How regional ‘roadblocks’ are derailing EAC trade

The unending conflict in South Sudan is slowly taking a toll on Uganda’s economy and becoming a threat to regional trade.

The power struggle in South Sudan has been brewing for a while despite the formation of the national unity government following the signing of a peace agreement in 2018 under the watchful eyes and facilitation of regional blocs, including the Intergovernmental Authority on Development (IGAD).

South Sudan, a member of the East African Community (EAC), continues to be a fragile economy despite its enormous untapped economic potential, largely being derailed on the power struggle between President Silva Kiir and first Vice President, Dr Riek Machar.

According to regional business experts, integration analysts, and Afro-centric researchers, the reputation of the EAC region as a trade and investment hub, will remain blemished until total stability in the region is restored.

If nothing is done to prevail over the cause of the uncertainty, in this case bringing an end to the political stability in South Sudan, the biggest losers apart from lives and properties, will be trade and investment, with Uganda particularly bearing the biggest brunt.

Before Covid-19, the EAC region, according to the Ministry of Finance statistics, was the fastest-growing economic bloc in Africa, with growth projected at 6.2 per cent in 2019, increasing from 5.9 per cent in 2018.

This performance is mainly attributed to the growth in the services and agriculture sectors as well as increased consumption and investment.

The Ministry of Finance statistics also showed that Uganda’s trade with other Africa countries was increasing, and amounted to 59 per cent of total goods exported in 2018.

During the same year, the EAC continued to be the largest destination for Uganda’s exports. Total goods exported to the EAC amounted to $1,469m compared to imports of $911m, thus registering a trade surplus of $ 557m.

Currently, Uganda’s products have a wide regional presence. For instance, in the pharmaceutical industry, CIPLA Quality Chemical Industries Ltd (CIPLAQCIL), has a footprint in West and Southern Africa. In the steel industry, Roofings Ltd has become a premier source of steel and plastic in East and Central Africa.

Is Uganda reaping anything?

According to the local manufacturers, the fortune being accrued from the regional blocs such as the EAC is bound to manipulation, something that is against the integration spirit.  For starters, the EAC Common Market guarantees tfree movement of goods and services.

However, according to Uganda Manufacturers Association (UMA), Kenya has ignored the EAC Common Market commitments and has on different occasions barred Ugandan goods from entering Kenyan market, which UMA describes as flimsy at its best.

The local manufacturers say this is done through intensified non-tariff barriers (NTBs), informed by fears of a possible takeover of the trade balance of power, an act that contradicts the EAC Common Market commitments.

Some of the NTBs include but not limited to questioning the origin of Uganda’s products even those with valid certificates of origin, baseless claims that products from Uganda are counterfeit despite bearing Q mark issued by the Uganda National Bureau of Standards.

The situation is not helped by the not-so-pleasant United Republic of Tanzania’s incessant tariff tinkering that also breaches the EAC Common Market commitments.

The Rwanda scuffle has only according to UMA, shrunk Uganda’s market share for the EAC,  and for that, experts  wonder if the EAC  is still relevant when the partner states just continue to mistreat particularly Uganda in every respect.

The press statement issued earlier is a culmination of untold frustration by the government in the pursuit for equity from the EAC partner states, UMA noted, before adding that: “Uganda believes in regional integration. However, Uganda must also benefit from the integration process.”

Experts’ views

Researcher Africa Kiiza, in a recent interview, said over the years, Uganda has traded more in Common Market for Eastern and Southern Africa (COMESA), the largest regional economic organisation in Africa, compared to the EAC.  Mr Kiiza’s argument is backed by statistics showing the level of trade between Uganda and the two blocs. 

Mr Kiiza who is also an analyst on matters of trade policies and negotiations, said Uganda’s share of regional trade has been increasing over the years, even at times when her share of EAC trade has declined.

He added that COMESA has strategic diversification with Uganda’s exports ranging from coffee, tea, maize, cement, milk, sugar, animal and vegetable fats and oil, rice, tobacco, beverages, iron and steel products, plastics, pharmaceutical products, milling industry, tubes and pipes.

As for the South Sudan situation and its implication to EAC regional trade, particularly for Uganda, Mr Kiiza said it will be problematic considering that over the years, South Sudan has become Uganda’s strategic trading partner.

Uganda exports

According to Uganda Export Promotions Board (UEPB), Uganda’s exports include, pharmaceuticals, cosmetics, and beauty products, soft drinks and edible oil. Others include foods such as milk, potatoes, cassava and fish, grains including beans, maize, and maize flour; millet, sorghum, rice and groundnuts; fruits and vegetable and some electronics (phones).

