If you asked Mr Edward Muwonge, a trader in a mall adjacent to Qualicel Bus terminal, downtown Kampala, to consider importing his merchandise from other countries other than China, chances are that he would say: “Yes” are close to none. His reasons? He could run into losses, yet it is easier for him to make profit from his current Chinese merchandise.
But also, he would need to have huge working capital, build a serious brand maybe through advertising and be patient enough to wait for five years before he can earn off his sales. His reasons, like those of his business partner Mr Emmanuel Kasole, are completely business related.
“Most of our goods are from China. China is known as one of the easiest countries to import goods from,” Mr Kasole says before Mr Muwonge delves more into the conversation.
“80 per cent of what we sell in my designers’ shop is from China, 5 per cent is from Italy while the rest is from Turkey,” Mr Muwonge chips in.
Mr Muwonge sells shirts, ties, shoes and trousers and has been at it for close to 12 years now. Using his own statistics, he believes 90 per cent of what is traded in the mall originates from China, including men’s and women’s wear while India partially accounts for the remaining percentage. The answer to the question on the major magnet for traders is the cost of goods from these markets.
“There is every class of merchandise from China, from the best to the lowest quality, be it leather shoes or plastic shoes. The advantage the Chinese have is that they can produce for everyone in the African market. Italians produce high quality things yet Africans want to buy cheap things because that is what they can afford,” Mr Muwonge says.
Since times are hard and consumers are looking for commodities within their budget, retailers turned to selling affordable merchandise without much regard for quality. In Muwonge’s example, most downtown retailers look for cheap merchandise to make a profit.
“If you show a retailer a shirt worth Shs20, 000, he will ask for one that costs Shs11,000 so that he can sell it at Shs20,000 and make a profit,” Mr Muwonge says.
Trends are also responsible for the shift to Chinese and Indian markets. Consumers, he explains, want a product that is on vogue but affordable. Quality hardly matters since they are willing to use it for a short time and China provides the cheap designer items.
It could be years since you last bought an item with labels ‘Made in U.K’ or somewhere in Europe or United States of America (USA).
It is hard to talk of quality without mentioning Europe or USA. The two are synonymous with quality – albeit with relatively expensive quotations.
Uganda now imports most goods from Asia and the Middle East particularly China and India.
Household items that could pass for simple basics such as toothpicks or toothpaste have to sit through hours as they journey from the Far East to the Ugandan market.
Surprisingly though is how business people go across borders just to import simple items such garlic – from China.
This has ballooned Uganda’s import bill. Data from Bank of Uganda indicate that Uganda’s import bill has grown from Shs10 trillion in 2007 to Shs18.6 trillion in 2017.
This indicates a 41 per cent increase over 10 years.
To put this in perspective, traditional source markets for Uganda’s imports such as United Kingdom have ceded market to other countries, reducing the country’s exports to Uganda to $56m (Shs207b) in 2017 from $101m (Shs373b) in 2007.
France and Sweden have also given in and have in the last 10 years seen their imports reduce to $24m (Shs88.8b) and $15m (Shs55.5b) in the period under review.
The two countries used to export goods worth $86m (Shs318b) and $83m (Shs307b) respectively.
Asked what the changing trends mean, Asad Lukwago, a partner at KPMG, said it is encouraging given that Uganda’s import bill has been growing slowly compared to other countries.
“If you look at our balance of trade in comparison to other economies, you will be amazed that we import less from Europe than we export there. So we are in a positive balance of trade with Europe.”
In the early 90s, consumer goods and personal care products were sourced from Kenya.
This trend, according to experts, was largely driven by the effects of political turmoil that had collapsed much of Uganda’s industries.
According to BoU data, 10 years ago, Uganda sourced goods worth $375m (Shs1.3 trillion) from Kenya, a trend that peaked during 2011 to $657m (Shs2.4 trillion).
