Kenya: Uganda and Kenya Dance, but Don’t Like the Music

In recent weeks, Ugandan traders have again been griping about Kenya, complaining that their eastern neighbour is erecting hurdles to their trade.

A wide range of Ugandan products, from sugar, rice, milk, eggs, and onward to booze are being blocked, even as Kenyan goods are allowed to trade relatively freely in Uganda.

They want the Kampala government to act; either get Nairobi to be business-friendly, or retaliate against Kenyan goods.

If this column had been written for a Ugandan newspaper barely 15 years ago, it would have opened exactly like this, except you would have had to exchange Kenya and Uganda.

At that time, Ugandan traders were screaming for the government to block Kenyan goods, to give the local industry time to grow and mature. The then very influential Uganda Manufacturers’ Association (UMA) led the fight. At that time too, the Uganda government, said “no”.

We’ve written before in this space about this reversal of roles, but it’s a long story with many layers.

There are things like electricity and water, that are cheaper for businesses in Uganda than in Kenya. Also, until about 10 years ago, Uganda had one of the freest economies not just in the region, but in Africa.

Ahead of the Tokyo International Conference on African Development (Ticad) in 1998, a business publication in Asia whose editor had probably had too much rum with his coffee, rated Uganda the freest economy in the world. In any event, a burst of enterprise developed and it has fruited fully in the last few years.

Cheap Dubai goods

Despite this, the Uganda economy itself, surprisingly remains one that not too many people in the region understand. Traders in Moshi, Tanzania, find it quicker and cheaper to cross to Uganda to buy cement and other goods. They can also buy goods from Dubai cheaper in Uganda, than if they went to Dubai.

The economy has become primed to supply South Sudan, eastern Democratic Republic of Congo, half of Kenya from the northwest through the Rift Valley, down to western Kenya and, until the recent bump in the road, Rwanda.

In the Christmas of December 2013, after the civil war broke out in South Sudan, I remember watching a TV report on the holiday’s season shopping.

One trader in downtown Kampala bemoaned the war in South Sudan, showing his stock piled to the roof, which was unbought. He had stocked, hoping it would be cleared by the South Sudanese as usual.

He denounced Ugandans, saying, they were mean-fisted shoppers. A Ugandan man walks into his shop with his wife and two children, and buys one or two items for each of them, he said. A South Sudanese man, he said, walks in with his six wives and 30 children, and buys 10 items for each of them. Kampala, and a handful of other towns, are like a vast Eastleigh market.

Apart from the earlier factors, and tax system, the other elements of this are complicated. Part of it has to do with the Uganda footprint in the African Union Mission in Somalia (Amisom). There is a vast supply network that regularly brings goods by cargo plane between Uganda and Somalia for the military, and the supply chain extends to the Gulf states and Asia.

They also bring consumer goods, which aren’t subject to duty, and they end up in the shops at prices you can’t compete against.

However, unlike any other country in East Africa, it sprouted a whole new “native” post-war commercial class, starting from 1990, which didn’t have legacy issues or was encumbered by old industries, enabling it to be quite nimble and efficient.

New major roads

Equally interesting, is how the country has been building out its roads towards, especially, Kenya. In just the last few weeks, it commissioned a new 44.5 kilometre road from the key commercial town of Mbale to Lwakhakha on the Uganda-Kenya border.

A new 105-kilometre road from Musita, Mayuge, a short distance from the industrial town of Jinja, was completed recently connecting to Busia at the Uganda-Kenya border.

There is a major rebuild of the 77-kilometre-long Suam road underway, to link to Endebess in Trans Nzoia County.

The road from the northeastern town of Soroti to Moroto — a spitting distance from Kenya’s northwestern border — has been upgraded to bitumen, and another loop from Mbale to Moroto is underway.

If you add the old traditional links at Busia and Moroto, Uganda will, in the space of five years, have built essentially five new major road links to its border with Kenya alone, creating an inexpensive pipeline of goods.

Most of this is fuelled by the Kampala government’s view of East African trade not as a market issue, but a strategic and national security imperative. It is the price it has to pay as a landlocked economy to gain access to sea routes.

But it’s also doing a lot to just make it cheaper to produce in Uganda than in Kenya. For the long-term, Kenya will have to muster a competitive, not bureaucratic, response to this emerging challenge.

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