since tripled across the country.

Already, the Uganda transporters and the entire business community are reeling, distressed by the price of fuel in Kampala.

Several Uganda importers said they had decided to delay clearing their goods through Mombasa seaport until the violence in Kenya ends. Those whose goods were caught up in transit have sought for safe havens in bonds and stores in Nairobi, according to a Kampala City Traders Association (Kacita) official.

Kacita Spokesman, Issa Ssekitto described the current situation in Nairobi and other cities as bad for the Ugandan exporters and importers.

"I personally had a truck in transit to Uganda. It was loaded with goods so I had to keep it in store for a while until chaos in Kenya ends," said Mr Sekitto.

All Nairobi/Kampala bound busses have been halted causing massive loses to the operators and inconveniencing travellers across the region.

"All buses that are going to Nairobi are here because of safety concern and fuel prices" the Manager of Falcon buses, Hajji Omar Selim said.

Business Power visited several bus stations and found them deserted with operators waiting in idleness for the situation in Kenya to improve.

Akamba, Gateway, Buscar, Falcon and Regional bus offices all looked deserted save for some disgruntled Nairobi bound passengers around the offices.

These busses have a capacity of 47-59 passengers and the fares to Nairobi ranges between Shs25,000 to Shs30,000. Close to 20 buses cross into either sides of the boarder daily.

Leaders react

"I can not tell you that we can open our Kenya route tomorrow or the other day because it all depends on the how quickly the situation gets back to [normal]," said Hajji Selim.

Business leaders have expressed concern about the situation but remain hopeful that Kenyans will amicably resolve the situation for a quick return to normal operations.

"We don't want any disturbances in the region because this is the time we are trying to market the region as both a local and FDI destination," Dr James Mulwana Chairman Private Sector Foundation Uganda said. Adding that; "the business community in Uganda wishes Kenya peace and stability because that is our life. We hope and pray that peace will prevail and we forge a head."

Kenya's turmoil is also a disruption of regional economic harmony given its strategic importance to the region.

According to Kacita spokesperson Issa Ssekitto, 90 per cent of Uganda's imports pass through Mombasa Port and 78 per cent of exports pass through the same route. Kenya earns about $200,000 (about UShs337 million) in taxes from goods destined for Uganda daily.

The Kenyan economy is also the largest in the region and provides several resource linkages to industries cross the region.

But even more frustrating is the extent of the damage that Kenya's post-election violence will wreak on the entire East African Community region's international business image.

For a region struggling to court more high-tech Western investors, Kenya's sudden collapse into a civil-war like state of affairs will come as a crushing development. It could extinguish any hopes in those investors that had been made to believe that Kenya and much of the East African Community had been set firmly on a path to a mature democracy and a glorious economic future.

"We are very concerned with what is happening in Kenya. Kenya is the region's biggest manufacturer and source of FDI in the region. This is a threat to both local and foreign direct investment. Uganda, Rwanda and Burundi are landlocked and being served by Mombasa port our transport system totally depends on Kenya," Dr Maggie Kigozi Chairperson of the East African Association of Investment Promotion Agencies, said.

Kenya's Business Community reported that the government there was losing $31 million (KShs2 billion) daily in missed revenue, according to Business Daily.

However the final cost to the entire economy of Kenya-resulting from the property destruction that raged on all across urban Kenya and the long term impact from the violence-might run into several hundreds of millions of dollars.

For example, the Nairobi Stock Exchange plunged 20-share index plunged 277 points as violence shrouded Kenya, with the equity market reportedly losing $629 million (KShs40 billion) in "panic selling," by small investors.

Beyond the long-term fall out from the staining of region's business image, it might take time for Uganda to recover from the fuel scarcities and other commercial disruptions spawned by the Kenyan turmoil.

No contingency plans

It is in Uganda's own vested interest that Kenya is peaceful and returns to normalcy immediately.

The question though now is how and why has the political leadership in Uganda been reluctant develop a fuel contingency plan for an economy that is landlocked?

Just two days into the post-election meltdown in Kenya were enough to get Uganda choking on fuel scarcities - initially caused by shrewd speculators - and its economy slowed to a near standstill, prompting observers to wonder whether the Uganda government keeps any petroleum reserves.

Officially, Uganda's national petroleum reserves are in Jinja but the government has never stated the size of that fuel, when and how it was accumulated-or whether in fact there's any fuel.

Almost as soon as the conflagration in Kenya started on Sunday, December 30 2007, fuel scarcities quickly spread across Kampala and, soon, the entire nation and since then there has not been any release of fuel onto the market by the government from its supposed reserves salted away in tanks in Jinja. At a press briefing on Wednesday December 2, Energy Minister Daudi Migereko dodged persistent queries from journalists on whether the government did indeed posses any petroleum reserves.

"It's actually our reserves that have kept the situation normal otherwise it would have been bad," he said.

But the situation is actually awfully bad, with petrol selling between Shs6,000 to Shs10,000 at some of the pump stations that still have some stocks. Across the world governments invest vast amounts of money in stockpiles of fuel which are kept away in secretive and highly secured locations, drawn on only when normal supplies are critically disrupted, directly threatening the economy.

The United States established its Strategic Petroleum Reserve (SPR), with a capacity to hold 700 million barrels, in 1975 after OPEC drastically cutback supplies and sharply drove prices up-a series of underground domes located in the states of Louisiana and Texas. They're currently said to hold about 660 million barrels

Petroleum reserves are even more imperative for landlocked countries like Uganda whose fuel supplies directly depend on Kenya.

The alternative routes are from Dar-es-salaam through Mutukula in south-western Uganda or from the port of Mwanza to Port Bell in Kampala. However both routes are considered longer and less efficient.

Currently the governments of Uganda and Tanzania have agreed to let some supplies come in via Dar-es-Salaam but Finance Manager of Total Uganda Limited, Mathieu Le Bigot said the Tanzanian routes will take not less than 10 days to deliver any fuel.

But even if sufficient supplies came in through Tanzania, pump prices, he suggested, would rise considerably because of the higher costs of transport the fuel.

"Because of Uganda's position in Africa, you can not bring fuel through DRC Congo or Sudan, the only door is through Mombasa-Kenya," he said.

According to him, several Total Uganda trucks loaded with fuel are trapped by the on -going violence in Kenya and that there is no any other way to get it out of there without passing through Malaba or Busia, routes that are still vulnerable to attacks by gangs.

"We have fuel in our trucks but nobody can drive it through here because we fear to be attacked," he said.

Although Mr Migereko had promised that 155 fuel tankers would arrive in the country by end of the week, he was on the defensive later in the week.

"The fuel which has so far entered the country cannot address the current crisis and meet the high demand. We must get fuel all the time. We need a continuous flow of fuel to be able to make a difference. I urge the public to bear with the situation as the government tries to ensure that adequate quantities of fuel are brought into the country," he said.