News Column

The Lost Merchants of Juba

June 3, 2014

Patrick Kagenda

Anyone wanting to see how the war in south Sudan has affected Uganda can look at the cross-border trade statistics of the World Bank. Better still, they can visit a place called "Arua Park" in downtown Kampala.

Arua Park proper is a triangular space between Wilson Road, Ben Kiwanuka St. and Johnson St. It is strategically located next to Kampala's biggest bulk general merchandise market-area called "kikuubo". The area is more of a goods-exchange market. Big trucks arrive loaded with goods that are sometimes traded on the truck or are broken up into smaller units, swap trucks, or enter the myriad shops, stores, and warehouses in the area.

When I was at Arua Park before the war broke out in South Sudan last December, I could barely find space to stand. The traffic was tight and the place was a sea of bales of cloth, tonnes of sugar, boxes of cooking fat, detergents, candles, and needles, and roofing sheets being loaded on trucks by strong-looking men whose sweating muscles glistened in the sun. I could hear traders barking orders, keeping careful count of their merchandise, booking seats on the Juba-bound buses, or exchanging wads of shillings, and American and South Sudanese dollars. Today, Arua Park is almost a ghost of its old self. A few trucks still load merchandise but there is little business urgency.

"The situation is worse and people's businesses are at the brink of total collapse," says Stephen Lwanga whose Lulwa Hardware shop deals in building materials in the area, "Today there is no South Sudanese coming here to buy anything. Before the war a South Sudanese would come and buy 500 roofing iron sheets at a go in a week. That last happened here four months ago. "Since the war started, I have not sold anything more than 20 roofing iron sheets in a week. We are many and the situation is no different."

"People are losing their property to banks where they got loans to invest in the business," said the 45-year old trader.

Big drop in business:

Back then, business at Arua Park was so big that Uganda's biggest steel products manufacturer, Roofings Ltd, had set up an outlet in the area. Today, one of the sales people says, their sales have dropped by up to 25 %.

Kampala City Traders Association (KACITA) spokesperson, Issa Sekitto, says trade between Uganda and south Sudan is now at about 30% of what it was.

"I can say it's only for the brave and reckless ones who don't value their lives and also for the heavily insured companies who are delivering goods through sending truck drivers.

"Traders who were operating in South Sudan are at a loss because this was a major market for Uganda," says Sekitto.

On average before the war erupted, the number of trucks from Uganda crossing the border to South Sudan was between 200 and 500 daily. That has reduced to about 20 trucks per day, according to the Head of customs at Elegu border post.

Whereas before the conflict about 21 buses travelled every day from Kampala to Juba carrying 1,365 passengers that number has since gone down tremendously.

At the ministry of Trade and Industry, the Permanent Secretary Ambassador Julius Onen says "as a country we have lost 15% of our export market which translates to over US$30 million per month as a result of the Sudan war. This market also includes parts of DRC where Ugandan traders can no longer go."

Much of the trade between Uganda and South Sudan is informal and a range of products that are exported include beer, water, food products, sugar, cooking oil and construction materials like cement, iron sheets, and Iron bars being the leading exports.

A recent report commissioned by International Alert (Uganda) on the impact of the South Sudan war on Uganda's economy confirms the losses.

Entitled, "South Sudan-Uganda investment & Trade relations: Preliminary Findings & Recommendations" the report says export revenue from South Sudan to Uganda has dropped by about 80% from Shs271 billion before the war to about Shs54.2 billion today. Uganda's trade with South Sudan has dropped by the same percentage in the first five months of 2014.

The International Alert report, authored by Habib Tibrichu of Creative Business Group, was conducted before the South Sudan conflict broke out on December 15, 2013. It sought to understand the South Sudan national investment and trade policies, programmes, investment opportunities, and potential for strategic partnership arrangements.

It noted that Ugandans in South Sudan engage in "impulse businesses" - the small scale informal and formal businesses, which are below the requirements of South Sudan Investment and trade policies of US$ 100,000, US$ 500,000 and above US$ 10 million. The report was released by the International Alert in February and made available to the public at the close of April 2014.

