What opportunities does Guangdong Province as one of China’s big commercial and industrial centres offer Ugandans?
Guangdong Province is currently ranked the richest province in China with a Gross Domestic Product (GDP) of $1.4 trillion contributing approximately 11 per cent of the total economic output of mainland China. Its economy has been growing on average between 8 to 9 per cent per annum higher than the national average of 6.7 per cent. Guangdong’s foreign trade accounts for more than 25 per cent of China’s foreign trade combined with a population of I10 million. The Province is home to the largest number of billionaires in mainland China and hosts the largest African diaspora in the mainland estimated between 40,000 to 50,000 revolving residents.
How relevant is the Canton Trade fair held annually in Guangzhou to Uganda’s business community?
The Canton Fair is the largest fair in China and is held twice a year in Guangzhou. It attracts both local and international machine and equipment suppliers. In 2018, total revenue of $30 billion was realised at the fair in business transactions out of which 54 per cent ($16.2 billion) was generated from machinery and electrical product sales. A total of 220,000 buyers and 25,000 exhibitors usually participate in the fair.
The Canton Fair provides an ideal platform for manufacturers of products and equipment suppliers to meet with prospective international buyers and introduce to the market their new products and technologies. The fair is divided into three phases, the first phase covers electronics, lighting equipment, vehicles & spare parts, machinery, hardware & tools, construction materials, chemical products, energy resources, and while Phase two covers international Consumer goods, gifts, and home decorations. Phase 3 covers textiles and garments, shoes, office supplies, cases and bags, recreation products, food, health products and medical devices, and the international pavilion Location.
Ugandan SME’s are encouraged to attend phase one of the fair so that they meet directly with machine /equipment suppliers and purchase some machinery for their cottage industry. Likewise, Ugandan exporters of coffee, sesame, crafts and other commodities are encouraged to exhibit and promote their products during Phase three of the fair.
In summary, the Canton Fair, is an ideal platform for Ugandan traders and exporters to purchase machinery and equipment for value addition while creating brand awareness for Ugandan products such as coffee, tea and sesame.
What is the current Uganda/China trade status? What are Uganda’s most competitive products for the Chinese market?
Like most countries in the world, Uganda has a trade deficit with China estimated on a ratio of 99 to 1 per cent last year. Worse still, most goods exported to China are mainly raw form agricultural products that are of low value. According to Uganda Revenue Authority figures in 2018, China exported goods worth over $1.71 billion to Uganda whereas imports from Uganda to China were valued at a paltry $28 million.
Several factors have been attributed to this low value of imports; namely low production levels with limited value addition, uncompetitive products and services, inadequate finance for the export sector and inadequate infrastructure for trade development combined with limited information and institutional inadequacies.
The Chinese exports to Uganda include mainly electronics, building/construction materials, clothes, household items (furniture, footwear) and small machinery/equipment, whereas, Uganda exports to China include mainly semi-processed hides and skins, coffee, sesame, mineral products/stones and crafts.
What can government do to increase her exports to China?
Government should continue investing in road infrastructure development together with hydro power energy generation and establishing industrial parks. The agriculture sector should continue being supported by providing seedlings for increased production and low cost financing for the purchase of machinery and equipment for value addition and technology transfer.
How is Uganda Coffee fairing in the Chinese market?
For the past decade, the coffee market in China has been growing at an average rate of 13 to 15 per cent per annum. Nonetheless, the market is still in its infant stages with relatively low annual per capita consumption levels of five cups compared to 300 cups in the western countries. China, which has a long tradition of tea drinking, still has a huge potential for coffee growth mainly driven by a growing middle class and youthful population with western tastes and high disposable incomes.
After a decade and a half since the first Ugandan coffee entered the mainland China market, some notable progress has been achieved in an effort to create brand awareness of Uganda coffee as a quality product among Chinese consumers. For instance, Uganda coffee is now sold in some of the online stores/platforms such as Taobao, JD.Com and other retail outlets.
At the end of FY 2016/17, an estimated 3,500 tonnes of Ugandan green coffee were exported to China compared to 40 tonnes realised in FY 2003/04, when it was first introduced. These are still relatively low volumes compared to the size of the population. Therefore, more promotional work needs to be undertaken through participation in coffee exhibitions, conferences, barista championships and other related brand awareness events.
What advice would you give to Uganda’s business fraternity about doing business with China?
China and Uganda have an excellent relationship at all levels (political, economic and social) and it should be developed further.
Our advice to the Uganda business community is to continue working closely with the Consulate in addressing some of the language and cultural challenges encountered while doing business.
Secondly, we also appeal to the business community to seek advice through our research unit before signing contracts and making purchases especially online purchases of machinery and equipment that may require software translations and user guide support. This would assist in circumventing some of the commercial and quality disputes caused by lack of knowledge and product information.
OPPORTUNITIES FOR UGANDAN BUSINESSES
Guangdong Province is also home to three Special Economic Trade Zones (SEZ’s) with manufacturing companies and industries in nearly all sectors of construction, food, mining, agriculture, energy ICT just to name a few. More importantly, Guangdong is currently ranked the leading centre of innovation and technology with companies like Huawei, ZTE and Tencent headquartered in one of the big cities called Shenzhen (regarded as the Silicon Valley of China).
Therefore, the Province offers Ugandan businesses an ideal environment for establishing partnerships for Ugandan exports combined with targeting outbound tourists furnished with disposable incomes for travel and leisure. The availability of affordable small machinery and equipment for value addition provides an opportunity to Small and Medium Enterprises (SME’s) in Uganda to set up factories that will create jobs and wealth for the youth.
Currently, approximately 99 per cent of Ugandan traders and entrepreneurs have established contacts and purchase most of their goods from the Province. At the same time, the Canton Fair which is held twice a year and is the largest fair in China, attracts hundreds of Ugandan visitors and entrepreneurs to the Province every year.