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The East African : May 12th 2014
The EastAfrican 42 DRIVEN BY INVESTMENT AND CONSUMPTION Uganda import bill rises by $73.35m in Q1 The bill had been static ove≥ the p≥eceding 12 months but a pick-up in domestic demand ≥eve≥sed this t≥end By MARTIN LUTHER OKETCH Special Correspondent ending March, driven by investment and consumption by the private sector. According to new data, the bill U had been static over the preceding 12 months as the economy struggled through a decline in aggregate demand. Officials say a pick-up in domestic demand reversed this trend in the past quarter. According to Bank of Uganda statistics, the quarter saw export earnings rise 3.1 per cent to $688.67 million, while imports increased by 5.9 per cent, pushing up the import bill to $1.306 billion. In a detailed breakdown the central bank said imports for private investment amounted to $863 million, accounting for 69.6 per cent of total private sector imports, while imports for private consumption increased by $41.7 million to $365.1 million. This resulted in a widening of the trade imbalance by 9.4 per cent to $617.9 million during the quarter covering January to March 2014. According to Gideon Badagawa, executive director of the Private Sector Foundation of Uganda, an ganda’s import bill increased by $73.35 million in the quarter anticipated boom in economic growth in coming years is driving private sector imports upwards both for investment and consumption purposes. “We have been importing more than 50 per cent of raw materials for the manufacturing sector in Uganda. Much as our manufacturing industries are agro-based, we are not getting much out of our agriculture because of low growth in the sector, so we have to import agricultural products for raw materials,” he said. Comparing the volume of exports with imports, Mr Badagawa said that while imports of agricultural products continue to grow, not much is being done by the government to improve the sector’s productivity for export. Mr Badagawa said that part of the increase in private sector imports is being driven by the construction sector, mainly roads and housing, which has led to increased importation of machinery for construction. “The construction industry is growing steadily and as a result we are seeing increasing importation of machinery for construction,” he said. Since the discovery of oil and gas in Uganda, there have been in- BUSINESS MAY 10-16,2014 can only be solved by increasing export earnings from commodity exports. “We have to have sufficient foreign exchange inflows to guard against currency depreciation. In the next budget, the government should focus on how to increase foreign exchange to have a fairly stable economy. To encourage domestic investment, it should not just stop at predicting high economic growth,” said Mr Badagawa. Uganda’s real GDP growth for 2013/14 is projected at 5.5-5.7 per cent, down from 6.0-6.5 per cent 2012-13. Growth in 2014-15 is however being projected to increase to 6.2-6.5 per cent. The executive director of research at the Bank of Uganda, Adam Mugume, said that after a long period of flat growth in Uganda’s import bill, imports will accelerate due to increasing economic activities. “The largest volume of imports is going to be driven by the private sector and the government on the lower end,” he said. Regarding the business climate Roofings Ltd in Namanve, a manufacturing company. Uganda imports more than 50pc of raw materials for the manufacturing sector. Pic: Morgan Mbabazi EARNINGS FOR THE QUARTER According to Bank of Uganda statistics, the quarter saw export earnings rise 3.1 per cent to $688.67 million, while imports increased by 5.9 per cent, pushing the bill to $1.306 billion. In a detailed breakdown the central bank said imports for private investment amounted to $863 million, accounting for 69.6 creased foreign investment inflows, especially in the oil sector in the recent past. Mr Badagawa said there has also been an increase in the importation of professional services, particular- per cent of total private sector imports while imports for private consumption increased by $41.7 million to $365.1 million. This resulted in a widening of the deficit in the trade balance by 9.4 per cent to $617.9 million during the quarter covering January to March 2014. ly in the oil sector. He said that the rising levels of imports of inputs to run industries in the country is taking up a lot of foreign exchange and causing exchange rate depreciation, which in Uganda in the coming months, Dr Mugume said the outlook for the next three months remains positive on account of significant projected increases in the construction sector and anticipated infrastructural development. A senior fellow at the