Uganda slow at adapting to changes in Southern Sudan

STILL WANTING: The Uganda Southern Sudan border.

Since Uganda and Southern Sudan began to trade following the end of wars fought either side of the two countries’ borders, business has boomed to an extent that Southern Sudan has overtaken all other countries as Uganda’s leading export market.

However, as more neighbouring countries like Kenya enter what was for some time a virgin market, the competition is growing stiffer.

This situation worries Uganda’s Consular General in Southern Sudan, Busho Ndinyenka, and not because other countries in the region want a piece of the pie but because he believes Ugandan businesses are ill-prepared to compete with them.

In a recent interview with Business Power in the Southern Sudan, the capital Juba, Mr Ndinyenka argues that while other countries in the region are entering the Southern Sudan market with intent on taking advantage of the competitive advantages that they have over other countries, Uganda is not adapting to the entry of the other countries into Southern Sudan quickly enough.

Comparative advantage

Mr Ndinyenka said Uganda has until now enjoyed a comparative advantage over other countries in exporting goods and items that are either perishable or bulky.

“Currently we have no competition on food items because even the other East African countries need food from Uganda,” he said.

“Building materials have also been quite marketable here. Maybe because of bulk, it is quite cheaper for Southern Sudan to get them from Uganda. So we have those two items plus a few others where bulk is a major advantage for us because we are quite nearer to the Sudan.”

This, he said, is mainly because of two reasons; Southern Sudan has not yet recovered sufficiently enough to produce its own perishable items like foodstuffs, and Uganda still has the most easily accessible route by road to Southern Sudan’s capital, Juba.

As a result of these advantages, trade between Uganda and Southern Sudan has increased three-fold since Sudan’s south and north signed a Comprehensive Peace Agreement (CPA) in 2005.

Currently, Southern Sudan is the largest importer of Uganda’s products, with the latest statistics showing that the number of exports from Uganda to Sudan rose from $91.7 million in 2006 to $257.9 million in 2008.

Those figures exclude informal trade, according to the Uganda Bureau of Statistics (Ubos), which said in a June 2009 report that Uganda’s informal cross-border sales into Southern Sudan alone reached more than $900 million in 2008 – twice the 2007 figure.

Although trade between the two neighbours has grown quickly, the way Ugandans are conducting it worries Mr Ndinyenka.

He says Uganda is backing the wrong horse by concentrating on informal trade as its leading source of export earnings from Southern Sudan.

“What is now apparent is that this is very informal trade. It is temporary,” he said. “I wouldn’t want us to plan in terms of expanding this informal trade. The Southern Sudanese will produce most of what we have been selling through the informal sector.”

Food basket

Giving the example of trade in food items, for instance, the Ugandan envoy said it is likely to flourish for the next two years or so. He, however, adds that as the people in Southern Sudan begin to produce their own food, the demand for food items from Uganda is likely to go down.

According to Mr Busho, Uganda should now position itself to cooperate with the people of Southern Sudan in terms of investments and manufacturing produce for the region based on the existing abundant resources in the two countries.

“The manufactured goods are what will be a little more medium term products for export,” he explained. “I would like more rise in the formal exports because those are the durable exports we are talking about in the medium term.

“I am not under-emphasising the informal exports because, in my view, they contribute more to the domestic market because the goods traded in the informal sector are from the peasants and so it is contributing more to enriching the impoverished than the formal sector. But I would like better growth in the coming year in the formal sector because it is the more durable one.”

Illustrating what he described as the inability of Ugandans to take advantage of the opportunities offered by formal trade in Southern Sudan so far, Mr Ndinyenka recalled a scenario in 2007 when the region needed dressed chicken but there was no supplier in the East African region with the cap.

“Neither Ugachick nor Kenchick in Kenya could provide so they imported 11 refrigerated containers of chicken from the Netherlands,” he said.

“You can imagine. What prevents us from taking advantage of this market? Why can’t we rear chicken in Uganda in sufficient quantities to satisfy the region? We must broaden our base.”

Other analysts share Mr Ndinyenka’s view. Dr Sallie Kayunga Simba of the Makerere University Department of Political Science and Public Administration believes that if Southern Sudan secedes from the North, it could lead to trade battles with Ugandans resulting from the belief that foreigners should not be involved in informal trade.
“Whereas Uganda gave sanctuary to hundreds of thousands of Sudanese, there appears to be a feeling that Ugandans are taking over the local markets in Southern Sudan cities, including small retail businesses, which ought to have been left in the hands of the indigenous Sudanese,” he said, while presenting his paper at a regional symposium on Sudan’s neighbours and South Sudan Referendum on Self-Determination on October 2-3, 2010, in Khartoum.

“Ugandans operate small businesses, work as taxi drivers, construction workers, administrative and service personnel among others, jobs which the locals believe should be left to them.”

In order to circumvent such battles, Mr Ndinyenka believes, Uganda should play to its strengths. One of the areas that he says Uganda should by now be planning to take advantage of is the availability of oil but lack of infrastructure in Southern Sudan.

“I would want to say that we should actually be thinking of cooperating in terms of oil,” he explained. “South Sudan has oil and we are trying to set up a refinery in Uganda. We could refine for the Sudanese if they so wish because their oil wells are not far away from our targets for constructing a new refinery so we should certainly be able to have a critical mass over which we have a comparative advantage over the East African region.”

Improved conditions

In the meantime, the government of Uganda has undertaken a series of activities to improve the conditions for Ugandans to do business in Southern Sudan. They include; the construction of a $2.5 million dollar market in Juba.

“Our objective was really to improve the working environment of the people who are engaged in that sector in Southern Sudan,” said Mr Ndinyenka.

Other projects include the construction of the 104-kilometre Gulu-Atiak-Bibia-Nimule by Uganda. Southern Sudan is also undertaking the re-construction of the 119-mile stretch from Nimule. There are also plans to revamp the defunct regional railway system and extend the railway from Gulu to Juba. These routes are likely to increase trade between Uganda and Sudan. However, with Kenya also planning to tarmac its direct route to Southern Sudan, as well as offering them access to the port at the cost, Uganda could also stand to lose out some areas to its neighbour