14 July 2016

Uganda Loses Shs3 Billion Daily in South Sudan Conflict

Photo: Fred Muzaale/Daily Monitor
The war in South Sudan has had a negative impact on trade in commodities such as foodstuffs.

Kampala — Uganda is losing about $1 million (Shs3.3 billion) every day since war resumed in Juba, the South Sudan capital last weekend

Uganda is losing about $1 million (Shs3.3 billion) every day since war resumed in Juba, the South Sudan capital last weekend.

According to the traders' leadership in Kampala, this figure is a very conservative estimate, considering that it does not factor in losses inflicted on life and properties.

Since Friday last week, the situation in the world's newest country has been dangerous following renewed fighting in Juba, where the majority of Ugandan-owned businesses are concentrated.

Speaking in an interview on Tuesday, the chairman Kampala City Traders Association (Kacita), Mr Everest Kayondo, said South Sudan, a key export market for Uganda, has for the last five days alone been depriving its members and affiliate organisations an opportunity to transact business worth at least Shs3.3 billion a day.

"Our calculation indicates that each time there is such a massive interruption on our businesses in South Sudan, we lose about a million US dollars a day. So each single day our businesses are interrupted, as a country we lose an opportunity to make at least a million US dollars," Mr Kayondo said.

He continued: "If things continue this way, it will not be long before the economy begins to feel the pinch. However, just like the government has said, we don't encourage our members to continue trading in South Sudan until stability is restored."

Evacuation plans

As if this is not bad enough, many Ugandan traders are trapped in the war zone, with the government planning to have them evacuated as soon as it is practically possible.

In a news conference on Monday at the government media centre in Kampala, Trade minister Amelia Kyambadde, while talking about the status of Uganda's traders in South Sudan in the wake of the renewed fighting, said about 30 trucks will be dispatched to evacuate Ugandans caught up in the conflict.

"The Juba airport is still closed and the main road to Nimule is also closed. However, security has gone in to clear the road and send in 30 trucks that are going to evacuate Ugandans through the eastern route of South Sudan," she said.

Ms Kyambadde also issued a warning, barring Ugandan traders from doing business in the neighbouring country saying it not worth the risk now.

Leading export destination

According to data from the Trade ministry, South Sudan became Uganda's leading export destination in 2008 following the signing of the Comprehensive Peace Agreement (CPA) in 2005.

Just three years later (in 2008), total exports (both formal and informal) peaked at $1.18 billion (nearly Shs4 trillion). About five years down the road, the gains were quickly eroded as the environment quickly degenerated into chaos.

"However, the fighting that broke out in December 2013, sparking off a civil war in South Sudan, caused a steady decrease in Uganda's exports from $414m (Shs1.3 trillion) in 2013, to $385m (Shs1.2 trillion) in 2014 and $353m (Shs1.1 trillion) in 2015," said Ms Kyambadde.

Uganda's leading exports to South Sudan are cereals, milling products (maize floor, wheat flour), sugar, iron and steel, cement, beers and soft drinks, motor vehicle re-exports, vegetable oils and soap lubricants.

For the meantime, the government not only want the traders to cut their losses in the troubled country despite the two warring principals, president Salva Kiir and his first vice president Riek Machar, calling for cessation of hostility, but also consider doing business elsewhere.

According to Ms Kyambadde, government's advice to the Ugandan business community is to explore other market opportunities created through regional integration especially in East African Community (EAC) and Common Market for Eastern and Southern Africa (Comesa).

She said under EAC, Ugandans can export to member countries such as Kenya, Tanzania, Burundi and Rwanda with no or minimum hindrances under the Common Market protocol.

And under Comesa, Uganda is implementing the Free Trade Area which opened up market opportunities in 19 member states including the neighbouring DR Congo where there is a huge market for Ugandan products.

BoU breaks down the impact of the war

South Sudan is currently facing two shocks: Domestic (political) instability and external shocks due to decline in oil prices.

Consequently, for the 12 months to May 2016, Uganda's exports to South Sudan had declined by 31 per cent from $423.6 million (about Shs1.4 trillion) in the 12 months to May 2015 to $290.8 million (about Shs981 billion) in the 12 months to May 2016.

Overall, the South Sudan situation will constrain the recovery of Uganda's exports in 2016/17 even if the oil prices were to improve.

Source: Bank of Uganda

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