Kahude R

By

Rehema Kahunde

During the 2018/2019 financial year (FY), there was a drastic reduction in key agricultural exports. Specifically, coffee exports reduced by 15%, maize reduced by 52% while beans reduced by 69% (Figure 1). As key agricultural exports declined, there was a sustained increase in total exports from about US$ 3.5 Billion in FY 2017/18 to US$ 3.9 Billion in FY 2018/2019. The increase in total exports was largely supported by non-agricultural products such as gold. Coffee is both Uganda’s major export commodity and a source of livelihood for a large population. Therefore, a 15% reduction in realised export earnings—from US$ 492 million to US$ 416 million between FY 2017/18 and 2018/19 was a major threat to the economy. In the same vain, a decline in the export values of maize and beans cannot be ignored as these are some of Uganda’s major export commodities to the COMESA region.

 Figure 1: Performance of exports (total and agricultural) between FY 2015/16 and 2018/19

 BOU figure 2

The decline in the export earnings of these commodities was also accompanied by a reduction in their export volumes in the same period. For instance, from FY 2017/18 to 2018/19, export volumes of beans and maize reduced drastically by 75% for beans and 44% or maize as shown in table 1 below.

Table 1: Export volumes of coffee, maize and beans from FY 2015/16 to 2018/19

 maize figures

While decline in global coffee prices (due to over supply) is  the main factor behind the decline in Uganda’s coffee export volumes as coffee exporters anticipate a higher price in future, a number of reasons could partly be responsible for the extreme decline in maize and beans exports some of which include; 

 

  1. The closure of Uganda-Rwanda border in February 2019 could explain the reduction in the volume of other commodities—notably maize and beans—as the country exports them to Rwanda. The performance of the economy report for May 2019 indicated a 9.8% decline in exports to the East African Community (EAC) from US$ 96.22 million in April 2018 to US$ 86.79 million in April 2019 owing to the fall in exports to Rwanda as a result of the closure of the Uganda-Rwanda border.
  2. Imposition of Non-Tariff Barriers (NTBs) on agricultural exports by some trading partners like Kenya and Tanzania in the quest to reduce agricultural exports from Uganda could also have worsened the situation. These barriers, together with the political conflicts in Sudan have been a major obstacle in the trade relationships between Uganda and her neighbours.

The recently released 2020/21 National Budget Framework paper noted the slowdown in Uganda’s trade with EAC member states between FY 2017/18 and 2018/19 on account of the above two issues (existence of non-tariff barriers with partner states, the temporary closure of Uganda-Rwanda border). It also highlighted the decline in maize and beans exports to the region, specifically Kenya due to increased domestic production of similar products (bumper harvest). According to Bank of Uganda, total exports to Rwanda and Kenya reduced from US$ 198 million and US$ 678 million to US$ 150 million and US$ 434 million respectively between FY 2017/18 and FY 2018/19.

Furthermore, given the continued conflict situation in South Sudan (a major export destination of Uganda’s maize) and the sticking non-tariff barriers with some of Uganda’s EAC trading partners, beans and maize exports are likely to continue reducing. In addition, other agricultural exports are likely to decline for instance dairy products, given the imposition of a 16% Value Added Tax by Kenya on Uganda’s exported milk in December 2019. Also, the European Union (EU) ban that was imposed on Uganda’s agro-exports such as Pepper in August 2019 (on grounds of non-compliance with the international EU health and phytosanitary standards) may also worsen the situation.

Therefore, peace and trade dialogues with our trading partners could solve the problem of the conflicts in South Sudan and non-tariff barriers between the various trading partners respectively. Additionally, value addition and venturing into new markets for our exports could solve such declines in agricultural exports especially in periods of bumper harvests in the region. There is need to build the capacity of farmers in trade-driven agricultural practises to avoid cases such as the EU ban due to poor quality exports.  These interventions would not only improve the quality and quantity of our agricultural produce but also improve trade relationships with our trading partners. This will enhance our export earnings, which boost the country’s foreign exchange reserves which in turn contribute to macroeconomic stability.  

 

[1] https://www.bou.or.ug/bou/bouwebsite/Statistics/Statistics.html

[2] https://www.bou.or.ug/bou/bouwebsite/Statistics/Statistics.html

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