Exporters eye new markets after Uganda’s entry into FTA

Uganda’s small and medium businesses are eyeing regional expansion with the country’s recent admission into the Common Market for Eastern and Southern Africa Free Trade Area (FTA).

Uganda had delayed signing the FTA, citing fears that the country would be flooded with goods from other countries in the bloc, killing local production.

An FTA is a trading zone whose member countries have eliminated tariffs, import quotas and preferences on goods and services traded between them.

Uganda is now eying more trade with Comesa member states and a wider market for its goods. Business people see the advantages of access to over 400 million people in the Comesa region.

Before joining the FTA, Ugandan goods entering the other Comesa states were subject to a four per cent tax.

READ: Uganda joins Comesa FTA, avoids sanctions

“We just have to increase production. Officials from the Uganda Industrial Research Institute have taken my samples to Kenya and South Sudan, but we are already exporting to Tanzania, Rwanda and Burundi,” says Prudence Konika, displaying a 750ml bottle of the Bella Wine her company produces.

“We hope the whole trade system will be fair and other countries will learn more about our products. We want to get into the whole [Comesa] market,” said Ms Konika whose company K-Roma produces 20,000 litres of wine annually, most of which is sold in the local market.

The Uganda Consumer Co-operative Union, maker of fruit juices, has been trying to break into the export market since 2008. Its executives said the firm is planning to sell its products in regional markets.

Zanaa Ltd, which deals in leather goods, is looking to the Comesa market as a source of raw materials for its vanity purses and men’s bags. Zanaa products are mainly exported and sold in high-end stores in Europe and North America, the company’s CEO Linda Lwanga said.

“We must guarantee quality, and to do that the source of our raw materials cannot always be Uganda. The challenge we have faced in the key markets where we sell our products is that the consumers are discerning and ask detailed questions; they demand to know where and how this cow was raised, how it was killed, how the horn was treated,” Ms Lwanga said.

The 19-member Comesa is working to become a common market by 2015, and a monetary union is mooted for 2018.

Uganda becomes the 15th member state of the Comesa FTA, which started in 2000; the others are Burundi, Comoros, Djibouti, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Zambia and Zimbabwe. In the region, only Eritrea, Ethiopia, Seychelles and the Democratic Republic of Congo are not members of the FTA.

Small businesses in Uganda feel that the country’s reluctance to join the FTA earlier on has cost them trade opportunities in Comesa.

Benefits of cross-border trade

Statistics from the Comesa Secretariat show that, apart from DR Congo, all the top five import and export markets in the bloc are countries that embraced the FTA and benefited from the cross-border trade.

Last year, the top intra-Comesa exporter was Kenya, with a market share of 20.7 per cent and goods worth $2.06 billion, ahead of Egypt at a market share of 16.3 per cent, with goods worth $1.6 billion.

With an 11.5 per cent market share, Zambia claimed third spot, having exported $1.14 billion worth of goods, ahead of DR Congo’s $1.03 billion representing 10.4 per cent of the export market share.

In spite of the country’s delay in joining the FTA, Uganda ranked sixth both as an exporter ($955.7 million or 9.6 per cent market share) and importer ($659.5 million or 7.4 per cent of the market share) within the Comesa region in 2011.

In Uganda, SMEs contribute more than 30 per cent of the GDP, more than 30 per cent to employment, and 80 per cent of manufactured output.