Kampala — INCREASING numbers of Ugandans watch South African TV, enjoy South African music and radio, eat South African food and are kept connected with their families through the Ugandan subsidiary of South Africa's telecom gaint MTN.

MTN is just one of the several South African firms which have penetrated the Ugandan market. Another prominent example is Stanbic Bank, which controls roughly over 50% of the banking industry.

Other South African companies making a fortune in Uganda include Engen (engaged in petroleum business), South African Airways (controlling a sizeable market share in the commercial aviation industry) and Game stores (commanding the largest share in wholesale business).

At the moment, over 50 South African firms are officially doing business in Uganda with most of them stabilised. They include Eskom (power generation/contracting), Mateos and Steers (fast foods), Mr Price (retail business), Protea Hotels (hospitality) and SAB Miller (brewery).

South African firms have also ventured in providing security services, construction, marketing and communication services.

Enter Nigeria, Kenya into Ugandan markets

The excellent performances of big boys like MTN and MultiChoice, the rousing reception given the new comers in the market and the limitless potential of the market has certainly lured more business from other parts of Africa to Uganda.

Already, the Nigerians have aggressively joined the fray in the financial sector with three banks registering, these are Bank PHB, United Bank for Africa (UBA) and Global Trust Bank.

Kenyan banks already in the market include Kenya Commercial Bank (KCB), Equity Bank and Fina Bank. This is on top of other businesses owned like aviation, security services, food chain stores, communication and trade among others.

Doris Nakiwala, the Uganda Investment Authority deputy director of communications and public relations, said more investment from Africa worth $644m are planned this year in tourism, mining, energy, construction, agriculture and trade and the service sector.

Sub-Sahara Africa economy grows

As economies in Sub-Saharan Africa gain strength, companies from other developing countries are rapidly increasing their investments in the region.

Supporting such cross-border investments and helping to increase the capital, technology, management expertise and jobs that flow to the region are key components.

South African companies are a good example of the trend towards regional investment between emerging markets.

It is hardly surprising that companies from outside the region are expanding in Sub-Saharan Africa. In recent years, many Sub-Saharan African countries have dramatically improved their business climate, making them much more attractive investment targets.

Governments have also implemented better macroeconomic policies and shown a greater commitment to the private sector, helping to stabilise exchange rates, hold inflation in check and enable banks to more easily provide long-term financing.

Economic experts say improving the trade-related business climate would attract firms into the export market and boost industrial productivity.

Stephen Bailey-Smith, the Standard Bank Group head of Emerging Market Strategy, explained that the increased cross-border trade was due to internal and external factors.

The internal factors, he pointed out, are: less wars, better macroeconomic management (fiscal and monetary) and improved political environment.

"The external factors include the extended period of low inflation and high economic growth, huge investment confidence globally and significant higher prices in commodities," he observed.

The other factors accelerating Africa-to-Africa trade include the trend of the US dollar weakness, tremendous search for yield, including frontier markets and concerted international aid effort, especially bilateral and multilateral debt relief.

Local investors unhappy

However, local investors and businessmen have not been able to mint money from cross-border trade because their cost of production is high.

For instance, the roads are bad, power supply epileptic and clean water a luxury. Worse, corruption has been accepted as a way of life.

As if the deplorable state of infrastructure is not enough of a disincentive, the development bank has failed and the commercial banks are reluctant to grant long-term loans.

The flooding of the market with counterfeit products limits the market for legitimate business entities, undermining investment and killing innovation in the long run.

That has made it difficult to have continental tigers emerge from Uganda. Many of the companies are contented to survive and remain local champions, while a few have managed to extend their activities to one or two regional states.

Economic experts argue that large foreign companies are in a much better position that local ones to weather the frustrations. They have easier access to money and they can negotiate exemptions, incentives and tax breaks from government that local companies can only dream of. Bigger companies can also invest in understanding and navigating stringent regulations.

Uganda's outlook

Uganda's Gross Domestic Product, according to Bailey-Smith, will continue to grow at an average of 7% as the shock of the global economic crisis was relatively muted adding that the current account deficit is easily financed and the fiscal policy is still conservative.

Barriers to trade

THEY argue that African trade flows could increase substantially if African countries were to improve trade-related capacity building indicators along three dimensions: institutions, infrastructure and human capital.

Michael Cook, a former UK High Commissioner to Uganda, wrote that; "On average, sub-Saharan African countries impose a 34% tariff on agricultural products from other African countries and 21% on manufactured goods."

"International agencies estimate that eliminating such tariffs would generate immediate gains to sub-Saharan economies of $1.2billion," he stated.

"Indeed, 70% of all trade barriers are imposed by governments in poor countries on people in other poor countries. The reason they remain poor, unlike, say, India after it improved some of its trade policies is the deliberate obstruction that undermines people's initiative and exchanges."

Cook pointed out that regional trade faces more than formal barriers. Exporters and importers usually face bewildering and inert bureaucracy, infected by corruption. "And the infrastructure, especially roads, is generally so poor that, for example, in East Africa, transport can add three quarters of the value of the exports carried," he explained.