Milly Nsubuga, 30, started out as a small-scale trader on the Kampala-Juba route in 2008. That she has now established herself as one of the biggest suppliers of unprocessed food products like eggs, maize and beans in the South Sudanese capital of Juba, is testament to the immense potential of this market.
Indeed, according to a new World Bank report, trade between Uganda and Sudan has skyrocketed since 2005, rising from US$60 million in 2005 to US$635 million in 2008.
Riding on the back of improved security in northern Uganda and South Sudan and lack of local production capacity in Africa’s newest country, cross-border trade has thrived in the last four years.
“Consequently, Sudan is now Uganda’s largest trading partner,” says a new World Bank report examining regional trade, titled “Defragmenting Africa: Deepening Regional Trade Integration in Goods and Services”. “For both formal and informal trade combined, Sudan has been the single largest destination of Uganda’s exports since 2007, larger than any other destination in the world.”
Products like beer, water, food products, sugar, cooking oil), construction materials (cement, iron sheets) are in high demand.
But there is a down-side.
“It is a risky business,” the single mother of four said, adding that had it not been the big dividends, she would have quit the business three years ago because of the numerous risks she has to encounter on every trip, including insecurity, harassment, robbery, delays and wastage in transit.
The report noted that thanks to high transaction costs, it was easier for Africa to trade with the rest of the world than with itself.
Concerns
High demand in S. Sudan has created shortages in Uganda and contributed to an increase in food prices over the past year. Maize in Juba is about three times more expensive than in Ugandan cities, while beans are about two times more.
One factor behind the large gap in prices is the high trading cost between Uganda and South Sudan. From a market in Kampala to one in Juba, transport and logistics costs (US$145 per tonne of goods; US$93 spent inside Uganda and US$52 in South Sudan), in addition to duty and other official charges ($218.33 per ton).
Several factors are responsible for the high costs, including lack of consistent implementation of trade policies by the Sudanese customs.
PSFU Director of Policy, Moses Ogwal, said regional trade presented excellent opportunities for agricultural production and industrialization but the key challenge was increasing productivity and lowering the cost of doing business to boost competitiveness in those markets.
“Ugandan products are not the only ones going to [S. Sudan]. If other countries are selling the same products there, Ugandan products will definitely lose out if they are not produced competitively,” Ogwal said.
In addition to constraints at the border, high transport costs due to poor road conditions (particularly in South Sudan), multiple checkpoints and roadblocks, multiple taxes, as well as product standards and import licenses, are key concerns.
Also, many trucks that transport goods from Uganda to South Sudan must return to Uganda empty, meaning meaning that charges are kept high to cover this cost.
Regarding security, the report said that even relatively small-scale incidents like robbery and confiscation of goods, if targeted at specific groups such as Ugandan traders, can generate substantial withdrawal of trading activities.
For example, the rapid growth in Ugandan trade with South Sudan stalled after 2008 and even declined in 2010 due to increased insecurity in South Sudan faced by Ugandan traders.
Kampala City Traders Association (KACITA) has recorded approximately 320 official complaints between 2007 and 2010 including murder, rape, confiscation of goods, and underpayment.
Ogwal said the private sector has been lobbying government for a railway connection to southern Sudan, which would help to curtail the constraints of road transport.
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