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Can Uganda benefit from superpower trade wars?
Recently, heads of two economic superpowers, China and India, visited Rwanda and Uganda respectively on their way to South Africa for the 10th Brics (Brazil, Russia, India, China and South Africa) summit.
While Chinese president Xi Jinping visited Rwanda, India’s prime minister Narendra Modi was in Uganda for a two-day state visit where he held bilateral talks with President Museveni.
It was subsequently announced that two lines of credit worth $200m in energy infrastructure, agriculture and dairy sectors was extended to Uganda. Furthermore, a Shs780b loan for electricity transmission was also availed and procurement of value addition equipment from India for food processing, maize milling, among others.
Since the establishment of Indian diplomatic relations in Uganda in 1965, the timing of India’s recent generosity to Uganda seems guarded.
Some people say that the superpowers are looking for absolute market dominance in the African continent since US president Donald Trump’s unpredictable economic trading decisions are increasingly becoming aggressive, causing daily tensions between existing trade partners and subsequently making the lucrative $19 trillion US market hostile to China and India.
According to president Trump, “I am ready to impose tariffs on all $500 billion of imported goods from China.” In effect, Trump’s position could escalate a deeper clash and trade wars which undoubtedly is already unnerving financial markets.
Trump’s protectionist posture on trade, having recently imposed tariffs on $34 billion of Chinese imports as well as tariffs on steel, aluminium from the European Union, Canada and Mexico, may just be the beginning with worse to come.
Although China is the second largest market in the world after the US, tension seems to be growing between the trade partners now almost at boiling point.
It is possible that the unsettling US market dynamics could be the driving force behind the converted expression of renewed interests with some urgency in the East African region from China and India.
There seems to be pressing need to find other trade partners, explore other markets with different profit options and opportunities. Some people feel slightly anxious, quietly wondering, what else the superpowers are now looking for in Uganda and Rwanda since our markets are already open, if not flooded with products from the superpowers, especially China.
At closer scrutiny, the superpowers’ interests in the East African regional bloc could be to earn interest from long term high interest loans.
The superpower seem to be moving into more profitable financing territories, scheduling loans for Africans looking for investment opportunities in infrastructure, technology and security developments, among others.
Effectively, China and India could lead market supremacy and dominance in Africa, not only fulfilling their profit interest through loans and technology, but may also in the process create some small employment opportunities, training and skills development for Ugandan youth.
Before travelling to South Africa for the Brics summit, in his speech to Parliament of Uganda Mr Modi remarked: “We are opening 18 new embassies in Africa, we want to implement 118 lines of credit worth $11b in 40 African countries.”
According to economist Thabi Leoka, South Africa will lobby for other African states to join Brics and be of the New Development Bank so that they can also have access to loans.
The superpowers seem to have a clear strategic profitability plan for the African market. In Uganda the hope is that government does not get tempted to resort to Brics interest loans unnecessarily. Additionally that government has some plans on how Uganda could best benefit from the rapidly changing superpower market dynamics.
