A farmer inspects coffee berries. Uganda coffee export revenues declined by 22 per cent to $81.52 million in the second quarter of 2015/16. PHOTO | FILE
What you need to know:
Modest export earnings posted in 2014/15 financial year have deepened Uganda’s policy woes as currency traders report limited impact on exchange rates amid growing effects of China’s economic slowdown on African economies.
Low demand patterns in China’s manufacturing sector since last year have eroded uptake for several African commodities, a key source of export revenues for the continent’s economies. The most affected products include copper, iron ore, platinum and coal.
Falling FDI inflows – a critical source of jobs and household incomes in many economies – is also cited for low demand for export items in regional markets.
Modest export earnings posted in 2014/15 financial year have deepened Uganda’s policy woes as currency traders report limited impact on exchange rates amid growing effects of China’s economic slowdown on African economies.
Latest data compiled by Bank of Uganda shows slow growth in overall export revenues recorded between March and June last year and the period between July and December 2014 with economists citing lower demand for Ugandan goods to the Common Market for Eastern and Southern Africa. Other exporters attributed poor returns to rising competition within regional markets.
Total export revenues dropped from $686.57 million between March and June 2015 to $637.69 million in the period between July and October 2015, but rose by one per cent to $644.26 million during the October and December 2015 period, BoU data shows.
Coffee also exhibited dull performance during the period under review, with total value of coffee exports increasing from $98.73 million to $104.93 million, a trend driven by higher volumes and lower market prices. Coffee export volumes rose from 880,000 60kg bags to 1.01 million bags while the global prices fell from $1.88 to $1.73 per kilogramme.
Coffee export revenues declined by 22 per cent to $81.52 million in the second quarter of 2015/16.
In the period under review, informal cross-border trade exports dropped from $112.21 million to $97.22 million recorded during the first quarter of 2015/16. Earnings from this segment fell by 0.27 per cent to $96.96 million in the second quarter of 2015/16.
Besides coffee, other prominent export items include cotton, tobacco, hides and skins.
Low demand patterns in China’s manufacturing sector since last year have eroded uptake for several African commodities, a key source of export revenues for the continent’s economies. The most affected products include copper, iron ore, platinum and coal.
For instance, copper production accounts for 70 per cent of Zambia’s export revenues but a 30 per cent decline in global prices registered in November last year is likely to reduce its export earnings.
Headline inflation in Comesa region is projected at 23.6 per cent this year compared with 19.5 per cent and 14.4 per cent posted in November and October 2015 respectively, according to Standard Chartered Bank Research data.
These trends are partly blamed for weak demand for export items sourced from Comesa countries such as Uganda, economists argue. Uganda exports cosmetics and other household products to Zambia.
“China’s economic slowdown has directly affected some of Uganda’s exports and also impacted certain trading partners. For example, most Comesa countries like Zambia depend on China for export revenues and prevailing low growth experienced by China has reduced their appetite for goods produced by developing countries. Dollar inflows realised from exports in recent months have been wiped out by rising expenditure on project related import needs and a swollen import bill,” argued Isaac Shinyekwa, a Research Fellow at the Economic Policy Research Centre based at Makerere University.
In contrast, China consumes roughly five per cent of Uganda’s exports, with coffee and minerals dominating the list.
Falling FDI inflows – a critical source of jobs and household incomes in many economies – is also cited for low demand for export items in regional markets. The United Nations Conference on Trade and Development statistics show overall FDI flows to Africa dropped by 31 per cent to an estimated $38 billion in 2015.
Mozambique and Nigeria recorded some of the biggest FDI declines, with the former recording a drop by 21 per cent to $3.8 billion while FDI flows to Nigeria slumped by 27 per cent to $3.4 billion due to depressed commodity prices.
