The Kampala “EFRIS” Strike; Why Traders Should Reconsider Chinese Stance

By Shemei Ndawula

In a poster that was circulating online and in Kampala malls and arcades for the past couple of days, a section of Kampala City traders, under a relatively unknown umbrella body the “Federation of Uganda Traders Association” was making  a clarion call for all traders within the business district to close their shops on the 8th of April.  This was to protest what they called the unfair tax regime of the Uganda Revenue Authority  and other trade related grievances. What stood out for me at first glance on this poster was a declaration; “LET THE CHINESE GO BACK TO FACTORIES”.

I am no trade expert but I do have a number of business interests within the city and more importantly; an education in foreign relations to know how damaging such a statement can be. Kampala is the thriving metropolis it is today because of its cosmopolitan origin. Perhaps most traders may not be aware of this but Kampala was never a capital city by design, it is too down south to be central in Uganda’s geography, too hilly for proper defense (one may argue all previous coups that have happened in Kampala clearly had the defending forces at a disadvantage). The Colonial government invested heavily in making Entebbe City, and later Jinja city  the locus of Urbanization. However none of these two could ever compare to the melting pot of cultures that was Kampala. That is who we are.

A lot of traders in Kampala seem to have been misled into believing that the Chinese businessmen in Kampala are the cause of most of their woes which, when investigated closely is far from the truth. A casual walk through downtown Kampala would acquaint the keen observer to the fact that the Chinese are not anywhere close to the top 5 demographics doing business in Kampala. To put it bluntly, there’s simply too few Chinese businesspeople in Kampala for them to pose a significant threat to the business of the average a Ugandan trader. If anything most of the Chinese businesses in Kampala are wholesale shops which are designed to sell goods affordably to the Ugandan traders which they in turn sell to the Ugandan consumer for a profit. This is a system that was developed out of a need to bring affordable quality manufactured products from China closer to the average Ugandan trader who didn’t have the ability to import in bulk.

I personally purchase artificial flowers for my flower shop from a Chinese wholesale shop downtown at a fraction of what it would cost me if I was to import the flowers myself. I know quite a number of traders within my same line of work doing the  same and who’s businesses would collapse if the Chinese wholesalers in Kikuubo closed shop. This is why many of us suspect that this narrative of “let the Chinese go back to the factories” could simply be a ploy by different players in the import sector to monopolize the market. Otherwise, since the Chinese operate an open market economy and we now have Ugandan importers getting goods right from Guangzou and Beijing it is hard to fathom why they are unable to have healthy competition with their Chinese counterparts and instead seek to instigate the small scale traders who’s businesses rely on these imports against them.

Additionally, there shouldn’t be anything wrong with Chinese factories having outlets and selling points within Kampala and other major economic hubs. For any manufacturer to stay relevant on the consumer market they should have contact with at least some of their clients to keep up with the changing trends and preferences. Many Ugandan companies do this, large brands like Jesa Diaries and Lato milk have got shops in almost all economic hubs across the country. It is actually more relevant for the Chinese companies to have representatives in all trading hubs so that they can better understand the local market and produce relevant products.

Looking at the bigger picture, China is perhaps our most significant trade partner outside of East Africa..Uganda’s exports to China surpassed $50M in 2022 and it’s very easy for this figure to have doubled by the end of 2024. In contrast Uganda’s exports to the United States of America through the AGOA(Africa Growth and Opportunity Act) initiative were only worth about $8.2M in the same period. This underscores the value of China as an important trade and development partner. On top of this the People’s Republic of China has got a Zero Tariff policy on 98% of the taxable goods produced in Uganda.

From this light it is clear to see that what some people are trying to market as a “Chinese problem” in Uganda is actually a Chinese opportunity. Instead of trying to push legitimate Chinese business representatives out of the capital our leaders should instead be lobbying the Chinese embassy in Kampala to set up trade hubs where Ugandan traders can get more information on the goods required by the Chinese market, the quantities needed and how to get them there. They can also set up backwards linkages directly from Chinese suppliers for goods needed in Uganda so that they do not need to worry about “competition” from the Chinese..

It is possible that the traders have got some genuine grievances that need to be aired out. It is in the best interest of all stakeholders for them to find common ground and hopefully a consensus is reached in the upcoming meeting they have got with the Head of State. However it is on the best interest of traders to look past hoarding the local market of 47 million people to explore the opportunity of 1.4 billion in China. Let’s not throw the baby with the bath water; with  98% of the goods to China tax exempt, while there maybe other concerns Ugandan traders need to worry about Chinese traders should not be one of them. They are helping in growing our economy, this in all ways is necessary.

