11 July 2016

Uganda: Who Gets More Benefits From Uganda-China Trade Dealings?

China's stash of cheap money might not be that cheap after all; at least that is the sentiment from some public figures, writes EDWARD SSEKIKA.

China's increasing footprint and influence in Uganda has come under serious scrutiny from a cross section of Ugandans. Over the years, Chinese state-owned as well as private companies have established operations in Uganda, providing employment opportunities.

Speaking at the State-of-the-Nation (STON) platform at Protea hotel recently, Prof Philip Kasaija, a lecturer of international relations in the department of Political Science at Makerere University, said Chinese presence in Uganda is a fresh breath and gives the country more room for funding.

The platfrom was organized by Advocates Coalition for Development and Environment (ACODE) to discuss the growing influence of China in Uganda and Africa at large.

EQUITABLE DEVELOPMENT

"If that relationship is well exploited, it can give us an alternative development - the Beijing Consensus, is based on innovation, equitable development and respect for sovereignty as opposed to the Western Washington Consensus that is based on market forces," Kasaija argued.

China's footprint in Uganda is visible, for in 2013, there were at least 360 Chinese companies operating in the country, participating in different sectors ranging from agriculture, construction, oil and gas, minerals to telecommunications. Some of the biggest Chinese companies here include China National Offshore Oil Corporation (Cnooc), whose investment in the oil sector now stands at $1.9bn.

Others are Guangzhou Dongsong Energy Group, with a mining lease for phosphates in Tororo district to produce fertilizers, and Sinohydro, which is building the 600MW Karuma power dam, among others.

Also, China has extended bilateral aid to Uganda. Such support includes the construction of the twin towers near parliament, offices of the ministry of foreign affairs, and Naguru hospital, among others. Zhao Yali, the Chinese ambassador to Uganda, used the event to boast about what China has done in Uganda.

"Just here, if you open the windows, you can see tangible results from China-Uganda relationship," Zhao said, making reference to the twin towers.

The support, he explained, is based on Chinese foreign policy that is rooted in respect for other countries' sovereignty.

"We provide grants with no strings," he said.

President Yoweri Museveni has often praised the Chinese for their culture of non-interference in the affairs of other countries. Weighing on the Sino-Uganda relations, Amelia Kyambadde, the minister for Trade, Industry and Cooperatives, said with a population of 1.4 billion people, China provides a market for Ugandan products.

These exports range from grains, raw hides and skins, coffee, tea and spices, among others. "Unfortunately, all these are either unprocessed or semi-processed. China provides a duty-free market for Ugandan products; but we are exporting too little. So, that is where our challenge is," she said.

Therefore, Uganda-China trade relations is asymmetrical in favour of China.

WHY IMPORT CEMENT?

However, in a candid manner, Kyambadde accused Chinese investors of carrying out poor business practices, such as importing construction materials, which are available in Uganda; and flooding Uganda's market with cheap, fake, and substandard products, especially electronics.

Kyambadde explained that Chinese projects have not provided enough jobs to Ugandans since there are many positions held by Chinese nationals that could be reserved for Uganda.

"Chinese companies should use our local goods and services. Why are you importing cement? We produce cement here. Why are you employing many Chinese on these projects? We have people here; so, we need to sort that out," she explained.

Ambassador Zhao conceded that, indeed, cement used in the construction of Karuma and Isimba is imported.

"This allegation that we [Chinese investors] bring in everything from China is totally wrong. On cement, there is a problem with quality of Uganda's cement. They [Chinese contractors] told me that is why they import cement from Kenya and sometimes from Turkey. We are building a dam, not a house," he said. He said they even import steel products because Uganda's steel is of poor quality.

"The companies have also told me that sometimes the quality is okay but very expensive; so, they have to go elsewhere. So, they want to use local products but the problem is quality and price," he said in defence of Chinese firms. He said it would be very expensive to employ many Chinese on Uganda's projects.

CHEAP LOANS

Felix Okot Ogong, the member of Parliament for Dokolo, said although Chinese loans appear attractive because of the low interest rates, they are expensive in the long run. He said when Uganda acquires loans for infrastructure projects from Exim bank, the lender ensures that contractors come from China, which increases capital flight.

"We get a loan from China, get a contractor that is Chinese, materials from China and everything is controlled by the Chinese. So, that can't be mutual benefit cooperation," Ogong said.

However, Zhao Yali said Chinese loans are the cheapest on the market.

"Our loans are less than two per cent per annum; that is cheap money. Where can you find such cheap money? You can go to the IMF, but you can't find that cheap money," he explained, adding: "Because the money is coming from China, the investor also has to come from China."

Unlike loans and aid from Western institutions like International Monetary Fund (IMF) and World Bank, that come with strings in terms of democratization and good governance, the Chinese strings are purely economic, mainly ensuring contractors are from China. Kyambadde disagreed with Okot Ogong that Chinese loans are expensive in the long run.

"We negotiate loans for some of these projects; they go through cabinet and parliament. Let us blame ourselves. Why do we approve these loans that we now call expensive? We are all responsible," she said.

Dr Arthur Bainomugisha, the executive director of Acode, said that despite the challenges, China presents a perfect market for Uganda, which the country should exploit.

Issa Sekitto, the spokesperson of Kampala City Traders Association, implored government to rein in the Chinese involved in petty trade. Kyambadde said that recently her ministry conducted a swoop and arrested around 600 Chinese involved in petty trade such as selling fruits, drinks and cosmetics. She said they were supposed to be deported but they bribed their way out.

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