Cross border trade opportunities await Uganda’s small and medium companies

Uganda’s ranking. Despite its shortcomings as a non-FTA member, Uganda ranked sixth both as an exporter and importer ($659.5 million/7.4 per cent of the market share) within the Comesa region in 2011. The country became the 15th signatory to the Comesa FTA, creating an opportunity for improved trade competitiveness and revenue.

Small businesses in Uganda selling goods worth $1,000 or less across borders within the Common Market for Eastern and Southern Africa (Comesa) have now been handed a boost to increase their turnover.
This arises out of the country’s recent accession to the Free Trade Area (FTA) of Africa’s largest trade bloc paving way to Comesa’s cross border trade.

This, importers and prospective exporters of various goods say, will formally draw a whole range of new entrants into cross border trade, under its simplified trade regime, but more importantly, it will ease commerce for the already existing micro, small and medium enterprises (MSMEs) that have for long been hampered by the rigorous customs procedures.

“We just have to increase production volumes. Officials from Uganda Industrial Research Institute have taken my samples to Kenya and South Sudan, but we are already exporting to Tanzania, Rwanda and Burundi,” says Prudence Konika, as she balances a 750ml bottle of Bella Wine in her palm, for a waiting customer.

“Uganda is now chair, and we have joined the FTA. We hope the whole trade system will be fair and other countries will know more about our products. With no restrictions, we want to get into the whole [Comesa] market,” says the wine maker, whose firm K-Roma produces 20,000 litres of wine annually, most of which had been restricted to the local market.

The beauty is that K-Roma does not have to export the wine. The FTA’s cross border trade, gives market access to traders for a range of products to be re-sold or used in business, with a value of $1,000, or less, free of tariff and quota, provided the trader carries a simplified certificate of origin.

This increases chances for people with small capital—and even plying trade routes using rudimentary transport means—to engage in formal trade in goods that are specified in the list of agreed products.
Meanwhile, another firm, the Uganda Consumer Cooperative Union, maker of fruit juices that has been looking to break into the export market since 2008, is ready to seize this moment.

By contrast, Zanaa Limited, another Ugandan start-up company, is looking at the Comesa market as a source of raw materials for its high quality Vanity purses and men’s bags—all in leather and animal skin, with horn finishes. Zanaa products are mainly exported and sold in high-end stores in Europe and North America, the company’s CEO Ms Linda Lwanga, explains.

“We must guarantee quality, and to do that, the source of our raw materials cannot always be Uganda. The challenge we have faced in the key markets where we sell our products is that the consumers are too discerning and ask detailed questions; they demand to know where and how this cow was raised, how it was killed, how the horn was treated…” Ms Lwanga said.

In a sense, small businesses in Uganda feel that the country’s reluctance to join the FTA earlier on, has cost them opportunities in Comesa, as fast selling wines, spirits, fruit juices, cosmetics, leather products and clothing are some of the agreed tradable goods under the simplified trade regime. But the full list, developed by Malawi, Zambia and Zimbabwe, is a template for the whole bloc, and is as comprehensive as any—covering agro produce, cement, cosmetics, stationery, plastics, laboratory and farm equipment.

According to the Comesa Statistics database, for instance, apart from DR Congo, all the top five import and export markets in Comesa are countries that embraced the FTA and benefited from the cross border trade.

Market share
In 2011 alone, the top intra-Comesa exporter was Kenya, with a market share of 20.7 per cent and goods worth $2.06 billion, ahead of Egypt coming in at a market share of 16.3 per cent, with goods worth $1.6 billion. With 11.5 per cent market share, Zambia claimed third spot, having exported $1.14 billion worth of goods, ahead of DR Congo’s $1.03 billion representing 10.4 per cent of the export market share.

The 2011 top intra-Comesa importers were Zambia, claiming 18.4 per cent of the import bill valued at $1.6 billion, with Libya in second place at 15.5 per cent, representing $1.37 billion. Egypt and DR Congo came in third and fourth place, with $834.8 million (9.4 per cent) and $806.1 million (9.1 per cent) respectively, ahead of Sudan with an import bill of $767.9 million, translating into 8.6 per cent market share.

Revenue
In spite of its shortcoming as a non-FTA member, Uganda still ranked sixth both as an exporter ($955.7 million/9.6 per cent market share) and importer ($659.5 million/7.4 per cent of the market share) within the Comesa region in 2011.

This explains why the small firms in Uganda are upbeat about doing commerce under FTA arrangements that have built economies elsewhere. Indeed, last year’s Comesa Summit in Kampala was themed on “Enhancing intra-Comesa trade through micro, small and medium enterprise development” considering that the bulk of economies in the region are MSMEs.

In Uganda, estimates say SMEs contribute over 30 per cent to the GDP, over 30 per cent to employment and 80 per cent of manufactured output, but this is not unique, as the immediate former Comesa Chair Malawian president Joyce Banda, noted.