14 December 2016

Uganda: Why Uganda Is Not Exporting Enough Products

Photo: Daily Monitor
The export process.

Sadly Uganda still belongs among the least developed countries despite the vast natural resources she has.

Government hopes to attain a middle income status by 2020. One of the driving forces for this will be through increasing the country's export earnings to at least $8 billion up from the current $2.3 billion, a feat expected to be achieved in three years from now.

Going by this projection, the question is: What silver bullet will the country use to boost its exports given that the trade balance is widening?

Mr Nimrod Waniala Nakisisa, the chairman Uganda Export Promotion Board, says: "We are faced with very challenging times globally, regionally and back at home. Global economic growth has dampened. Regional markets are facing economic and social challenges and as a result, the export growth especially from Uganda has been very negligible."

Numbers

According to statistics from Bank of Uganda and Uganda Bureau of Statistics (Ubos) the country in 2011 the country only earned $2.8 billion (Shs10 trillion) worth of exports, this rose to about $3.6 billion (Shs13 trillion) in 2012.

Then declined to $3.14 billion (Shs11 trillion) and more seriously went down to $3 billion (Shs10.8 trillion) at the end of 2015.

Yet when you look at the country's imports statistics in the same period five years ago, they show that Uganda's trade deficit is widening every year.

According to statistics from the ministry of Trade and International Trade Centre, Uganda imported goods worth $6 billion (Shs21.7 trillion) in 2015.

Experts say if this deficit is not closed through doubling the exports, efforts of attaining a middle income status will not be achieved.

"There is a serious challenge which must be solved by all stakeholders to turn around the geometric increase in the export earning if the country is to have sustainable economic growth," Mr Nakisisa said.

Exports

Uganda mostly exports agricultural products which contribute about 80 per cent of her total exports.

These exports include; coffee which is the leading export in the market, fish and products, maize, tobacco, tea, hides and skins, cocoa beans, other livestock/dairy, sim sim, flowers, beans, and cotton.

The country is also making progress on the exportation of value added and manufactured products such as base metal products, cement, edible fats and oils, sugar, plastics, soap, personal care products and cosmetics.

Exporters' views

Most exporters are bouncing the blame for the low exports to government's failure to support the industry saying they have done it on their own to hold the national flag through exports.

In an interview with Prosper magazine, Dr James Kanyije, the chief executive officer KK Fresh Produce Exporters Ltd, an exporter of fruits and vegetables, said: "Government is not doing enough; this is our sweat with no government intervention. They should step up to help the exporters do business and this is how exports figures will increase."

He said government should do more than promising to help improve the export base and implement its promises.

"The words and deeds are totally different. They have a tendency of promising so many things and when it comes to implementation, they don't do their job. If they step up and help, we believe the exports will be doubled," Mr Kanyije shared.

Mr Philip Bates, the managing director Esco (U) Ltd, a cocoa exporting company, in his view on how to boost the country's exports, says production and volumes have to be increased.

"We need to focus on production and volumes by distributing seedlings yet the farmers get excited about the crop. Encourage farmers to grow their own seeds. It will help them meet other farmers."

Movit Product Ltd's director, Mr Emmy Musasirane, just like the other exporters, says they have made efforts to extend the country's exports to the EAC and other Comesa countries.

However, he adds: "We have encountered bottlenecks in this journey of exporting most especially with the government regulatory bodies. UNBS has no standards for some of the products we make. This has hindered us from widening our export base."

He called on the EAC countries to implement what they agreed on to allow free movement of goods and services.

Solutions

Mr Ramathan Ggoobi, an economics lecturer at Makerere University Business School, in his expert opinion suggests there are several measures that both government and the private sector should take to grow the country's export base.

"First, the often talk about adding value to our exports through supporting those firms that have invested into this like Good African Coffee, Nucafe," he says.

Mr Ggoobi thinks there is need to increase export volumes of coffee, tea and cotton by supporting farmers and exporters of these items.

Invest in quick wins such as tourism, fish, flowers, that bring in dollars quickly.

He thinks that providing serious business development services (BDS) for SMEs such as training, consulting, technical and managerial assistance, marketing, physical infrastructure and policy advocacy is important.

"Private sector agencies such as Private Sector Foundation Uganda, Uganda National Chamber of Commerce and Industry, Uganda Manufacturers Association need to take on this role," he adds.

In order to build the country's export competitiveness, forming clusters should be done. Economic actors concentrate along a value chain within a geographically delimited space.

He says: "Clustering helps to deepen and broaden the knowledge base of companies, including design, quality control and information related to markets and marketing and the establishment of linkages to a wider set of technology inputs and actors."

Natural clusters such as Katwe should be linked up with technical institutes, such as Makerere, Kyambogo and Busitema Universities, to enable them benefit from the technological advice and incubation.