However, it has continued declining, according to Dr Adam Mugume, the BoU director research. For instance, he says, in the last 11 months of 2017/18, goods from Kenya declined by 2.4 per cent, compared to the same period in 2016/17.
Uganda’s imports from Kenya, Dr Mugume says, are largely consumer goods and growth in this category has ceded way to raw materials and capital goods from China.
Unexpectedly though, Tanzania’s exports to Uganda have increased by 87 per cent in the in the last 10 years.
According to BoU data, Uganda imported goods worth $187m (Shs691b) in 2017 from Tanzania compared to $22m (Shs81b) that was imported in 2007.
The other rather interesting market source is DR Congo which, 10 years ago, exported goods worth less than $1m (Shs3.7b). This has since increased to $147m (Shs543b).
Mr Lukwago explains that Uganda might be importing more from DR Congo but much of these are a result of “illicit trade”.
However, Mr Lukwago argues that Ugandan traders have to analyse what is imported from Tanzania so that it can be produced here.
“This is because there is a market and it looks like no one is supplying those items in Uganda. So, the natural thing is to import, there is no way we should be importing from Tanzania,” he says.
According to Mr Lukwago, Uganda imports are quite obvious, including petroleum products, textiles, vehicles and their parts, manufacturing equipment, construction related products and foodstuffs such as beverages and oils.
China, India and Japan are the leading market sources for Uganda’s imports supplying mainly electrical appliances, machinery, construction materials, vehicles and pharmaceuticals, among others.
Data from BoU indicate that imports from China grew by 18.2 per cent, largely because of large public infrastructure projects, which demand high import intensity.
Uganda’s total imports from Asia alone were worth $2.2b (Shs8.4 trillion) in 2017 compared to $1b (Shs3.7 trillion) in 2007. This indicates a 54 per cent increase in the period that has been largely dominated by India as the main source country.
Imports from India started declining between 2015 and 2017 from $1.2b (Shs4.5 trillion) reaching $566m (Shs2 trillion). On the other hand, China imported goods worth $816m (Shs3 trillion) in 2017.
According to Mr Everest Kayondo, the Kampala City Traders Association chairman, an organisation with more than 50,000 traders, the changing trend could be explained by cost of manufacturing in China which is relatively low when compared to other countries.
“The prices are low when compared to the traditional source markets. Perhaps, this has been facilitated by the cheap labour in the new source countries,” he says.
Mr Lukwago notes that it is not only Uganda experiencing the shift.
“Markets such as India, Japan and China have enabling policies for manufacturing and good political policies that don’t infringe on the rights of other countries,” he says.
It is not just the Chinese textiles that have penetrated the Ugandan market. On the shelves of a popular supermarket along Burton street, toothpaste, tea, table mats, air freshener, kitchenwear, toys, electricity bulbs, electronics that range from coffee makers, gan stoves, television sets, blenders, bread toasters, radios and ovens are made in China.
However, if you are shopping spices, you will likely buy those from India while your salt, milk powder, hand wash, juice, popcorn, perfume and detergent will be made in United Arab Emirates.
Commenting on the imports market source drifting to Asia and Middle East, Dr Fred Muhumuza, an economist and lecturer at Makerere University, says: “The export driven strategies of the Asian countries that involve planting/supporting their own businesses to set up camp in the destination countries, makes it easier for home countries to export.”
Secondly, the Asians have affordable products possibly because of fewer adherences to standards. Poor Ugandans cannot afford expensive European products much as they are durable.
Finally, the ease of travel for traders who face fewer restrictions in travel compared to Asia. The EU largely thinks it is about permanent migration for work.
Since they (China, India and United Arab Emirates) have combined their numbers with good relations and cheap labour to produce affordable goods that attract traders from Africa.
These markets have a variety of products and offer cheap alternatives.
However, he cautions that China has heavily relied on fabricating global brands, something which becomes expensive in the long run.
China has recently started to tighten the noose around producers who produce counterfeits.