Relations between Rwanda and Uganda hit a new low in 2019 with the closure of the border causing enormous disruptions to cross-border trade and movement of persons. According to Southern and Eastern African Trade, Information and Negotiations Institute (SEATINI), more than 6,000 small-scale traders were affected.
Furthermore, the November 2019 East African Community (EAC) summit was postponed partly due to the escalation in the conflict between the two partner states and the fact that one of the warring parties (Rwanda) also doubled as the 2019 chair of the EAC. Although since then efforts are underway to address the outstanding accusations from both sides and reduce tension, restoring normal relations will likely take some time and tension will continue to affect trade between the countries
In August 2019, the presidents of Rwanda and Uganda signed Memorandum of Understanding (MoU) in Luanda, Angola aimed at easing the tensions between the two countries. The two leaders agreed to protect and respect the rights and freedoms of people resident or in transit through their respective countries, and to recommence cross-border activities (including the movement of persons and goods as soon as possible).
However, despite the presence of the MoU, there has been slow progress on its implementation partly due to differing interpretation and expectations. For example, Uganda’s attention is on the economy and expects Rwanda to lessen restrictions on trade and movement of people. On the contrary, Rwanda’s focus is on security.
The Bank of Uganda trade statistics show a drop in Uganda’s exports to Rwanda to $4 million on average in 2019 in comparison to 2018 which was approximately $18 million on average. However, the value of Rwanda’s exports to Uganda reduced from $19 million on average in 2018 to an average of $14 million in 2019. This shows that if the conflict continues, Uganda stands to lose in terms of trade revenue.
The continued restrictions of movement of persons across borders has implications for trade in services. For example, Uganda revived its national airline in August 2019 has no schedule operating between Entebbe and Kigali whereas it flies to all the other EAC capitals. This can cause a decline in productivity and investment because of security concerns which in turn make normal business operations difficult and uncertain, hence disrupting traditional trade routes.
A linkage also exists between trade in services and free movement of persons. The fact that some Rwandese were attending school in Uganda, and some professionals were employed in either country, any restriction on movement is likely to disrupt further trade in services. This is the case despite the presence of the EAC Common Market Protocol that calls for lifting of restrictions on the movement of persons.
Literature shows that such “continual” conflicts have the potential to spill-over to neighbouring states. Already, there is some evidence of this as Burundi appears to have sided with Uganda in the on-going conflict. Such spill-over effects can manifest through discouraging economic activity such as trade or by creating social strains as result of refugee influx in nearby countries, even if those countries are not party to the conflict.
In the same way, the aftermaths of the impasse between Uganda and Rwanda (such as trade disruptions) have also been felt by other states in the region which are not part of the brawl like Kenya and Tanzania, given that the conflicting parties are both landlocked, import and export their goods through the ports of Mombasa and Dar-es-salaam. Also important to note is that if the conflict extends to neighbouring fragile states such as Burundi and DRC, the effects are likely to be greater.
As a result, the region is bound to suffer through slowing down on the progress of regional cooperation and integration, since both countries are members of East African Community (EAC). Moreover, at this critical moment when the African Continental Free Trade Area is taking effect, the EAC is being affected by clash of two member states; this could affect the speed by which EAC embraces the AFCFTA. However, the risk of experiencing a full blown conflict is minimal given the continued trade and interaction between the countries even within conditions of the stalemate. Hence, not all doors have closed entirely.
Ms. Luwedde is a Research Analyst at Economic Policy Research Centre