“With the ongoing trade tensions with Rwanda, South Sudan provides a strategic and important market for Uganda, as she is Uganda’s fourth trading partner after DRC, Kenya and Rwanda,” Mr Kiiza said.

 According to the Uganda Bureau of Statistics, Uganda’s exports to South Sudan have been increasing over the years from $10.6m (in 2015); $12.9 (in 2016); $19.1 (in 2017); $3.6 (2018), and $3.9million (2019).

“For that, the current insecurity, coming at a time the regional countries are trying to recover from the Covid-19 while at the same time averting the negative implications of Uganda-border closure on Uganda’s economy, barely eight months since trading under AfCFTA commenced, does not support a transformative economic recovery post Covid-19,” said Mr Kiiza.

He added: “Moreover, this will not only disrupt trade but also slow down regional integration as regional economic communities meant to be building blocks for the implementation of  AfCFTA, will suffer from such tensions which directly affect trade facilitation in EAC and turn affects the much desired AfCFTA.”

In another interview with Economic Policy Research Centre (EPRC) Senior Research Fellow, Corti Paul Lakuma, it became evident that Uganda reaps more from COMESA irrespective of being one of the founder members of the EAC.

He said: “We are reaping big from the COMESA pact.  Annually, we get about $ 1.2b from that market. This is even while our exports are not that sophisticated. One wonders where this value will go when our COMESA exports become dominated by manufacturers and industrial products,”

Mr Lakuma said there is a need to expand the scope of COMESA membership the country is trading with. He says, for instance, there is little trade interaction between Uganda and some COMESA members such as Libya, Eritrea, Mauritius, and Seychelles. 

“We also need to improve the quality of our exports and extensively (variety), for this will attract a higher price and more export revenues,” he said.

The EPRC Senior Research Fellow said the attempted toppling of Machar points to the intensification of conflict in the region, saying it will certainly affect informal exports traded between Uganda and South Sudan. 

Interestingly perhaps, he opines: “But it may also offer a chance for President Kiir to consolidate power and offer a path towards lasting peace. Let’s wait and see how it all plays out!”

Mr Martin Luther Munu, a trade, and regional integration analyst, said NTBs continue to be a big problem for the regional blocs to deal with. However, he says, most regional block trades are due to proximity so even COMESA exports are largely EAC.

He said investment in connectivity infrastructure, air, and rail transport would be a perfect fit in terms of helping in exports as well as increase production and manufacturing beyond agricultural commodities.

 “It should be noted that on one hand, the EAC summit is facing challenges to meet, worsened by Covid-19. On another hand, the EAC is not as strong as ECOWAS in terms of addressing political issues. We can only keep on engaging with South Sudan to protect traders during such a time.”

In a recent interview, the Business Development Manager, Roofings Group, Mr Stuart Mwesigwa, appeared more concerned about the cautious approach businesses will resort to for as long as uncertainty in the region is not nipped in the bud.

“Stability and certainty are crucial in informing whether we open our purse or adapt a wait and see approach,” Mr Mwesigwa who is also EABC board member told Prosper Magazine, before disclosing that EABC are already working out engagement modalities with the regional leaders on the South Sudan situation.

He said trading is the only ticket to prosperity that the whole region freely has within its disposal. And nothing should be allowed to come in the way of flawless regional trade, considering that all regional sector players, including the various government, have a stake in the development of the region.

Mr Jim Kabeho, the Uganda Sugar Manufacturers Association chairman described the political tension in the region as unfortunate.

He said such tense political environment leads to uncertainty, something that trade and investment oftentimes are averse to.

He added that presidents of the different EAC member states should quickly get interested in this matter to ensure that it doesn’t degenerate into a full-blown skirmish, interrupting regional trade.With the Rwanda unfinished business, the South Sudan situation simply renders the region, according to Mr Kabeho, as unattractive trade and investment. And that is bad news for Uganda and the EAC in general.

UGANDAN PRODUCTS HAVE WIDE PRESENCE

The Ministry of Finance statistics showed that Uganda’s trade with other Africa countries was increasing, and amounted to 59 per cent of total goods exported in 2018.

During the same year, the EAC continued to be the largest destination for Uganda’s exports.

Total goods exported to the EAC amounted to $1,469m compared to imports of $911m, thus registering a trade surplus of $ 557m.

Currently, Uganda’s products have a wide regional presence. For instance, in the pharmaceutical industry, CIPLA Quality Chemical Industries Ltd (CIPLAQCIL), now has a footprint in West and Southern Africa. In the steel industry, Roofings Ltd has become a premier source of steel and plastic in East and Central Africa.