Economic Policy Research Centre, Fred Muhumuza, told The EastAfrican that the investment and consumption needs of both the private sector and the government are driving up the country’s import bill. Dr Muhumuza said Uganda has had a long dry spell in the past season, which may mean increased importation of agricultural products like foodstuff, fruits for juice and poultry. “We could see increased imports of rice as a result of the dry spell experienced in the country in the past season,” he said. There are fears that Uganda’s commodity exports could suffer a decline in value and volumes due to slow economic growth in emerging economies. Tanzanian law to check inflow of fo≥eign wo≥ke≥s stokes cont≥ove≥sy By JEFF OTIENO The EastAfrican THE RECENT announcement by Tanzania that it plans to enact a law to check the inflow of foreign workers in the country may put it on a collision course with its EAC counterparts if not implemented properly, experts have warned. During the recent May Day celebrations, President Jakaya Kikwete announced that a Bill on foreigners’ work permits would be tabled in parliament in October. He said the law was necessary since the number of foreigners working in the country was alarmingly high. But political analysts argue that although Tanzania has a right to enact laws it considers good for its citizens, this law, if not well handled, may cause friction with its EAC partners who are pushing for free movement of people, goods and services as per the principles of the Common Market Protocol. Tanzania has long expressed reservations about laws that allow foreigners to freely work and own land in the country, even if they are from East Africa. On the contentious issue of land ownership it maintains that all land belongs to the government and cannot be privately owned as is the case in other East African countries. “For some time now, people have been complaining that foreigners are employed in positions that Tanzanians can serve in, which is true,” President Kikwete said at the Workers’ Day rally. “Since some institutions responsible for issuing work permits have not been loyal, we intend to enact a law that will give that mandate to one institution.” Jack Odingo, a political analyst on African affairs, said EAC presidents who have in the past expressed concern over the slow progress in establishing a fully operational trade bloc, will closely follow the implementation of the law. Unlike other member states that have taken steps to abolish work permits for East African citizens, Tanzania is yet to do so. Rwanda was the first country to abolish work permits for EA citizens, followed by Kenya, while Uganda recently abolished work permit fees for citizens of Kenya and Rwanda. The three countries say the move is aimed at encouraging free movement of labour within the bloc. Asked during a recent interview with Citizen Television Kenya why Tanzania was charging fees on work permits when other East African countries are abolishing it altogether, President Kikwete said, “It is an issue we can discuss.” Cautiousness Tanzania has always been cautious $3,000 The amount large-scale traders, businesses and consultancy firms have to pay for work permits in Tanzania, up from $1,600 about full economic integration with its neighbours, fearing its businesses may be swamped by rivals from Kenya, Uganda and Rwanda. “Once you have decided to be a member of a trade bloc, you must be ready to concede on some issues even if you don’t want to. It is all about give and take since members have different interests,” said Mr Odingo. He, however, adds that disagreements will always be there. “What is important is how issues that member states disagree on are resolved,” said Mr Odingo. But critics say that, going by Tanzania’s past actions, it will take a long time for the country to allow citizens of other EAC countries to work and own investments in the country without excessive red tape. In 2012, Tanzania raised work permit fees by nearly 100 per cent, a move that left other member states questioning the country’s commitment to opening its borders. Hardest hit were those in categories A-1, A-2, and A-3, engaged in prospecting and mining, as well as large-scale traders and businesses, who have to pay $3,000, up from $1,600. Lawyers, accountants and doctors who run consultancy services in Tanzania, will also pay a similar amount. Recently, Tanzania also rejected the single tourism visa rolled out by Kenya, Uganda and Tanzania, saying it was a threat to its security and economy. Mr Odingo says Tanzania’s cautious approach to EAC matters is partly the reason why Kenya, Uganda and Rwanda decided to come together to tackle issues of common interest and fast track signed agreements.
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