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Uganda counts its losses in South Sudan

Uganda counts its losses in South Sudan

Uganda’s traders, who have hitherto done brisk business across the border, are counting their losses after violence erupted in July between forces loyal to President Salva Kiir and followers of his deputy Riek Machar in South Sudan’s capital, Juba.

“Our members lost everything. They lost cash, goods and physical property. They also lost life. It is not possible to quantify the losses,” says Issa Ssekitto, the Communications director of Kampala City Traders Association (KACITA), the country’s umbrella body of top business firms in the country.

According to Ssekitto, KACITA members were suffering losses even before the July crisis. “The Uganda Grain Traders Association has been owed $48m by various South Sudanese firms since 2011. Other traders are owed $15m,” Ssekitto claims.

Attempts to quantify the losses arising from the violence are underway. According to Ssekitto, over 850,000 individuals trading or working in South Sudan are affected. Estimates put the number of Ugandans living there at 3m. Other than trade, Ugandans in Sudan operated hair salons, restaurants; boda boda (motorcycle taxis) barber shops and beauty salons.

“We built the Juba central market called Konyo Konyo, which has now been forcefully taken over by South Sudan nationals. They do not respect the rights of Ugandans to their property,” claims Pastor Eddie Ssenjobe, who chairs a nine-member team compiling losses suffered by Ugandans doing business in South Sudan with the objective of helping them resume economic activities after their evacuation from South Sudan by the Uganda People’s Defence Force.

“We have so far registered 28,000 victims who lost everything. We expect the number to rise to at least 50,000,” says Ssenjobe. He says most of those affected operated petty businesses such as hair salons, market stalls and groceries, which were looted. The victims are currently unemployed and without livelihood.

According to Ssenjobe, establishing the losses is an uphill task because of the large number of victims involved. South Sudan has been the main destination of Ugandan products since it gained independence in 2011.

According to an official in the Department of Exports in the Ministry of Trade, Industry and Cooperatives, who declined to be named, Ugandans, many of them illiterate and less conversant with international trade practices, find it easy to do business with Juba because it is near and less stringent on trade regulations and international product standards.

GDP declines

Since the escalation of violence in July, the Ugandan economy has been suffering. John Gobi, an economist from the Ministry of Finance and Economic planning, says GDP declined by 0.5% in July and is expected to decline further as the impact on agriculture continues to bite.

“It is impossible to achieve the 5.8% economic growth target this financial year,” says Gobi. He adds that “because agriculture is the heart of the economy, the negative multiplier effects of the Juba crisis on the economy are expected to become graver.”

He says $265m in export revenue from South Sudan will be lost in 2016, a figure which only reflects formal trade. The value of informal cross-border trade is difficult to quantify because close trade and cultural links between the border communities are a way of life. However, conservative estimates by a Trade Ministry official who declined to be named put the figure at over $100m this year.

The effect of the collapse of trade with South Sudan is already being felt by the Uganda Revenue Authority (URA), the national tax collector. URA commissioner general Doris Akol says revenue collections are down and the authority was unlikely to meet its tax collection targets for the 2016–17 financial year. In addition, the economy has been strained by the arrival of thousands of Ugandans from South Sudan who have swollen the unemployment figures.

Impact on agriculture

The main victim, however, is the agricultural sector. According to Ssekitto, Uganda exports every imaginable agricultural product to South Sudan. Its fertile soils and good weather give the country comparative advantage in the region.

Prices of agricultural products have plummeted in the local market. “Pineapple farmers in Luweero district in the central region who borrowed money from banks to expand their farms are stuck with pineapples, which are rotting in stores,” says Ssekitto. A survey of markets in Kampala shows they are flooded by cheaply priced agricultural products hitherto destined for South Sudan. Pineapples, which used to sell for USh6,000 ($1.66), are being sold at USh1,000.

Ssekitto says some banks are demanding repayment of agricultural loans. “We are asking them to wait as we engage government to see how bail out the affected traders,” he says.

It is not only farmers who are affected. Ugandan firms have been re-exporting vehicles, especially four-wheel Land Cruisers, which are in demand in South Sudan due to its bad roads. Car dealers are paying charges for the vehicles stuck in customs warehouses awaiting re-export to South Sudan. “We do not know when we shall do business again with Juba,” says Andrew Musoke, whose KK Motors has been supplying four-wheel vehicles to Juba.

Other firms have been re-exporting electronics and electrical appliances, generators, solar panels and construction materials. “While some items in South Sudan were looted, those which were delivered have not been paid for,” says Ssekitto.

Firms owed by South Sudan facing collapse have petitioned the Uganda government to bail them out. They want the government to draw money from the South Sudan account in the Bank of Uganda.

“It is an open secret that at the height of the conflict in Juba an unknown but large amount of cash dollars was deposited in Bank of Uganda by the South Sudan government. I have raised this issue with top government officials when discussing settlement of money owed our members and no one has denied that money exists,” says Ssekitto.

There was uproar in parliament over the government’s plan to draw $50m from the Treasury to advance money to the South Sudan government to settle claims by the traders. Ssekitto says that the list of firms to be paid includes nightclubs in the city and excludes the affected firms.

Whatever the measures the government takes to mitigate the adverse effects of the collapse of trade with South Sudan, Uganda’s economy will suffer for some time.

Epajjar Ojulu

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Written by African Business Magazine

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