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Uganda: Invest at home to promote a deeper regional market

Rachel K. Sebudde's picture

“Uganda might lose the market in South Sudan, if deliberate efforts aren’t put in place to sustain it”, said Uganda Investment Authority Chairman, Patrick Bitature during a hard-talk discussion at the February 14th launch of the Uganda Economic Update – Bridges across Borders: Unleashing Uganda’s Regional Trade Potential.
Bitature argued that Uganda’s supplying of South Sudan was more circumstantial than strategic.
 
“Food items like rice, matooke [green bananas], maize and sorghum that Uganda is exporting to South Sudan will soon be grown there, once stability returns. Uganda instead needs to add value to these exports”, he said.

This viewpoint echoes the Economic Update’s findings that while Uganda has the potential to feed the region through more food exports, it must improve productivity to remain competitive. It must also move beyond food exports to emphasize trade in manufactured goods and services.
 
Over the last five years, South Sudan became the main trading partner for Uganda, consuming 38 percent of its exports, in grains, processed foods, iron, steel, cement, paints, plastics, cosmetics and pharmaceuticals. However, Uganda’s reliance on natural advantages and insecurity of its neighbors is dangerously unsustainable.
In the food sector, for example, other competitors include Zambia, Mozambique and South Africa, all food surplus producers. Tanzania also often produces a food surplus. In 2011, Tanzania exported 100,000 tons of maize to the region.

Uganda can remain competitive only if it modernizes and diversifies its agricultural sector. Raising productivity on the farm must be accompanied by improved storage, better and cheaper transport, and connectivity to markets. The largest constraint to getting goods to the markets remain the high transport costs. Currently, many producing areas are connected via seasonal roads. Furthermore, to link to the regional markets, a Ugandan trader pays 30% more in transport costs, than their counterparts in Southern Africa. The costs are 70% higher when compared to traders in America and Europe.
 
Over 84% of Uganda’s trade relies on poor road infrastructure because of a dysfunctional rail and water transport system. Transport costs are exacerbated by bad logistics including high berth and yard congestion at ports, excessive dwell times for ships, low operating efficiency, ineffective regulation, and non-tariff barriers.  For Bitature, a functioning railway system would reduce the number of commercial trucks on the road by 500 cars per day. This would result in huge savings from lower congestion and road maintenance costs.
 
Overcoming these constraints requires steep investments.   Uganda must therefore do its own homework, and do it quickly, to be able to tap more regional trade. While deeper regional integration is the gateway to unlocking greater trade opportunities, the message for Uganda remains the same: raise productivity in key strategic sectors and get products to the market at a competitive price.
 
Deeper regional integration will support Uganda’s own development by allowing for development of regional public goods and policies that support free flow of products, capital and labor. Quick gains can be made in adopting more efficient modes of road, rail and water transport; eliminating non-tariff trade barriers; and exploiting service exports in tourism, transport and logistics, education, and professional services.
 
In-depth discussion of these issues can be found in the World Bank’s First Uganda Economic Update – “Bridges across Borders – Unleashing Uganda’s Regional Trade