Long term view dim:

Data collecting bodies like the World Bank take a long time view of Uganda's loss of South Sudan Business.

The World Bank Uganda Country Office Senior economist Rachel Sebudde told The Independent that trade between Uganda and South Sudan had "grown very fast in the three years before war broke out" and that "the disruption in the market has had an impact on the Ugandan economy especially for the Ugandan producers".

According to the World Bank, Technical and Administrative Support Unit (TASU) the Ugandan and South Sudanese economies had become deeply intertwined. Trade had risen dramatically between both countries over the last decade, and so had financial flows in form of foreign direct investment and remittances.

The remittances and Foreign Direct Investments are from the Ugandan Community in South Sudan and from South Sudan national with connections in Uganda.

Some figures put the number of Ugandans in S. Sudan before the war at between 500,000 and 900,000 although the Uganda Embassy in Juba had registered only 40,000 by end of 2012.

According to data from the Bank of Uganda remittance flows in 2012 from South Sudan were only second to the United Kingdom. Uganda received more than US$ 210 million in personal transfers that year.

Although still informal and not recorded in official data, the boom in real estate seen in Uganda around FY2010/11 has been attributed to an influx of South Sudanese investors. FDI flows originating in South Sudan could, therefore, also fall as a consequence of the crisis.

Since FY 2006/07, 19% of Uganda's exports have on average been destined to South Sudan, making it Uganda's biggest export market while imports from South Sudan to Uganda have been less than 1% in each year since FY 2006/07.

TASU further says that in 2012/13, Uganda's exports to South Sudan stood at US$ 474 million, equivalent to 16% of all exports and 2.25% of GDP.

Changing trade dynamics:

But there had been a steady decline in informal exports to South Sudan even before the war. Reports indicate that the share of informal exports dropped from its peak of 66% in FY2009/10 to about 30% in FY 2012/13. This was mainly due to increased occurrence of security incidents specifically targeting Ugandan traders.

The report says changing trade dynamics in South Sudan had contributed to the steady decline. There was stiff competition emerging from other countries that include the UAE, China, Kenya, Ethiopia, Somalia, and Eritrea that had also entered the S. Sudan market.

Overall TASU estimates that a halt to Uganda's trade with South Sudan might have led to a deterioration in Uganda's trade balance by US$87 million in the second half of FY2013/14. This is lower than the total loss of US$ 237 million in export revenues (formal and informal), as some of the reduction in formal exports is offset by a decline in imports from Kenya, which TASU assumes might have fallen by 50%.

The TASU report notes that the decline in Ugandan exports to South Sudan leads to a reduction of imports from Kenya as a large share of Kenyan exports to South Sudan pass through Uganda.

It happened during the political uncertainties surrounding the Kenyan presidential election in early 2012, which not only led to a reduction in Uganda's imports from Kenya but also resulted in lower exports from Uganda to South Sudan.

Gideon Badagawa, the Executive Director of the Private Sector Foundation Uganda (PSFU) says it is unfortunate that the decline in South Sudan business is happening at a time when donors are cutting aid to Uganda.

"Service delivery in health, education, infrastructure etc shall be impacted and this will further ruin the economy," he told The Independent.

"The lesson for Uganda is that we must always negotiate and open wider markets while supporting all efforts to reduce or curtail regional conflicts," he added.

He recommends that traders switch to the DR Congo market but with better market research than happened in South Sudan.

There was some good news when the Uganda Revenue Authority (URA) and the South Sudan Revenue Authority formalised their tax collection partnership on May 23 in Kampala. Speaking at the occasion, the URA Commissioner of Customs, Richard Kamajugo, said trade between the two states was getting back to pre-war volumes.

Earlier, in the report, the Secretary General of the South Sudan Chamber of Commerce and Industry (SSCCIA), Simon Akuei Deng, had said "the investment & trade between Uganda and South Sudan has no problem but the problem is with some individuals who are engaged in the business."

Traders at Arua Park in Kampala, who are praying for a return to normalcy in the Juba trade, hope Kamajugo and Simon Akuei Deng are right.


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Source: AllAfrica


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