The writer is a senior research fellow at the Development Watch Centre.

The Multilateral Trading System: The U.S Should Stop Undermining Global Practice

The Multilateral Trading System: The U.S Should Stop Undermining Global Practice

By Alan Collins Mpewo

It is not in doubt that the United States of America (US) has is always doing their best to stabilize global economy through various measures for selfish gains. Indeed, the US was among the spearhead as of what has popularly in recent times to be known as the Multilateral Trading System that has wide reception globally. This game after the second world that had seen an increase in various shortfalls especially during and shortly after the Cold war with the Soviets. The inception of this system lead to a finality of the General Arrangement on Tariffs and Trade. The Multilateral Trading System also saw the birth of the Uruguay Round sometime in 1980. Because of the growing conflict in the economies of scale between the competing blocs of the West and the Eastern globe there was need to set up formal rules to follow during international trade and business. Because of this, the United States was one of the founding members of the World trade organization and consequently part of the formulation committee over the World trade organization rules that would later bind all existing partners States at the time and those that would later in the near future adopt and assent to the World trade organization. Countless achievements have been since achieved by the World Trade Organization due to the recognizable leadership over the United States of America. It therefore goes without saying that the United States of America has made its solid contribution to the growth and periodic stabilization of the world’s economy.

Most important under the World Trade Organization rules was and still remains the dispute resolution mechanisms that have constantly been explored by the various parties whenever conflicts arise. The United States of America has without a doubt being on the forefront of always making sure that no more devastating consequences arise which would greatly affect majority of the global stakeholders in dangerously unimaginable levels. It should therefore be understood That’s that the United States of America has made various contributions as aforementioned herein, it has also in equal measures benefitted from the Multilateral Trading System. It is therefore safe to state that the system has been important in elevating various economies globally. The role played by the United States of America remains pivotal given that it is the world’s leading economy and ranks among the top three investment Nations in the world. Understanding that comes with major implications on how it exercises its dominance and authority in the various circles to which it trades and has power.

It is not bad for any Nation to come up with policies that seek to put it first ahead of other global key players’ interests. The United States of America in 2017 also came up with a major slogan and policy formulation along that line of “America first.” However, while it is a noble thing to do, friction and antagonism has since ruptured between the United States of America’s internal policies and the aspirations of other global actors under the Multilateral Trading System. The U.S has constantly deviated from the very ideas to which it was a founding state. Its trade protectionist policies have rather been hurting other trade stakeholders by closing the windows to trade information and active participation on the American soil. From commencing with ideas of globalization, the Multilateral Trading System has now come into an uncertain trade abyss and now every country does as it wishes under the current structures of global economics.

Among other things that explain the above State of affairs is the constantly unchecked bullying through its hegemonic tendencies that are used to exert unwarranted sanctions and dominance through the guise of “National Security.” In other instances, depending on how it chooses to act or react to other countries, it uses the connotation of “Human Rights.” It has been seen with the Middle East and due to the sanctions and blockages there has been deprivation of equity, debt, and investment in many countries because trade diplomacy ends up as a victim. Additionally, dispute resolution and settlement mechanisms have also been greatly undermined by the United States of America. An example can be cited before 2022 when the United States of America blocked the requisite appointments of the new members to the Appellate body. That alone has paralyzed the various efforts by concerned countries in trying to resolve the different disputes that have been arising on an appeal point of view. The United States of America holds a very important vote and by December 2022, it has refused the outcries from the other members of the World Trade Organization to have the Appellate body constituted for purposes of dispute resolution. While Article 17.2 of the Dispute Settlement Understanding gives the legal reception for the appointment of the members to the Appellate body, enforcement has been stalled by the United States of America. By February 2023, 29 appeals are still pending as a consequence of US’s actions.

Some other practices have included, offending export control, often undermining other members’ legitimate industrial policies, unwarranted sanction measures, economic coercion, disrupting industrial and global supply chains, among many other. Other strong economies and lead actors like China and Mexico and the World Trade Organization have constantly called out the United States of America over the above practices but the endeavors have met unresponsiveness. And therefore, while the U.S’ reaction remains an impediment, if unchecked, the once booming Multilateral Trading System is a route of demise.

Alan Collins Mpewo, is a Law and Senior Research Fellow, Development Watch Centre.