Likewise, schools that teach business, such as Makerere University Business School, should be funded and empowered to engage in research that the business community needs to expand and start producing for export.

Govt efforts

Infrastructure such as roads, railway and energy should be improved. That's why government is focusing on these areas through allocation of resources.

Mr Onen said government has made it simpler for the small traders by implementing some simplified trade regimes under the EAC and Comesa which allows traders exporting commodities worth $2,000 (Shs7.2 million) not to go through complicated treatment.

He further said government has made sure the exporters go through URA at all border points to get their certificate of origin to ease exporting.

"Exporting is not rocket science: we are so blessed that within 300 kilometres, you have reached the markets," Mr Onen said.

However, he said for all this to happen, there should be a mindset change of the people on how to engage in export business.

He encouraged Ugandans to support their own through a campaign dubbed 'Buy Ugandan Build Uganda (BUBU). This will cut back on the import bill the country is experiencing.

Way forward

Going forward, implementation of the National Export Strategy (NEDS) where all the key stakeholders have to be involved to unlock the potential for the country's export growth has to be done.

Within the NEDS, government is zeroing on promoting specified products such as coffee, cement, fish and fish products, flowers, iron and metal products, sugar, tea and tobacco.

Government, through local governments, is also constructing eight border points to facilitate SMEs, at Elegu, Olum, Katuna, Busia and Mutugula and Mpondwe.

Governments suggest that through contract farming and cooperatives, production will be boosted. This will help in meeting the respective demand that the country can get.

"Where we have to import raw materials to facilitate the manufacturing sector, government wants the private sector to form groups through other financial arrangements to be able to import in bulk and distribute," Mr Onen shared.

Government hopes to attract partners to invest through partnerships.

"If we have land, then let's get them here to develop the land. This will create jobs and revenues,"Mr Onen added.

Government should brand Ugandan products in a way that appeals to international supermarket market chains. So far, government is working with a team which is going to push Elgon Coffee to the supermarkets directly.

Markets for Ugandans

Uganda does not lack markets. The East African Community, Comesa, tripartite trade area of 26 countries and ministry of Trade have embarked on the continental free trade area of 55 countries and these negotiations will be concluded in October next year.

Uganda also has markets in other parts of the world such as Agoa, Everything but Arms, European Union, Economic Partnership Agreement whose negotiations have been finalised and the country is ready to sign.

More still, there are other micro markets such as China, Japan, India and Saudi Arabia which are less stringent.

Ambassador Julius Onen, the Permanent Secretary in the ministry of Trade shares: "Our exciting markets are within the region because we have stopped being landlocked but instead have become market-linked because all our neighbours are buying something from us."

Mr Onen adds that despite the availability of these markets, Uganda's exports have not been encouraging. They have been declining every year. As government, we want all of everybody to take advantage of these opportunities," Mr Onen urged.

PERFOMANCE OF EXPORTs

Coffee

Coffee remains the country's leading export commodity contributing between 20 and 30 per cent of the foreign exchange earnings. Last year, the country earned revenue worth $400 million (Shs1.4 trillion) from coffee exports.

Though large scale coffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about 500,000 smallholder farmers, each covering less than 2.4 acres.

At least 1.7 million households depend on the coffee production as their main source of income.

Production averages almost 3.3 million bags-this ranks Uganda among the top 10-leading producers of coffee.

Shs1.4t

Amount uganda earned from coffee exports in 2015

Fish

Over the last 15 years, the fisheries sector has played an important social and economic role in Uganda as the second largest foreign exchange earner, contributing 2.6 per cent of Gross Domestic Product (GDP) and 12 per cent to agricultural GDP.
Fish exports to overseas markets increased from 1,664 tonnes valued at $1.4 million (Shs5 billion) in 1990 to a peak of 36,615 tons valued at $143.6m (Shs516.7b) in 2005 but decreased 17,597 tonnes worth $134.791m(Shs485 billion) by 2014 further going down $113.0m (Shs407b) in 2015.

Shs407b

VALUE OF uganda’s FISH EXPORTS in 2015

Tea

Tea is one of Uganda’s traditional export commodities supporting more than 62,000 people and more than 500,000 dependants. Annually, Uganda earns about $90 to 100 million (Shs362 billion) in the export of tea. Europe, Kenya, the Middle East, Russia, and America are the major export destinations for Uganda’s tea. Over the years, tea production in Uganda has unsteadily increased. Prevailing statistics show that the industry registered a slight increase of less than 1 per cent in quantity procured in 2014. According to the figure, there was a slight increase in tea production from 53,000 tonnes in 2013 to 61,000 tonnes in 2014

Shs362b

Average amount of money that uganda earns from tea exports annually.

 

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