What you need to know:
- South African investors have agreed to invest in telecommunication, electricity, and Ammonia fertilisers among others following a two-day trade and investment summit.
There seems to be a renewed energy about Uganda–South Africa trade and investment relations even as a barrage of grave complaints some relating to non-tariff barriers still stand in the way of otherwise a historical relationship between the two countries.
According to Uganda investment Authority (UIA) records, South Africa is a major contributor to Uganda’s Foreign Direct Investment (FDI), specifically in sectors such as telecommunications, brewing and beverages, energy, finance and banking, and wholesale and retail.
Two out of the five top banks in the country are South African, contributing 30 per cent of the total loans, according to the Private Sector Foundation Uganda’s (PSFU) computation.
Before Covid – 19 hit the economy, there were over 70 South African companies, with an investment of $2.4 billion, going by PSFU data which further indicates that presently, there are slightly more than 35 companies operating in the country.
Despite the reduction of South African companies in the country due to macroeconomics challenges, eroding purchasing power and the effect of Covid-19 on the economy, the balance of payment remains in favour of South Africa. Uganda’s exports to South Africa are in the range of $20.7 million (about Shs77.5 billion) while South Africa’s exports to Uganda are to the tune of $187m (nearly Shs700 billion, according to United Nations COMTRADE database.
“We are here to ensure that this is tripled through partnerships and joint ventures,” the Private Sector Foundation Uganda (PSFU), chairman Board of Directors, Mr Humphrey Nzeyi, told participants at Uganda - South Africa Business Summit held in Kampala – Uganda last week (between 5-6th).
Uganda imports from South Africa, mainly: electronic and electric equipment, motor vehicles and machinery (both valued at $46.4 million), while Uganda exports to South Africa packaged medicaments ($ 13.1 million), coffee ($ 2.88 million), and raw tobacco ($ 1.28 million).
“All we need is not a competition but partnerships and joint ventures to harness these opportunities for our fastest-growing young population and our economies,” he said.
With partnerships and joint ventures, coffee that Uganda exports (amounting to $862 million last financial year) to the rest of the world can be processed here before exporting, reaping multiple values out of the cash crop.
Currently, Uganda imports cars from Japan ($59.5 million), United Arab Emirates ($21.3 million), United Kingdom ($4.89 million) and Thailand ($2.72 million), yet Mr Nzeyi says if the two countries collaborate and develop partnerships, beginning right after the concluded summit, Mr Nzeyi, “believes 90 per cent of car imports to Uganda should be from South Africa.”
By close of the two-day summit, a South African company committed to invest in the production of transformers in Uganda. To that effect, a Memorandum of Understanding (MoU) between Uganda Industrial Research Institute (UIRI) and Hexagon Electrical (PTY) Ltd for the setting up of an Engineering hub to manufacture electricity transformers was signed.
Another MoU for the export of 25 tonnes of beef per month from Uganda to South Africa was inked. This is addition to the exports of roasted coffee from Uganda to South Africa which will more than double Uganda’s current exports of $1.2 million (nearly Shs4.5 billion).
After injecting about Shs1.5 billion into the trade and investment summit, the telecom giant, MTN has also committed to a partnership with an assembling plant for cell phones in Uganda, pledging to purchasing one million handsets from the factory once it is up and running.
There was also expression of interest from a South African company to invest in the manufacturing of Ammonia fertilisers using green energy of which Uganda has plenty. Commitments to increase by four-fold the tourist arrivals including weekly charters from South Africa to Uganda were also made.
The national carrier - Uganda Airlines agreed to increase the weekly frequency and capacity to South Africa and maintain a rate of a dollar per kilo of fruits, vegetables, flowers and coffee, a commitment looking to consolidate the efforts and gains resulting from the Kampala trade and investment Summit.
Additionally, commitments towards training support for the hospitality Institute in Jinja, a key tourism sector support institute was agreed upon by the South African counterparts who are much more experienced in this field.
Another MoU between the South African investment prefect and its counterpart, Uganda Investment Authority (UIA) to promote and facilitate investments between the two countries was inked.
For the aforementioned to see light of the day, political will and commitments can never be emphasised enough.
Largely, many of the unresolved challenges the two countries are grappling with, according sector players, industry captains and sector analysts interviewed for this article, are either related or direct consequences of failed political leadership at several levels across ministries, departments and agencies (MDA) of the two governments.
For that, the Ministers reiterated the commitment of their respective countries in resolving all challenges to business in Uganda and South Africa, including; strengthening trade and business linkages for favourable balance of trade between the two countries.
They also committed to remove all trade barriers and enhance free movement of goods, services, capital and people.
Ministers from both countries undertook to expedite processes of reciprocal recognition of standards and compliances for goods and services.
Opportunities are in abundance in all economic sectors for the private sectors in the two countries to take advantage of.
For example in mineral sector, the country’s Minerals investment opportunity is now at $ 620.5 billion, according to government records. Uganda is also among the top exporters of fresh fruits and vegetables exporting over 5.8 million tonnes worth $ 35 million per year, according to CIO Africa 2021 publication. This can be scaled up through investment in horticultural products and opening of the South African market. Uganda’s untapped potential for fish exports is worth over $150 million.
Being the largest producer of freshwater fish, there is an opportunity for investment in high-quality fish farming on Lake Victoria. Between June 2020 and July 2021, according to data from the Central Bank, at least 15,149 tonnes of fish worth $118.6m was exported. However, there is high potential to grow this number to more than 3.5 billion.
Uganda is one of the major milk producers in the EAC. The country has reached production levels of 2.8 billion litres of milk annually yet, only half of it is processed and consumed raw.
There are immense opportunities in milk value chain including the processing of yoghurts, powdered milk, ghee, and cheese. Through partnerships and joint ventures, this opportunity can easily come to fruition.
Pending issues, Visa priorities and opportunities
Although the trade and investment summit seeks to strengthen and cement the economic relationship between Uganda and South Africa, several barriers continue to affect the free movement of people and goods, derailing trade and investment according to PSFU, the private sector apex body in the country.
Visa issues were glaringly conspicuous both before and throughout the trade and investment summit, with South Africa being marked as the most notorious when dealing with Visa requests, often times complicating the process, making it hard for Ugandans to access permission to enter, leave or stay in South Africa for a specified time period.
In a mini survey carried out by Prosper Magazine, majority of the Ugandan businesses attending the trade and investment Summit were dissatisfied with the way South Africans go about handling their Visa issuance.
In her presentation, the South Africa’s High Commissioner to Uganda, Ms Lulama Xingwana, indicated that South African Visa is not for every Tom, Dick and Harry, but ‘real business people.’
She said: “Visa is not a problem, but you must prove that you’re real businessman in Uganda before you go to South Africa. If you are going to look for a job, we will ask a number of questions.”
Uganda’s High Commissioner to South Africa, Paul Omiat Amoru, recognises the visa issue as a pressing matter, noting that it is being discussed at high level and soon, it will be resolved.