1 July 2008

Uganda: Competition Toughens Amidst EAC Integration

Kampala — Amid an impending head-on competition as the East African Community takes shape, Ugandan private sector players are negotiating a tough junction in readiness for an all out war.

As several businesses in the region begin to crisscross borders to establish satellite offices or branches, a number of Ugandan firms have equally set foot in neighbouring countries to firm up their positions.

Notably, Casements Africa - steel manufacturing, Mukwano Group of Companies - consumables and Simba Telecom have led the way.

In an interview with Daily Monitor about their regional expansion, Mukwano Group Spokesperson Ms Grace Nyamhunge said: "With the advent of the EAC we made a decision to have a manufacturing presence in a port city and Dar-es-salaam offered us the best alternative".

The company opened operations in Tanzania in 2003 and established a plant which manufacturers oil, soaps and plastics with a total annual sales volume ranging between $5 million and $10 million in Tanzania and created over 400 jobs for the locals.

The EAC trading bloc comprising Uganda, Rwanda, Kenya, Burundi and Tanzania, is currently in negotiations to set up a Common Market, after the Customs Union was signed in January 2005. Kenyan-based businesses have already taken a greater leap in establishing a regional presence to underscore their readiness for the competition with such firms like retail trader Uchumi, Bidco, Sameer Agricultural and Livestock Ltd., and several service based firms in Uganda.

Mukwano's expansion into Tanzania opened the group's finished products to markets beyond Tanzania, including Kenya, Malawi, DR Congo, Burundi, Rwanda, and Madagascar where it has established.

Simba Group of Companies - Uganda's pioneer distributor of Nokia phones and accessories - is in Kenya and Tanzania.

Although, Simba Telecom set foot in Kenya in 2000, the company boosts of $1.7 million (Shs2.9 billion) worth of investment in Kenya and currently controlling 8 per cent of the market.

Simba's Retail and Marketing Manager Jacqui Mwangi says the company has created jobs for close to 160 people.

Simba Telecom has had to wither the storm against the mammoth Safaricom dealers.

"This has led to unstable prices in the market as undercutting of prices can sometimes occur," said Ms Mwangi. She said the other challenge in Kenya for Ugandan businesses are Value Added Tax, travel documents and movement of people.

"It's a good initiative if we do market EAC as an investment destination and success of these companies into these markets means more revenue will be repatriated back into the Uganda and brand the country within the region and beyond," the Executive Director Uganda Manufacturers Association (UMA) Mr Gideon Badagawa said. However, Mr Badagawa said it is not a rosy move but some Ugandan companies are attracted to Kenya and Tanzania to cut on their costs on transport.

Dozens of non-tariff barriers keep cropping up and this has beset the business community that is on the look for softer markets with lower costs.

Ms Nyamhuge from Mukwano Group says that founder partner member states still have major challenges in regional integration especially when it comes to the link between national and regional policies on economic integration.

"The absence of a harmonized standards policy has affected especially manufacturers from accessing different markets," she said.

All too often regional policies are not followed through at national level and as such important deadlines of regional programmes are missed.

More so the disparity and multiple memberships overlap the trading. Tanzania is a member Southern Africa Development Community (SADC) and EAC and Kenya is member of EAC and Common Market for Eastern and Southern Africa (Comesa) this has impeded businesses from enjoying privileges especially in the tax cuts.

The fundamental challenge is that while these groupings were established with different mandates, lately there is significant overlap in the trade agendas between EAC, Comesa and SADC. As such, the problem of multiple memberships has become an issue.

All but three of the 20 Comesa states belong to more than one regional trade block while for SADC the exception is only one country out of the 14 member states.

For EAC and SACU there is no exception. Thus, as a result of the convergence of trade agenda the problem of multiple memberships has become an obstacle in terms of moving the trade integration projects of the three regions particularly as they all intend to become customs unions.

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