Uganda: Fear of Price Hike As Imports From China Reduce

14 February 2020

Business people who import goods from China say they have been unable to send money for goods or fly to China as most factories supplying them are closed due to the outbreak of the coronavirus.

The development is likely have an impact on the prices of most goods like building materials, clothes, factory raw materials, among others.

Mr William Kaggwa, the secretary-general of the Hardware Traders' Association, says that they have suspended orders which means that, soon, fewer goods will be on market.

Mr Kaggwa said traders should not send money to manufacturers until they are sure the factories are fully operational.

Officials at Kidde Enterprises in Kampala, one of the biggest importers of construction materials, said that they waiting until end of March to place orders from Chinese factories.

"The fear is that you may send money and end up not getting supplies because your contact could be in area under quarantine," one official at the company, who preferred anonymity to speak freely, said.

There are reports that some traders who received goods in December or early January are hoarding them goods in anticipation of shortages, to enable them sell at higher prices.

The Bank of Uganda has said the situation is serious. Dr Adam Mugume, the director of research at Bank of Uganda said there is an eminent impact on commodity prices in Uganda, if the disease in China is not controlled.

He said that Uganda imports 25 percent its goods from China and 70 percent these are raw materials used by local manufacturers.

He said that prices of imported goods are likely to rise as well as prices of locally-made goods whose raw materials are sourced from China.

However, Mr Richard Walker, a World Bank Uganda economist, said there are still uncertain how coronavirus in China will affect the economy this year. He said they expected Uganda not to grow below 6 percent despite the current problems.

Dr Enock Nyorekwa, an infrastructure economist, said the impact will largely depend upon quarantine measures and sentiments.

Fewer imports mean less tax revenues at the time when the Uganda Revenue Authority (URA) is failing to meet its targets.

Ms Doris Akol, the URA's commissioner general, told reporters early this month that in the six months, traders imported fewer products which reduced expected revenues.

Coronavirus in China is likely to worsen the situation.

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