Ugandan trade liberalisation ‘hindering not helping’

Uganda_tradeLiberalisation policies by the government have done more harm than good - Ugandan traders Ugandan traders say that the trade liberalisation policies introduced by the government over ten years have done more harm than good to the economy

The National Resistance Movement (NRM) government introduced the policies to attract investors to the country. However, traders have grown increasingly worried that the influx of Chinese traders under the pretext that they are investors, only to set up shops in Kampala city and other suburbs, is driving them out of business.

Traders have warned that they will stage more strikes, if the government does not address the issue of those Chinese traders masquerading as investors. They also accuse the Chinese petty investors for the escalation of the foreign exchange rates at times through speculation, high rates for business premises (which are paid in US dollars to landlords) and uncontrolled repatriation of foreign earnings.

The traders say that China does not allow a foreigner to even render a free service inside their country, but Uganda is allowing Chinese traders, who reportedly manufacture the same goods to compete directly with locals, to engage in the wholesale or retail of goods. In recent months, hundreds of Chinese traders have opened up shops in trade centres in Kampala City – Kikuubo, William and Wilson Streets (business district), and are out-competing Ugandans.

“One of the outstanding grievances among traders in Uganda government’s policy, is of allowing foreigners, especially Chinese people, to directly compete with locals,” said the Kampala City Traders Association (KACITA) Chairman, Everest Kayondo. “Investors should come here and set up factories, so that we buy their goods. We are quite aware that Uganda is a friendly country with a very liberal economy. But KACITA is yet to appreciate that transparency which means nakedness.

“The way foreigners are allowed to come and operate petty business and drive our indigenous local traders out of business without government intervention, makes us believe that we are neglected children. We are not against allowing Chinese people to come and do business here, but if they are to do business, let them come for big investment like factories, hospitals, hotels and others but, not petty trade.

“We are quite aware that our president is interested in seeing more of our members doing export than import. It is also KACITA’s vision to see them doing more export than import. However, as we aim at reducing import trade, let us not ‘import importers’. We need to import exporters, employing our local resources in order to make a product rather than importing already made products.”

Eddie Mugisha, a member of KACITA and an importer from China, said that they are mostly concerned about the influx of Chinese traders. “The Chinese suppliers, from whom we buy the goods in China, are opening up shops all over Kampala,” he said. “They are importing here very poor quality goods and hence get an edge over us.”

Mugisha added that in addition to engaging in local commerce, the Chinese are offering exaggerated rented fees to Ugandan landlords, to get space in the central business district. “The Chinese are now buying our shops by offering so much goodwill,” he said. “So many landlords are raising rented fees or else they tell us to vacate the shops so they can accommodate Chinese traders.”

In addition to having the advantage of being producers of the same goods, Mugisha said that for every container a Chinese national sells abroad such as in Uganda, he or she gets a percentage from the government. This he said, gives the Chinese upper hand in international trade, because they get cheaper capital as opposed to Ugandans who have to borrow at high interest rates in order to be able to fly to China and carry out trade.

Following an outcry from the business community and general public about the adverse effects arising from the influx of Chinese and other Asian nationals on the Ugandan economy, the ministry of internal Affairs, promised to embark on a process to review the current immigration arrangements.

The state minister of International Affairs, James Baba, said that the government aimed to make immigration beneficial to Uganda’s social economic development.

“We hope this policy will take up a step further in gaining economic development as a country”, he said. ”The policy should enhance security both internally and internationally by keeping criminals, fake products and wrong persons out of Uganda.”

Officials from the Directorate of Citizenship Immigration Control, said most of the immigration challenges had been through fragmented policies and with ad hoc and reactive responses in the past. The policy formulation process, is to be facilitated by The International Organisation of Migration with the help of consultants and the policy is expected to be finalised by this year.

The Minister of Trade, Industry and Cooperatives, Amelia Anne Kyambadde, said “ I have taken up this issue with the ministry of Internal Affairs and the review process has started. In the meantime, I would appeal to the Ugandan traders to work closely with government officials in trying to address this problem.”

Trade between the two countries remained low until 1999, when bilateral trade between the countries hit the US$11mn mark, a significant milestone between the two countries. This was fostered by the NRM government coming to power in 1986, establishing peace in Uganda and a conducive environment to do business.

The majority of Chinese enterprises operating in Uganda are engaged in wholesale and retail trade, a survey has revealed. The survey, commissioned by the Federation of Uganda Employers and the Uganda Investment Authority, revealed that Chinese businessmen licensed as investors, had instead turned to petty trade. The survey indicated that about 65 enterprises out of the 150 that were surveyed, deal in wholesale and retail trade.

According to the report, only 44 enterprises are engaged in manufacturing, 11 in accommodation and food services while 10 deal in construction services. The majority of these enterprises employ more Ugandans than Chinese nationals and the top five employment sectors include manufacturing and construction, wholesale and retail, accommodation and catering and information and communication.

Speaking at the release of the survey, Rebecca Wamono Nuluma , Special Advisor of Uganda Investment Authority, said it was also discovered that the majority of these enterprises, had no sign posts, making them difficult to trace. The survey covered Kampala Capital City, Wakiso, Mukono and Jinja districts. But it was revealed that 94 per cent of the businesses are located in Kampala.

Nuluma said some enterprises were reluctant to give their business details. She also noted that it is crucial to promote dialogue between KACITA and the Chinese counterparts so as to forge good working relations between the two. The report revealed that although there had been rapid growth in Chinese investments in Uganda in the past there years, some companies lack information in relation to labour laws and labour relations.

Statistics indicate that by 2008, Ugandan exports to China, which include cotton, coffee, leather and fish, amounted to US$20mn while imports such as mechanical and electrical appliances, stood at US$2bn. Two visits by President Yoweri Museveni to China one in 2004 and the other in 2006, cemented the political relationship between the two countries, enabling business between Uganda and China to thrive.

Moses Kalisa Seruwagi

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