The economics of banning second hand clothes in Uganda

As you walk along Nakivubo Mews Road, your eye cannot miss the two-man stall of a well-stretched sack holding clothes for sale. 

“Clothes for children at two thousand shillings,” the sellers call out as a couple of interested buyers gather. In Owino (St Balikudembe) and Nakawa markets, in the roving markets, the practice is similar. All these are jostling for affordable and quality made used clothes.

Women, laid-off or entrenched workers, and youth have found a break in business with the sale of second-hand items being the launch pad. For many, capital as small as Shs20,000 is a good start.

Through this business, many have educated children, built houses and other businesses, among other achievements.

While opening the Sino-Uganda Mbale Industrial Park in August, President Yoweri Museveni announced an unexpected ban on imported second-hand clothes. 
“Stop buying second-hand clothes, these clothes are for dead people,” he said.
Uganda has been trying to phase out imports of secondhand clothing with the aim of building her local textile industries. 

Background
Global trade of second-hand clothing (mivumba) is facilitated by the abundance of donated clothing in wealthy countries and the fast-changing/ trends in the fashion industry. This trade accounts for approximately 0.5 percent of the total value of clothing traded worldwide, according to the Ministry of Trade, Industry and Cooperatives. 
In some countries, imported used clothes constitute the biggest percentage of purchased and used clothing. Today, second-hand clothes are mostly got from charity organizations that used the proceeds to fund their major charity operations. Western countries with a big middle class are the top used cloth exporters, while the poorer countries such as those in Africa are the biggest importers. 
While Rwanda implemented the second clothes ban in 2016, Uganda backed out due to immense pressure from the US, one of her biggest second-hand cloth suppliers.

Geraldine Ssali, the Permanent Sectary at the Trade Ministry, says total imports for the Cotton Textiles and Apparels (CTA) sector in Uganda are estimated at over $252m. Of this, $56m is for new clothing and $83m for worn clothing. 

Additionally, Uganda imports $38m of furnishing fabrics, drapes, blankets, sheets, towels tarpaulins, homeware, and the like. 

“There is an opportunity to replace a significant volume of these imports if efficient and diversified manufacturing industries were established,” she says.

Taxes collected
On the other hand, according to the Uganda Revenue Authority (URA), the taxes paid on second hand clothes have risen to Shs265 billion in the financial year 2022/23, up from Shs243 billion in the financial year 2020/21.

In regards to what is paid per container, Ibrahim Kibuuka Bbosa, the URA assistant commissioner for public and corporate affairs, says the amount of revenue collected depends on the weight category of the container. 

“The weight categories include 15 tonnes, 24 tonnes, and others. The customs officer uses a declaration form to determine the appropriate charge for each container. Some bales are classified as passenger baggage and contain used clothes, which are declared accordingly,” he says.

However, regarding new clothes, for the last three years, URA has collected approximately Shs262.4 billion from international trade taxes (import duty, Withholding tax and Value added tax) from the importers. 

Bbosa adds that while the ban on second-hand clothes will impact import duty, it will be a short-term loss, but a long-term gain for the local industries and the Income tax revenues. 

“Local industries can create more employment opportunities for the citizens, which can increase their disposable income and increase income tax revenues of Pay as You Earn (PAYE), corporation income tax,” he says. 

Torn
Despaired yet appalled by the talk of a ban on second-hand clothes, Mr John Kabanda of New Generation Traders says the bigger percentage of Uganda’s population has a direct or indirect benefit from the trade. 

“There are the clearing agents, the shipping companies, the young and single mothers, the school dropouts, the elderly even those exporting to neighbouring countries. With the proposed ban, what becomes of the containers in transit or those at the clearance centres? How about all these traders downtown?”

He wonders what will become of their business but also questions the move yet there is barely a local industry producing for local production. 

“There are clothes as low as Shs1,000 in second-hand piles and one wonders if these industries, which produce for export will have something for someone with this budget. But many of us have no other job option at the moment,” Kabanda says.

Adding, “If they need to ban used clothing, do so for undergarments. Otherwise, bundling up all the second-hand clothing will leave many in a deplorable situation.” 

He also decries the ever-increasing taxes on clothing imports, saying the profits are dwindling with each passing year.

Bbosa says the increase in international taxes is government’s deliberate move  to discourage importation while encouraging import substitution and export promotion of Ugandan-made products. 

“It also accounts for the protection of domestic manufacturers,” he says. 

Implementation of ban 
Ssali says banning the importation of used clothing will protect health, safety and the environment. However, it should be implemented in a phased manner. She agrees with traders on banning the importation of all used underwear products (socks, pants, bras) not forgetting torn and stained textile products. 
“Second-hand clothing poses a risk of microbial organisms, migration of dyestuffs or chemicals to the skin and cause skin diseases such as body itches and cancer. In addition, there is capital flight on low-value products with short life cycles to the environment,” she says.

Secondly, the local textile industries should be supported. Currently, the local factories have established the capacity to make knitted t-shirts and a few woven products (bed sheets, school uniforms, mattress covers). However, to serve Uganda’s population, these industries must increase in value addition to cotton and the range of manufactured textile products. 

“If we are to substitute imported textile products, especially used ones, there is a need to build capacity in the textile manufacturing factories, fashion design studios and garment workshops,” she says.

Experts’  view 
When contacted, the Economic Policy Research Centre senior research fellow, Corti Paul Lakuma, notes that banning second hand clothes is fine, considering its advantages. 

He says: “ It will address environmental issues of dumping used clothing in Uganda and landfills..”

But the question is: how can the country practically solve this problem?
Since Uganda does not have enough textiles to satisfy the demand, cheap Chinese fabrics could close the demand gap. Therefore, what is the point of banning it? 

He also believes the economy doesn’t efficiently produce enough to keep apparels cheap. Majority of Ugandans cannot afford new “made in Uganda” fabric. 

“It’s still a specialty market for uniforms of armed forces and educational institutions, and perhaps the very rich,” he says.