China’s BRI and a formidable AfCFTA in the face of Globalisation

By Musanjufu Benjamin Kavubu

After many years of planning, discussion and negotiations on the 1st day of 2021, the African Continental Free Trade Area (AfCFTA) came into existence. Now the basis for a free trade area is free movement of people and free movement of goods and commodities across countries’ borders. This whole process revolves around transportation. There is talk that “it’s easier to fly to France than fly directly to West Africa from East Africa” because there is barely any infrastructure to support intra African travels.

The Trans African highway system can easily come off as a myth if you looked at the figures for Intra-African trade.  For example, in East Africa, Kenya Exports about $ 1 billion worth of goods to the United States and $ 500 million to EU but it only exports $ 69 million to Ethiopia who they share a land border with. Of course, we can’t water down the impact of tariffs amongst African countries but there is need for ground infrastructure to foster an African free trade area.

We are yet to see the benefits of AfCFTA but in the last 10 years, there is something that has sprang up and it’s a remarkable vehicle for the African Free trade area. In September 2013 China’s President Xi Jinping put in place his grand political-economic project and in it came the Belt and Road Initiative (BRI) and at the moment it links about 155 countries and 32 International organisations. AfCFTA on paper brings together 55 markets of 1.2 billion people with a total GDP OF $ 2 trillion. The BRI project at the moment has 52 African countries out of its total 155 worldwide.

A close look at the BRI, one will understand how much China is subconsciously putting in an African Free trade area that benefits the European Union more since Exports to Africa stand at 36% against China’s 9%, EU imports from Africa including uranium for their weapons and energy are at 33% against China’s 5% but its China that is blamed to over invest in Africa’s infrastructure. One would say China uses its Silk Road history to link to Europe and maximise the African supply chain but then that would fit the definitions of Globalization which is the future.

In China’s bid to facilitate free movement of goods and services Beijing set up $ 3.3 billion in the Nador Med West industrial port in Algeria and it’s said that route is the North African link to West Africa through the Trans-Saharan Highway. In West Africa we have witnessed China set its foot on projects like the Abuja-Kaduna railway line that was done by China Civil Engineering Construction Company (CCECC) as Africa’s giant embarks on setting up a standard gauge across the country. In 2023, we saw China sign a deal that would see oil pipeline in Niger and set up an industrial park.

The El Hamdania Central Port is one of the largest in Africa and its part of the BRI in Algeria on top of it China has done a 750 mile East-West road that connects Algeria, Morocco and Tunisia. At the peak of the resent Ethiopian civil war, the Addis Ababa-Djibouti Railway was a source of contest but no one ever mentioned that it was a BRI by-product that links Landlocked Ethiopia to the Sea and the Ethiopia-Djibouti Water Pipeline all financed by EXIM Bank.

 

There is a 10,228 KM road that starts from the many ports of Egypt and ends in Cape Town. The great Trans African Highway. This route is full of Chinese projects that are bettering transportation and industrial infrastructure. It’s said Egypt could be the most important part of the BRI with projects like the Chinese Industrial zone in the Gulf of Suez, the electric train system for Egypt’s new capital. Of course, geopolitically, Egypt has always been a prize for world powers and China is not being left behind. Apart from the African Cup of Nations there, nothing that has made Egypt more active in African affairs like the AfCFTA.

Down The great Trans African Highway in Sudan, China has been part of the rehabilitation of railway lines by the Chines Company CRRC Ziyang. China is at the forefront of the oil industry in Sudan and it has promised to have a nuclear power station be set up in future.

Along the great Trans African Highway is the East African Community and the BRI has seen the development of the Mombasa-Nairobi Standard Gauge Railway and also Kenya’s biggest infrastructure project since Independence that spans 470 km in 4 hours and half, boosting the GDP by 1.5% and creating about 40,000 jobs for Kenyans. In Tanzania, the BRI has put in place a 2,561 km line that links Dar es Salaam to Mwanza on Lake Victoria and will further go to Burundi, Rwanda and Democratic Republic of Congo. In Uganda, there is the Entebbe-Kampala Expressway that connects Uganda to the world in a shortened time.

The BRI could be China’s plan to speed up trade with Africa but at the end of the day chokepoints are eliminated they in turn benefit the African Continental Free Trade Area (AfCFTA) since there is this new mix of rail, road and water transport infrastructure being put in place. As China tries to reach more so called less developed countries, Africa is being opened up for Intra-African trade. Then AfCFTA will be able to lift 30 million African from poverty in no time.

Musanjufu Benjamin Kavubu is a Junior Research Fellow at Sino-Uganda Research Centre.

 

 

 

 

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